Thailand's Minimum Wage Increases: Dream becomes Reality

Imagine yourself as a Burmese peasant constantly oppressed by the military regime. You come to Thailand, hopeful of earning a share of its economic prosperity. Instead, you are tricked to work as a slave 24 hours a day for just 100 baht. Peur Thai Party's political campaign in 2011 gave you a strong sense of hope to earn a satisfactory amount while being treated fairly. Now, your dream has become a reality, as the government just announced last Sunday nation wide increases in regional minimum wages by 40%, causing the wages in the Bangkok Metropolitan Regions and Phuket to reach 300 baht a day. The government plans to lift all other provinces' wages to the same nation wide flat rate of 300 baht next year. According to the Bank of Thailand, 3.2 million workers will directly benefit from this policy. The International Labour Organisation says that under equitable terms, there is a need to increase the minimum wages in Thailand as their values have been declining for over 15 years because of inflation. However, the wage increases will put pressure on business costs, especially in labour intensive industries such as wood processing, furniture, textiles and basic metals. Thai Chamber of Commerce estimates that Small and Medium Enterprises hiring 1-25 workers, which consist of 98% of all businesses in Thailand will be affected. 200 thousand businesses will be forced to cease operations or relocate their production bases. Meanwhile, large businesses hiring from 500-1,000 workers will be affected by less than 1%. However, with the current strenght in business investment, the overall short term unemployment rate will only be 0.8%. Inflationary effects caused by increase in spending and business costs will only be around 0.4-0.7% due to the expected 1.5% loss of private consumption from redundant workers and decrease in investment. Labour intensive industries are seeking to move their production base to other cheaper countries such as Indonesia, Burma and Vietnam. The rise in minimum wages reduces Thailand's labour competitiveness. Costs of labour in Thailand is lower than Singapore, but comparable to Malaysia. It is twice as costly as Indonesian labour and 9 times of the Burmese. But our labour productivity is only 1.5 times of Indonesian and 5 times of Burmese. The increase in minimum wage is the crucial and historical process of Thailand's economic restructuring. It pushes businesses as well as labour to become more competitive, productive and efficient. If successful, it will lift many people out of poverty, helping the working class gain a higher quality of life. But the successes also depends on the government's willingness to work alongside the private sector to raise the productivity and efficiency of human capital and quality of education in order to maintain Thailand's labour competitiveness. This extremely crucial for Thailand's integration in the Asean Economic Community in 2015. Dreams may become reality, but are we dreaming for the future or just for votes?