Bangkok (dpa) – Come April 1, Thailand will join the ranks of South-East Asia's increasingly costly labor markets, with a hike the minimum wage that not everyone is convinced will be in the workers' best interests. The ruling Pheu Thai party is to keep a campaign promise and raise the minimum wage in Bangkok and five surrounding provinces, plus Phuket island, to a flat 300 baht (9.80 dollars) – about 295 dollars a month. The new rate, which represents an increase of around 40 percent, will be applied nationwide next year. Wages are on the rise in China and South-East Asia, historically the favorite investment destinations for industries reliant on cheap labor, and where the minimum wage is earned by the majority of workers. In China during the first three months of this year alone, workers' wages rose more than 10 percent, reaching 230 dollars a month in Shanghai, 240 dollars in Shenzhen and 200 dollars in Beijing. In Manila, the minimum wage is about 10 dollars per day, and in Jakarta, it is about 169 dollars per month, after recent increases. The Vietnamese government in October raised the minimum wage from 66 dollars a month to 94 dollars, a 42 percent jump. In Cambodia and Myanmar, average monthly wages are still low at 66 dollars and 50 dollars, respectively. Malaysia has no minimum wage yet, but Prime Minister Najib Razak was expected to announce one soon, perhaps on May 1. It is likely to be set at between 266 to 300 dollars a month. Boosting minimum wages has become a means of winning votes in Asia's emerging democracies, and keeping a lid on dissent in the not-so-democratic countries. Wage hikes of 13 percent per annum are part of the five-year plan in China, as the world's most populous nation strives to bolster domestic spending, keep people satisfied and join the ranks of the rich countries. “Rich countries pay rich wages,” said John Ritchotte, International Labor Organization's specialist on labour relations in South-East Asia. “That's a lesson that seems to be lost on other policy makers in the region, like Thailand, where the only model they have is a low-wage one.” Bangkok may be raising wages, he said, but it is going about it the wrong way. “The 300-baht decision is a political one, not an economic one,” Ritchotte said. Better would be to allow workers some organized representation to negotiate themselves a share of improving profits, he said. That said, he added, a wage increase was overdue. “It's clear that average wages in Thailand, adjusted for inflation, have been declining over the past ten years so they clearly need to increase them.” The Democrat party, now in opposition, is also critical of the move. The party promised to boost minimum wage by 25 percent nationwide as part of their unsuccessful bid for re-election in July. But it was one-upped by the Pheu Thai Party, which promised a flat 300 baht wage nationwide, ignoring the previous system of different rates for different provinces. The flat rate proved a winning campaign strategy, acknowledged Democrat deputy leader Korn Chatikavanij. “But frankly, the 300-baht rate is a big adjustment for manufacturers to adapt to, especially right after the floods,” Korn said. Floods across Thailand's central plains in October and November killed nearly 700 people, wrecked millions of homes and hectares of crops, and forced hundreds of factories to shut down, disrupting the global supply chains in the electronics and automotive sectors. Now, just as some are reopening, the factories are facing a hike in minimum wage which will affect most of their employees, along with the majority of the country's workers. The administration, however, has defended the initiative. “It's probably too much for the very small businesses, but I think the medium-sized and big business will be able to handle it,” Industry Minister Pongsvas Svasti said. To ease the burden, the government has cut the corporate tax from 25 per cent of profits to 23 per cent. Few expect a surge in unemployment, which is now below two percent, because of a shortage of skilled and unskilled laborers in Thailand. But to really increase individual wealth, economists argue that the government needs to do more than just raise the minimum wage. These measures just reduce competitiveness or are pass costs on to the consumers in the shape of higher prices, driving inflation, experts say. “The main issue for Thailand is to restructure the industrial sector by increasing productivity and providing tax incentives for companies to invest in research and development,” said Nipon Paopongsakorn, President of the Thailand Development Research Institute, a think tank. These measures are necessary “so the country can go up the value-added ladder,” he said. BM ShortURL: http://goo.gl/hHlzL Tags: Economy, Labor, Thailand, Workers Section: Business, Features, Latest News, Southeast Asia
