Rigorous minimum wage debate keeps parties raging

#Timeline #Minimumwage

The first day of the New Year saw a wage raise of 2-16 baht in some parts of the country. The highest hike was implemented in the pearl of the Andaman, Phuket, where minimum wage went up from 354 to 370 baht, while the lowest raise was in the deep South in Narathiwat, Pattani and Yala provinces, from 328 to 330 baht – a mere 2 baht.

The second raise was also a New Year gift, but the Thai one on April 13 marked the first day of the Songkran festival. The minimum wage was hiked to 400 baht in 10 provinces, but only in some districts, and only for workers in four-star hotels and more luxurious facilities.

On April 25, Just as the Songkran water guns had gone dry, the tripartite committee sprung a surprise with the third wage hike of the year. They declared that from October this year, the minimum daily wage nationwide would be 400 baht. 

The idea of raising the daily wage to 400 baht throughout the country has not pleased everyone. There’s strong opposition from some quarters because of its fallout on businesses. Let’s scroll up to see what each of them have said about the hike.
 

April 4

Speaking at a House of Representatives meeting, Minister of Labour Phiphat Ratchakitprakarn said that the 400 baht minimum wage would reach everyone across the country.

“The rise is not fair, they say, and we need to look into the reasons. We need to see what or where is more appropriate. In some places, the raise might affect some businesses negatively and could lead to the businesses closing down. That would be a disaster for the Ministry of Labour and the labourers, too. Because the ministry will not be able to find 4-5 million jobs. Keeping this in mind, we must be careful in hiking the minimum wage."

April 24

Labour Minister Phiphat sent a gift in a chat forum in advance of Labour Day on May 1. Phiphat said:

“On Labour Day, the board of directors of the Labour Ministry and I will announce the intention of the policy to raise the minimum wage to 400 baht for people in all industries within 2024. I think we do not need to wait until the end of the year. On October 1, there will be an announcement across the country.”

May 1

As promised, Phiphat sent the wage hike gift to the chat from a national labour day event and said:

“We have raised the minimum wage for all regions in the country and for all professions. But when I say all professions will be covered, I do not mean everyone can do it. If you cannot, tell the government so we can support you. This minimum wage announcement is across all industries and provinces in Thailand beginning October 1.”
 

#Whogetsthebenefits #workers? #employers? 
According to Kasikorn Research Center, the 400-baht daily wage could impact each region differently. The most affected businesses would be those in the deep South where the wage will go up by 21%  – from the current 330 baht to 400 baht – and the least impact would be in Phuket, where the wage would go up by 8% – from the current 370 baht. Based on data from the last quarter of last year from the National Statistical Office, more than 2.5 million people in Thailand (mostly in agriculture, domestic services, restaurant and hospitality, and construction) live on a daily wage of less than 400 baht. Workers in these sectors would be the beneficiaries from the rise. A 1990 study by George Akerlof and Janet Yellen, titled  “The Fair Wage-Effort Hypothesis and Unemployment”, made a case for hiking the minimum wage, arguing that it has a psychological impact on workers and their increased productivity could benefit the companies. 

May 4

Phiphat stated that he was sure the policy could take effect on October 1 and they needed to work with the Ministry of Commerce to control prices, otherwise it would negate the objective of the wage hike.

“We agree that this is once again the time we need to raise the minimum wage in Thailand as well as control the prices of products that have already increased in advance.”

May 6

At a joint press conference, the business sector flagged the risks from implementing the wage hike. Poj Aramwattananont, the deputy chairman of the Thai Chamber of Commerce and the delegation said:

“The rise in the minimum wage across the country will be a double-edged sword for the business sector. Some might be able to adjust themselves. Some might suffer a negative impact. In this case, the raise should be made only in some industries and in industries with more Thai workers than foreign workers.”

On the same day, Thanawan Polwichai, the advisory chairman of the UTCC’s Centre for Economic and Business Forecast, said:

“I agree with the idea of increasing the minimum wage, but I don’t agree it should be 400 baht all over Thailand. Also, I want to point out who benefits the most. The Labour Ministry should listen and have clear goals as well as attract more labour to the social security system for them to have welfare and make sure they have a fair wage. Efficiency is also important, so raising the minimum wage is not another government ritual.”

Soon the business sector was up in arms over the proposal.

May 7

The Joint Standing Committee on Commerce, Industry, and Banking (JSCCIB), one of the influential business sector bodies, opposed the 400 baht minimum wage throughout the country and did not want politics to influence the increase in minimum wage. They advocated a wage hike based on the provisions of the Labour Protection Act BE 2541.

May 8

Kriangkrai Thiennukul, chairman of the Federation of Thai Industries (FIT) said:

“The Joint Standing Committee on Commerce Industry, and Banking agrees with raising the wage for the sake of better living conditions…but we do not agree with the 400-baht daily wage for all provinces. Instead I think we should let the subcommittee on minimum wage consider it by province and the tripartite committee should check if this aligns with the economic factors of each province: inflation rate, GDP growth rate, ability to employ and employees' skills.”

May 13

Chanintr Chalisarapong, president of Thai Tuna Industry Association, representing chambers of commerce and 95 trade associations in Thailand, submitted an open letter to the labour minister opposing the 400 baht daily wage. The letter said:

“This is the first time the chambers of commerce in 76 provinces in Thailand, 92 trade associations and over 15,000 business persons have filed a complaint. We agree with the wage rise […] but we need empathy for SMEs [small and medium-sized enterprises]. The economy is still stagnant, the interest rate is still high, not to mention rising prices of fuel further pressuring the people’s purchasing power. If the economy starts to recover and grows according to the government's policy, the minimum wage must be raised accordingly.”

May 14

At the Cabinet meeting in Phetchaburi, Deputy Prime Minister and Minister of Commerce Phumtham Wechayachai, fired a counter to the opponents of the proposed wage hike.

“The increase in the minimum wage does not equal an increase in the prices of all products. We need to look into the details, and look at the cost too. You cannot just blame the minimum wage hike.”

On the same day, Prime Minister Srettha Thavisin appeared unfazed by the debate over the policy and said definitively:

“The Cabinet is aware of the progress in raising the minimum wage by the Ministry of Labour. The raise will take effect within October 2024.”

On the same day, a letter was submitted to the labour minister by 16 Employers’ Confederations of Thailand, opposing the minimum wage hike to 400 baht throughout the country and across all industries. 

Naowarat Songsawatchai, chairperson of the Employers’ Confederation of Thai Trade and Industry, said:

“We agree with raising the wage in relation to skills which all industries have and we support SMEs to take on skilled workers like big companies, but the wage should be different according to the size and profit of each business.”

Still on May 14, The Nation accessed a 2023 report by Jesse Wurstenand Michael Reich titled “Small Business and the Minimum Wage”, which suggested that a rise in the minimum wage did not seem to have a palpable effect on employment in small businesses. On the contrary, it appeared to benefit recruitment. The research conclusion would be a substantive contribution to the debate:

“We conclude that minimum wages cause modestly higher wage increases in smaller low-wage firms than in larger low-wage firms. This result is consistent with the continuing size wage [premium] in low-wage industries. We also conclude that minimum wages do not cause disemployment effects among low-wage industries in any size bin. We find some modest disemployment effects among teens, which may reflect labour supply rather than labour demand responses to minimum wages…, we find evidence that the particulars of a minimum wage policy (indexed, one shot, scheduled) might affect how price changes occur within the relevant area. These results can be used to design future minimum wage policies that best temper the pass-through effect.”

May 15

Foreign businesses operating in Thailand offered critical and dissuasive inputs. Vibeke Lyssand Leirvag, chairwoman of the Joint Foreign Chambers of Commerce in Thailand, expressed worries about the 400-baht wage proposal of the Thai government. The chambers believe Thailand is not ready to deal with a wage increase and warned that without a rise in productivity, it could possibly lead to inflation. 

Photo sent to the group.

After being silent for a while, three groups – the Creative Workers Union Thailand and the Freedom Rider Union – joined the chatroom, and unsurprisingly, they spoke in favour of the wage hike.

May 20

Chaiwat Wannakhot, the co-founder of the Creative Workers Union Thailand, a labour union focusing on workers in creative industries, strongly stood up for the cause of the workers, calling out the power of businesses to manipulate the rhetoric.

“It is normal for people losing benefits to oppose. There are groups and associations of capitalists to guide and negotiate with the government, which are what the employees in this country lack, or even if they voice something those are often neglected and the struggles of the workers do not mean much. This often leads to wage suppression by private companies. They are supported by researchers working for them while in reality the rise in minimum wage does not damage the economy overall or people’s lives negatively. If it does, why haven’t countries with high wages fallen apart yet?” he said.

Chaiwat added that a higher minimum wage would be beneficial for workers.

“A higher wage means workers can work less and find time to relax. Now the reason working hours are higher than eight hours per day is because the wages are so low. And the rise of the minimum wage not only benefits people who live on the minimum wage but those with higher wage too. You can take a look at the rise of the 300-baht wage during the Yingluck Shinawatra government.”

Chaiwat cited a research paper, “Natural experiments in Labour Economics and Beyond” by Romesh Vaitilingam in 2021, which aligns with the work of Nobel Prize winner for economics David Card, Guido W Imbens and Joshua D Angrist that showed an increase in minimum wage did not lead to less hiring. Questioning the logic of those opposing the hike, he argued:

“These days even without a rise in minimum wage, the inflation rate is getting higher, prices are increasing and companies are laying off workers and moving their production bases anyway.”
On May 23, Anukool Rahaguna, a network coordinator from Freedom Rider Union – the union of workers in the delivery services – which has been voicing proposals from the group since 2021, told The Nation: “Why do living wages go up only in some areas? And do prices rise only in some areas? A pack of Mama instant noodles costs the same  in Bangkok or in rural areas. This minimum wage hike for only some provinces is nonsense. Why don’t businesses rally to oppose the rise in water or electricity bills or cost of fuel or other goods? Doesn’t this form of ganging up show that they are doing their business by paying very low wages?”

Anukool added the rise in minimum wage would undoubtedly benefit workers, but he also shared his concerns.

“What I am concerned about is, will the employers exploit the employees even more if they pay more? And will this move benefit people who are already working at 400 baht daily wage, too? As a rider, I think this will benefit the customers more but I don’t think it will benefit riders that much because riders are working under a contract with the company […] My other concern is that will it affect the cost of living too? ” 

#Risksofminimumwage #Prices #Inflation
A 2016 research paper titled “The Effects of Increasing the Minimum Wage on Prices: Analyzing the Incidence of Policy Design and Context” by Daniel Macdonald and Eric Nilsson, summed up the link between minimum wage hike and prices.

“Small minimum wage hikes do not lead to higher prices, and they might actually lead to lower prices. On the other hand, large minimum wage hikes have clear positive effects on output prices. Such a finding about the different effects of small and of large minimum wage hikes is consistent with the claim that low wage labour markets are monopolistically competitive. If such labour markets are indeed monopolistically competitive, then small increases in minimum wages might lead to increased employment.”

But another concern is inflation. Will a rise in minimum wage leader to higher prices and open the doors to inflation? The endless debate will make everyone here want to leave the chat. The Nation found another research in 2022, apt for the situation. 

“ Does the minimum wage affect inflation?” by Aleksandra Majchrowka, the research used data from 16 Polish regional labour markets from 2003-2020 and found that even though the minimum wage hike could be a tool to overcome poverty, it could raise the cost of production and reduce profits. The interesting finding is that the hike in minimum wage can affect inflation more in low price elasticity of demand, for instance food, and in regions with strong labour markets, such as big cities. An excerpt from the research aptly sums up the situation:
“The results show that the minimum wage effect on inflation is statistically significant and positive and is higher when food inflation is the dependent variable. Minimum wage effects vary temporarily and across regions. Minimum wage increases are more significant during times of high inflation than in low-inflation periods. As for regional differences, inflationary pressure is greater in regions with strong labour markets and relatively high wages, i.e. regions where companies can pass on more of their increased labour costs to consumers.”

#Sumitup
The discourse has been thematically consistent with the roles of capital and labour in the economy: where businesses persist in maintaining lower wages while workers periodically try to improve their quality of life. While PM Srettha and the ruling Pheu Thai continue to be politically savvy in making pro-labour proclamations, a useful vote bank, no one is actually diving to the crux of the matter: Is 400 baht per day sufficient for workers at the lowest rungs of society to get by? And will implementing this baseline of 400 baht per day truly make a substantive difference in their ability to subsist in difficult and often demanding work conditions?