Wage rise proposal rejected by business sector

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Wage rise proposal rejected by business sector

The Federation of Thai Industries (FTI) recently rejected a proposal to increase the minimum wage above the 300 baht per day minimum for unskilled workers. The proposal to increase the minimum daily wage from 300 to 360 baht per day from January 2016 came from the Thai Labour Solidarity Committee (TLSC).

The FTI claimed any increase at the present time would have a negative impact on small and medium-sized enterprises (SMEs) which are the backbone of the overall economy.

In contrast, of course, the TLSC claims rising living costs are making it increasingly difficult for those at the bottom of the labour scale to make ends meet. The TLSC said it had conducted a survey of almost 3,000 day labourers in 12 provinces, including Bangkok, Chonburi and Rayong, and this had shown how difficult times were for those people in terms of living standards.

Conversely, the FTI claims up to 100,000 SMEs could be put out of business by rising labour costs. The industry peak body believes now is not a good time to be considering raising the minimum wage as the economy has not fully recovered.

According to the FTI the previous government had distorted wage structures by populist policies, citing the first-time car buyer scheme which had helped propel household debt. That, in turn, had led to people being more cautious in their spending habits, reducing demand and impacting negatively across the overall economy.

The FTI also claims that any wage increase would damage the export industry since more than half of Thai businesses are engaged in the export sector. Increased wage pressure would obviously raise costs and exporters would be compelled to build these costs into their pricing, thereby reducing their competitive advantage. This could lead to reduced demand for Thai exports at a time when this part of the economy is vibrant and is seen as essential to the future economic strength of Thailand in general.

While the FTI claimed it fully appreciated the reasoning behind the Labour Solidarity Committee’s calls, it said the government needed to thoroughly consider three factors it considered key to the whole wage increase argument: 1. The overall cost of living; 2. The current levels of inflation, and 3. Thailand’s overall competitiveness vis-à-vis its neighbours.

Importantly, the FTI is of the opinion that increasing the minimum daily wage for unskilled workers by what would be a 20 percent hike will only have a negative effect on inflation, forcing it higher while also not really lift general purchasing power, a key driver of the domestic economy.

 

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