THB300 Minimum Wage: Impact on Thai Economy (Business Brief No.3394 Full Ed.)

On November 20, 2012, the Thai Cabinet approved an increase in the minimum wage to THB300/day in 70 provinces, effective January 1, 2013, in accordance with a recommendation of the National Wage Committee, following the increase in seven pilot provinces on April 1, 2012. Wages will be kept at this level for another two years, unless extreme economic circumstances that adversely affect workers' livelihoods require another review.

KResearch holds the view that the minimum wage increase to THB300 per day nationwide may raise the incomes of around 70.0 percent of workers with a minimum wage pay across the country, representing 0.6 percent of GDP in 2013. However, the positive effect of the increase on the GDP via private sector consumption might be lower than that, hampered many factors. Inflation due to the wage hike may induce a 0.4 percent higher rate in 2013. However, amid a rather tight labor market and continued investment by some businesses, the increase may not cause the number of unemployed to rise precariously. KResearch forecasts that unemployment in 2013 may reach 300,000 persons, representing 0.8 percent of the workforce (or within our projected range of 260,000-340,000, representing 0.7-0.9 percent).

KResearch views that adverse impacts from the national wage increase may be felt across the board, but to a varying degree according to location, size and type of business, etc. Broadly speaking, however, Thai businesses should remain resilient to the increase if they maintain their competitiveness along with making some adjustments, especially amid an economic situation that seems favorable to growth.