National Labor Day: Productivity Remains a Challenge for Entrepreneurs (Current Issue No. 2357 Full Ed.)

The Thai National Labor Day on May 1, 2013 marks the first year that all laborers earn a daily minimum wage of THB300 nationwide. The higher daily minimum wage was first introduced last year in seven pilot provinces, before becoming effective throughout the country on January 1.

Although it has been in force for a while, no clear indications have been verified of any negative impact on the country, partly because of the current labor shortage being experienced within many manufacturing and service sectors that continue to recruit new workers, including those who have been laid off. It is expected that the domestic shortfall for workers needed to create higher outputs in the economic system will decline because businesses affected by higher labor costs have already embarked on various cost cutting measures.During 2M13, the employment rate in Thailand increased 1.2 percent (compared to an average of 1.7 percent recorded over the past 10 years). If that rate remains unchanged this year and the economy grows at perhaps 4.8 percent YoY – as projected by KResearch – labor productivity here should increase by 4 percent YoY, beating the 3 percent YoY 10-year average.

Even as businesses are adjusting to the new minimum wage, it will take some time for them to feel any great impact of the higher cost because the current business environment is being pressured by many other factors. In the short-term, sluggish trade partner economic growth, Baht volatility and lofty production costs may cause many businesses – especially SMEs in the export sector – to experience greater uncertainty ahead. As a result, KResearch projects that the unemployment rate in Thailand may rise only 0.8 percent in 2013, or within 0.7-0.9 percent, versus the 0.7 percent pace recorded in 2012.