Mixed feelings in business sector about daily wage rise

While some see it as a positive move to boost the overall economy and improve the financial well-being of workers, others are concerned about its impact on production costs and consumer prices. The effects on different industries, such as real estate, construction, agriculture, and manufacturing, will vary, and government policies and industry responses will play a crucial role in shaping the outcome.

Here some leading business leaders express their views.

Wage increases should be gradual

Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association (THA), says that while the government's policy to increase the minimum wage to 400 baht per day will have positive effects on the labour market and the flow of money in the system, the plan to raise the daily wage to 600 baht per day within 2027 would impact the cost of business operations, especially for SMEs. The Thai Hotel Association has thus requested the government to reconsider this policy and take into account the economic situation and potential in each province, as many areas are still recovering from the impacts of Covid-19. There is also the issue of high energy costs, gas, and electricity, all of which continue to be significant expenses in the hotel industry, along with the problem of labour shortages in the service sector.

Chamnan Srisawat, president of the Tourism Council of Thailand (TCT), said he has no issue with the policy of gradually raising the minimum wage to 400 baht per day. However, he wishes the government would implement wage increases more gradually, as an abrupt increase would cause distress for tourism operators and hotels.

The planned increase to 600 baht per day by 2027 will likely require business operators to find ways to control costs, such as increasing the proportion of part-time employment to maintain productivity.

Tourism operators and hotels are already paying wages and adjusting them according to skills, he stressed. When the government proceeds with a wage increase policy, it should be based on upskilling and reskilling, and it should assist the private sector in upgrading the skills of the workforce, he added.

At the same time, he hopes the government will introduce measures to help businesses reduce other costs, such as electricity and water, and implement tourism stimulus programmes, similar to the previous government’s “We Travel Together” project. This would boost income from the domestic market and reduce the risk of foreign market dependency.

Foreign investors may look elsewhere

Wasan Kiangsiri, president of the Housing Business Association, noted that the policy of raising the minimum wage to 400 baht and 600 baht by 2027, an average increase of 14-15%, requires cooperation from all parties involved. If not carefully managed, it could lead to workforce reductions for some businesses, while those who remain may have to work longer hours. A balance must therefore be found because if wages rise without control over product prices, there will undoubtedly be consequences.

From the long-term perspective, he warned that high wage increases could lead foreign investors to consider investing in neighbouring countries where labour costs are lower.

Housing prices will also be affected, he said, adding that businesses should focus on cost management.

Peerapong Jaroon-ek, president of the Thai Condominium Association and CEO of Origin Property, holds a different view. He believes the wage increase policy, which he sees as acceptable because it increases people's income, will have a positive effect on purchasing power, especially in the real estate sector.

In terms of its impact on costs, the minimum wage increase to 400 baht will have a minimal effect, and he sees no need to adjust prices unless it goes up to 600 Baht per day, which would have a more significant impact.

Vittakarn Chandavimol, executive vice president at AP (Thailand), stated that the increase in the minimum wage to 400 baht may have a 1-2% impact on costs and could affect prices due to other associated costs such as construction materials and continuously rising land prices. Overall, it could influence price adjustments, even though labour costs are not significantly high compared to other costs.

AP has plans for cost management by purchasing materials in advance to control costs, enabling them to maintain product prices suitable for consumer demand.

Sutee Ketsiri, managing director of Built to Build Group, expressed concern that the gradual increase in the minimum wage to 600 Baht by 2027 from the previous average of about 353 baht per day, would impact the real estate and construction industries. This could lead to a further increase in house prices, driven by increased labour and construction material costs. Additionally, the government's policy to distribute 10,000 baht digital cash to stimulate the economy is expected to result in clear price increases for various products.

He added that the Thai economy has shown signs of improvement since the establishment of the new government and that confidence among consumers and the export sector is gradually recovering.

Rise in labour costs to affect housing prices

Tritecha Tangmatitham, managing director of Supalai Plc, felt the increase in labour costs would help the overall economy in the long term as it will improve customers' future wealth. However, labour costs are related to the already rising housing prices. At the same time, when the economy improves, overall consumer spending increases, so there should be no major problem.

The government must quickly and transparently allocate the budget to drive the economy to allow the real estate sector to grow alongside the country's infrastructure, such as new roads and railways, which will expand the market and create more locations for real estate projects. Additionally, the announcement of new city plans will also lead to market growth. If the new government can kick-start the economy, the real estate market will undoubtedly thrive in the next 2-3 years, according to Tritecha.

For his part, Apa Ataboonwongse, CEO of Richy Place 2002, views the increase in the minimum wage to 400 baht positively, saying that although it will increase construction costs by more than 10%. companies should be willing to pay more for labour to ensure an adequate workforce. While technology can help, it can only partially compensate for the labour shortage, so higher labour costs are necessary. However, these increased labour costs may affect overall production costs and lead to higher prices, which consumers will have to accept.

Positive effects on food production but farmers could suffer

Khem Wanglee, managing director of SMS Corporation, a leading producer of high-quality modified tapioca starch, agrees with the wage increase policy. While it may impact labour-intensive industries, including agriculture, which relies heavily on a large workforce, it could help transition the workforce from low-wage to high-wage jobs. However, he calls for government support in implementing agricultural innovations and technologies to increase the value of agricultural production.

On the downside, agricultural sectors, especially those involved in cultivating cassava, which rely on a large labour force, may be affected negatively affected. Thailand is a major agricultural producer, he pointed out, and the increase in labour costs could affect the entire industry, leading to price adjustments for agricultural products.

Thai President Foods' general manager, Pun Paniangvait, expressed the view that the policy of raising the minimum wage to 400 baht per day should not be enforced uniformly across the country. He believes it would have more negative than positive impacts on businesses and manufacturing. He cites the 2011 wage increase to 300 baht per day as an example of a policy that did not provide the right solution and led to centralisation instead of decentralization. He believes it would not be a major concern if there were an influx of foreign labour into Thailand due to the policy, as the country is currently facing a labour shortage, particularly in labour-intensive industries.