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29 Aug 2022


Labour-intensive industries: Profits projected to decline by 5-15 percent due to minimum wage hike (Current Issue No.3340)


KResearch views that an increase in the average daily minimum wage by 5 percent starting October 1, 2022 will affect industrial costs in the last quarter of this year and into next year. This may lead to an average cost increase of around 0.5 percent and a decrease in operating profit by an average of 4.6 percent.
For the agriculture, retail, hotel, restaurant and construction industries, which have a high proportion of labour costs to total costs, profits may initially drop more than the industry average, or a decrease of 5-15 percent, depending on each business’s flexibility to adjust and competitiveness. However, business operators are facing rising costs in several categories though they are able to increase their product prices by only a limited amount. The aforementioned figures are based on a preliminary impact analysis focusing on labour costs, under the assumption that other relevant factors remain unchanged, and profits will be reduced if the businesses cannot raise prices.
In addition to labour costs, the industrial sector has already faced rising cost pressures, as the costs of both raw materials and energy are likely to remain high. What’s more, the industrial sector will have to bear the brunt of increasing financial cost shortly. Although overall revenue will tend to gradually recover, it remains fragile and unstable. Given this, maintaining profitability will still present an immediate challenge for the industrial sector going forward.
    Looking ahead, the industrial sector will still be pressured by the labour issues under Thailand’s demographic structure wherein overall population declines while the elderly increases. Aside from revenue potentially seeing limited growth amid intense competition, operators may simultaneously face labour shortages and a minimum wage hike. As a result, it is imperative to focus on investment to boost labour productivity as soon as possible so that businesses can maintain competitiveness and make progress in the medium to long term.