A daily minimum wage hike to THB300 will become effective on April 1, 2012, in Bangkok, Metropolitan area and Phuket, while a 39.5-percent rise in the minimum daily wage will be applicable to the rest of 70 provinces nationwide. The minimum wage hike to THB 300 will be effective nationwide on January 1, 2013. Barring any dramatic economic volatility, this minimum wage level (THB300) will remain in effect for two years.
Therefore, KResearch views the higher minimum wage will improve the standard of living for workers, but also induce gradual increases in product prices and service fees due to private sector business costs, thus likely boosting inflation in 2012 by 0.6-0.7 percent. (The Headline Inflation is expected to average at 3.9 percent.)
Amid adjustments by businesses to cope with this large increase in wages, KResearch expects that the unemployment rate may rise only slightly over the short term to 0.8 percent in 2012, against 0.7 percent in 2011. But, afterward, employment trend will largely depend on investment prospect in our country.
In addition, maintaining our competitiveness will be a challenge to both the private and government sectors. Should we want to maintain the current spread between domestic labor costs and those of neighboring countries, it means that we have to enhance productivity of our workforce in consistent rate with the minimum wage hike. Previously, Thai worker productivity increased by only 2-3 percent per year.
KResearch views that the Thai economic structure will be changed significantly by surges in labor costs, which will force quick adjustments by Thai businesses. The government should play a vital role in enhancing efficiency and human resource development as this would be a solid foundation for our new economic structure development. Meanwhile, the wage trend over the upcoming years will likely be more stable.
Meanwhile, major risks to the employment situation may include political instability at home, as well as disaster management that may affect foreign investor confidence and determine the extent of foreign direct investment (FDI) into Thailand as they are key determinants toward economic development, in terms of employment, industrial development and opportunities to broaden our export potential.
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