The result of the Central Wage Committee meeting on April 18, 2008 was to approve the raise in minimum wage levels after the latest increase by Baht1.00-7.00 varying by province on January 1, 2008. However, there is still no conclusion on how much higher wage levels will be put.
The increase in minimum wage levels in 2008 was attributed to the dramatic increases in commodity prices and living costs overall, driven by higher transportation costs caused by rising fuel prices.
Headline inflation in the first quarter of 2008 (1Q08) increased to 5.0 percent, compared to only 2.4 percent in the first quarter of 2007.
These had forced most labor unions to ask for an equal lift in the minimum wages of THB9.0/day nationwide.
At present, there are 8.5 million workers being employed in factories and entrepreneurial venues across the country (workers under the social security system). Their wages are usually based on minimum wages known as the ‘Reference Wage Rate'.
A survey showed that workers who earn wages at the minimum rate total around 3 million persons nationwide. Of these, 2 million workers are Thais and 1 million workers are foreign workers from Thailand's neighboring countries. Most of these workers are daily paid employees working at small entrepreneurial venues.
After taking the impact of the minimum wage increase into consideration, it has been found that small-scale entrepreneurs will be directly affected by the increased labor costs because they employ a large number of unskilled workers.
The impacts on medium and large businesses may only be marginally because they offer higher wages than the minimum wage rates.
According to a KResearch study, it was found that if wages increase THB 1.00/day, commodity prices overall will increase by around 0.02 percent. (based on the recent adjustment in minimum wages).
Then, if the minimum wages increase THB4.00/day, this will drive up commodity prices by around 0.08 percent, and by about 0.18 percent should minimum wages rise by THB9.00/day.
The impact of the higher minimum wages on general commodities is minimal. However, since it is a ‘Reference Wage Rate' that factors into hiring costs, higher minimum wages will have a knock-down effect on other economic factors, as well such as national competitiveness, foreign direct investment incentives and greater impact on production costs, which will drive up commodity prices eventually.
KResearch is of the view that the government's decision to raise minimum wages would help solve immediate problems only, but entrepreneurs are left to face surging costs.
As a result, the government should address this problem urgently; otherwise the government will be pressured to introduce monetary and fiscal policies to ease hardships among people.
The Central Wage Committee has already approved a call to adjust the minimum wages and the matter is being considered by Provincial Sub-Committees. It is expected that the Minimum Wage Committee will present the new rates as a gift to workers on May 1, 2008 – the National Labor Day.
We hope all workers, who help create the world, will receive some good news on Labor Day!
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