Thailand’s minimum wage challenged by Rising Inflation

Finance Minister Korn has previously spoken about a big increase in the minimum wage and then no increases for 5 years so perhaps that is how they may sell it to employers together with decreases in taxes for businesses.* Actually, BP sees the talk of increasing the minimum wage and other measures as a way to balance out the increasing food prices which is becoming a bigger political issue for the government as time goes on.

Reuters Bureau Chief Jason Szep has an interesting analytical piece on inflation in Thailand:

Earning $6 a day from her food stall outside her home next to a railway track, Lumyai Rungruang is sceptical of news that Thailand’s wages are rising. The 54-year-old is too busy contending with spiralling inflation.

Coconut juice has doubled in price. Egg prices are up 50 percent at 90 baht ($2.95) a dozen. Doubtful her income can keep pace, she bristles when pressed about her future.

For the past decade, Thailand’s minimum wage has trailed inflation, creating one of the widest gaps between rich and poor in Asia according to the World Bank, and fuelling working-class frustrations that erupted into violent street protests last year

“I expect to work the rest of my life,” the mother of five said from her makeshift stall with its corrugated iron roof and bamboo stools, where she sells rice porridge and noodles.

Abhisit, facing a close election expected mid-year, said this week he would raise the daily minimum wage by 25 percent over the next two years if his Democrat Party was elected, a break from the past when wages barely kept pace with inflation.

According to Thailand’s Labour Ministry, there were only two years in the past decade when the increase in minimum wage exceeded inflation: in 2001 when inflation was 1.6 percent and the increase was 2.2 percent and 2007 when inflation was 2.3 percent and the wage rose 3.1 percent.

BP: Finance Minister Korn has previously spoken about a big increase in the minimum wage and then no increases for 5 years so perhaps that is how they may sell it to employers together with decreases in taxes for businesses.* Actually, BP sees the talk of increasing the minimum wage and other measures as a way to balance out the increasing food prices which is becoming a bigger political issue for the government as time goes on.

There are also ever increasing meat prices. The Nation in February 2011:

The move came after the ministry received a lot of complaints. For instance, the price of pork has increased since last month by Bt10 per kilogram to Bt115-Bt120, while eggs have gone up from Bt2.90-Bt3.00 per egg to Bt3.10 now.

Ministry spokesman Chatchai Chookaew said yesterday that Commerce Minister Porntiva Nakasai had ordered the Internal Trade Department to look into the production cost of feed meal and whether it is in line the rise in retail prices of these main foods.

However, prices are expected to increase at the end of March when some price controls will expire per the Bangkok Post:

An index of consumer prices increased 2.87% in February from a year earlier to stand at 109.95 points, compared with a 3.03% increase the previous month.

Two-month inflation was at 2.95%, so the ministry projected first-quarter inflation would not exceed the central bank’s target of 3%, said permanent secretary Yanyong Puangrach.

The food and beverage price index last month rose by 5.15% from the previous year, while the non-food price index increased by 1.53%. Core inflation in February grew 1.45%.

However, inflation is likely to spike in the future as several government measures, including price caps on some food staples like eggs and sugar, expire at the end of March. The ministry expects 2011 inflation between 3.2-3.7%.

Originally posted here:
Will inflation damage Abhisit’s election chances?