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Higher Minimum Wage sparks controversy in Thailand

Thailand has enacted a national minimum wage that mandates a daily rate of 300 baht or $10. Although workers across the country welcomed the boost in income, some businesses have been laying off employees, complaining that they cannot afford to pay them.

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Thailand has enacted a national minimum wage that mandates a daily rate of 300 baht or $10. Although workers across the country welcomed the boost in income, some businesses have been laying off employees, complaining that they cannot afford to pay them.

A policy to raise Thailand’s national minimum wage was a key platform of the governing Pheu Thai Party of Prime Minister Yingluck Shinawatra in the lead up to general elections in 2011.

The national minimum wage marks a sharp departure from past wage policies that set lower daily rates in provincial regions against higher rates in more industrialized regions closer to the capital, Bangkok.

Since it took effect January 1, Thailand’s Labor Ministry says up to 2,500 people have been laid off.

This month’s enforcement of Thailand’s 300 baht minimum wage will force more than half the country’s small businesses to close in the next six months if the government fails to take concrete action to remedy the situation, according to a university survey.

The Economic and Business Forecast Centre of the University of the Thai Chamber of Commerce conducted the survey Jan 15-17 by randomly interviewing 600 respondents. Two-thirds, some 68.5 per cent, said small businesses will have to close down or lay off workers in the next six months due to the excessive cost, and 68.7 per cent said they would have no choice but to increase prices of their products.

Almost 40 per cent of manufacturers said their businesses have been negatively affected by the Bt300 daily wage since early this month.

Thailand has 24.1 million workers in the informal sector, or 62.3% of the total labour force

Chiwat Withit-Thammawong, chairman of Tak Provinces’ Federation of Thai Industries in northwest Thailand, near the border with Burma, says the pay hikes have resulted in some factory closures.

According to the National Office of Statistics, there are 24.1 million workers in the informal sector, or 62.3% of the total labour force. About 14.5 million of them _ some 60% _ work in the agricultural sector, 31.4% are in the service sector, and 8.6% are in the manufacturing sector.

From the Thaksin Shinawatra government to the one led by his sister, Yingluck, the 300-baht minimum wage policy is probably the populist policy that most responds to the way of life of people in the lower rungs of society, especially the rural poor.

Thai fruit street vendor

Informal workers might not benefit from the 300-baht minimum wage policy.

 

Why? Because the main income of the poor no longer comes from farming, but from daily wages in the informal sector. Other populist policies concerning agriculture therefore have little impact on these people’s way of life that has now changed.

Only one-third of the labour force is now in the agricultural sector

They also produce only 12% of gross domestic product. In farm families, only 10.9% of their income comes from the agricultural sector. More than 60% comes from non-farm activities.

Farming is thus no longer the basis of rural villagers’ livelihoods. The rice pledging policy seems to generate huge incomes for farmers. But upon taking a closer look we find that it does not really make that many changes to their lives.

According to a study by Apichart Satitniramai, at least two to three members of farm families leave home to work elsewhere. Some describe this phenomenon as arising from youngsters’ unwillingness to toil under the sun. But the other main reason is farmland shortages since family farmland has been divided through successive generations until each separate plot is too small to sustain one’s family. Short of land reform, this problem won’t go away. The Thaksin government’s policies on health welfare benefits and other forms of social security, therefore, helps the rural poor a great deal in keeping their heads above water. These policies respond to people’s needs from their changing way of life. That’s why they are popular. So is the 300-baht minimum wage.

In our highly politicised environment, the policy has been under heavy criticism and used as a tool by political opponents to try to topple the government. Of course, we should be critical of public policies. But we should be critical in order to find ways to fix policy flaws and negative side effects, not to overthrow the minimum wage policy _ and the government.

One of the complaints is the higher prices of foods and goods caused by the increase in the minimum wage

This is one of the things the government should deal with more effectively. Another concern is mass lay-offs. To solve this, we need to support the labour movement to bring justice to informal workers.

The sorry plight of informal workers is as important as the minimum wage issue. If the government continues to allow businesses to operate through different layers of outsourcing without labour rights, the majority of workers will still not be able to reap the benefits of the 300-baht minimum wage.

According to the National Office of Statistics, there are 24.1 million workers in the informal sector, or 62.3% of the total labour force. About 14.5 million of them _ some 60% _ work in the agricultural sector, 31.4% are in the service sector, and 8.6% are in the manufacturing sector.

This huge number of workers still lack most basic labour rights. No work security, no fair wages, no work safety, no access to state welfare benefits such as social security, and no right to get organised.

This is because the 1998 Labour Protection Law governs only workers in the formal sector

Given low wages and lack of welfare protection, the health welfare benefits from the government have become very important to these informal workers. As voters, their choice is decided by political parties’ policies that better respond to their welfare needs because welfare support has become an important factor in helping them survive the economic crunch.

Many labour leaders have called on the government to not just focus on winning votes through the minimum wage which will benefit only 8-9 million workers in the formal sector.

They have urged policy makers to look at the welfare dimensions which will help the entire workforce. I totally agree with this stance.

There are also concerns that the minimum wage hike will make employers cut costs in work-related safety and environmental protection measures.

This is an important issue which the government must monitor closely. According to statistics from the Workers’ Compensation Fund, there have been 1,836,411 workers who experienced work-related accidents over the past 10 years. Of this number, 7,710 died or went missing, 148 became disabled, and 30,370 lost some of their body parts. The compensation paid amounts to about 1,500 million baht.

But any financial compensation cannot make up for the loss of one’s body parts, the psychological toll and the poorer quality of life. Illnesses and disability affect workers in various dimensions, from their health, family, society, finances to future well-being. This also represents a loss to the country of valuable human resources.

There are also concerns that the employers will only hire obedient workers and frown on union activities, which will further weaken labour unions. This is also an important issue. At present, there are only about 500,000 workers who are union members out of the workforce of 30 million.

In sum, the minimum wage increase responds to the way of life of the majority of people whose main income is from non-farm work. There will be some adverse impacts from this policy which must be monitored and redressed. But criticisms of the minimum wage hike should be based on concerns of the workers’ well-being first and foremost.

The government must also move beyond the increase in the minimum wage. Workers’ well-being depends on many factors. The government should not reduce the workers’ problems to only one dimension _ the one which they think will win election votes _ without carefully preparing for its adverse impacts.

Unfortunately, this seems to be the prevailing policy attitude since Thaksin’s time in power, which has been passed on to his successors including his sister, without fail.


Prapas Pintobtaeng is assistant professor in political science, Chulalongkorn University.

via Debate Underway on Merits of Higher Minimum Wage in Thailand. and Survey reveals small businesses risk closure due to wage hike

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