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How much should workers earn?

Posted by arnon_k On October - 11 - 2010

Most people agree minimum wages should rise but say a single nationwide rate is impractical and could have negative consequences.

Prime Minister Abhisit Vejjajiva’s proposal to raise the daily minimum wage to 250 baht nationwide – 21% higher than today’s rate in Bangkok – continues to provoke a lively debate among employers and economists.

Employers say it would be impossible to maintain one minimum wage nationwide, citing different wage structures in each province. Labour unions strongly support the idea, with some saying 420 baht would be a more appropriate rate.

The economic intelligence centre of Siam Commercial Bank (SCB) said that if 250 baht was the final rate, entrepreneurs in 39 of the 76 provinces would be hard hit, because they now pay their workers much less than that.

It said a rate of 250 baht would be 66% higher than the lowest daily wage now paid – 151 baht in remote provinces including Mae Hong Son and Phayao.

The centre’s labour force survey in the first quarter showed the average wage in Bangkok, Nonthaburi, Pathum Thani and Phuket was already higher than 250 baht. Thus, paying 250 baht a day would affect entrepreneurs in those areas only slightly.

Much more heavily affected would be entrepreneurs in Mae Hong Son, Phayao and Si Sa Ket, where the proposed rate would mean a wage increase of 99 baht per day per worker, said the research centre.

Mr Abhisit said that what he proposed was not yet final but insisted the minimum wage must increase. By how much is what agencies must study, and he has asked the Finance Ministry to look into the matter.

Mr Abhisit voiced concern about foreign labour being paid less than the minimum wage.

But critics say the prime minster’s idea of a flat 250-baht rate nationwide is merely another populist policy from the Democrat-led coalition government in case a general election is called. Fugitive former prime minister Thaksin Shinawatra also promised once that the minimum wage would rise to 300 baht if the Puea Thai party that supports him won an election.

“So whether it’s 250 baht or 300 baht, it’s just the same thing – a tactic to win popular support,” said one critic.

Payungsak Chartsutipol, chairman of the Federation of Thai Industries (FTI), said the circumstances in each province were different, such as the ability of employers to pay and the cost of living.

In the end, the issue is up to the tripartite Central Wage Committee, which includes government, employer and labour representatives, and this would depend on various factors, he said.

“People have been saying the rate could rise by seven to 10 baht in Bangkok, but it’s really up to the committee,” said Mr Payungsak.

“However, a single rate for the whole country is inappropriate. We need to consider both the employers and the employees – if employers cannot survive, then neither can their workers.”

The private sector has proposed a wage system based on workers’ skills.

Mr Payungsak said that not only should business operators improve their workers’ efficiency, workers should also improve themselves.

For the long term, the FTI plans to reach out to provincial areas and co-operate with various agencies, he said.

“We want to create a supply chain for business operators in regional areas and for different sectors. We could also provide them with technology,” he said.

Surapong Paisitpatnapong, spokesman for the FTI’s Automotive Industry Club, said labour-intensive industries would face a sharp increase in costs, in turn lowering their ability to compete with neighbouring countries.

“However, in the automotive sector we already provide a considerable amount of bonuses and overtime pay,” said Mr Surapong, adding that increasing workers’ skills is an important element.

Kampon Adireksombat, a senior economist at SCB, said not all occupations should even have a minimum wage, as that would distort the market. It should be left to the market to decide.

Sethaput Suthiwart-narueput, a chief economist and executive vice-president at SCB, called the move “too aggressive and inappropriate”.

He said growth in Thailand’s labour force averaged only one percent over the past decade, lower than for the region.

In the next 10 years, the average will drop to 0.2% due to the ageing population, said Mr Sethaput. “That would be okay if we upgraded skills [among the labour force], but we have not been doing that.”

Out of Thailand’s population of 67 million, 38 million are in the labour force – 17 million salaried workers and 21 million self-employed.

Dr Sethaput said 9 million workers are receiving daily wages, while 8 million earn monthly salaries.

“This way, the willingness of employers to invest in people is going to be quite slow for those receiving daily wages,” he said.

Labour Minister Chalermchai Sri-on said the wage committee had received proposals from each province and would finalise a decision this month, with rates to take effect on Jan 1.

He expressed hope for a “quantum leap” in minimum wages, not just a one- or two-baht increase.

Next year, wages will be based on skills as proposed by the private sector, said Mr Chalermchai.

“The most important issue will be development of human resources. Workers will have to pass a standard skills test,” he said.

Srithai Superware said an increase in the minimum wage to 250 baht a day would add to to its already heavy burden.

At a rate of 250 baht, Srithai would face an extra 2 million baht in salaries for monthly-paid workers or a 10.5% increase.

At a rate of 420 baht as proposed by some unions, the increase would be 41.7 million baht or 40% per month.

For daily-paid workers, the company would have to pay 2.6 million baht more or a 31% increase at the 250-baht rate and an additional 10 million baht or 122% more for the 420-baht proposal.

Srithai currently pays 8,000 to 8,500 baht a month for a 12-hour workday to low-income staff and more for skilled workers.

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