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Fear of SME impact from minimum wage hike

BANGKOK: Promises to hike the daily minimum wage will incentivise investors to relocate production bases to offset the higher wage burden, with financially strained small companies among those to be hit hardest, say business executives.

By Bangkok Post

Thursday 21 March 2019, 09:39AM

Workers process chicken at CPF’s plant in Nakhon Ratchasima. The agribusiness giant expressed reservations about a higher minimum wage. Photo: Apichart Jinakul

Workers process chicken at CPF’s plant in Nakhon Ratchasima. The agribusiness giant expressed reservations about a higher minimum wage. Photo: Apichart Jinakul

We will have to follow government regulation [on the daily minimum wage], but generally speaking investors will relocate their production bases because neighbouring countries have lower labour costs and acceptable skilled workers,” said Sooksunt Jiumjaiswanglerg, chief executive of agro-industrial business and co-president at Charoen Pokphand Foods Plc.

If the daily minimum wage continues to increase, artificial intelligence will replace some of the work once done by the human workforce to offset the higher wage burden, he said.

Although raising the daily minimum wage can be done easily, hiking the prices of goods by 5-10% is an uphill task because several negotiations have to be made, Mr Sooksunt said.

Still, CPF has no issue if the next government decides to hike the minimum wage, he said.

Michinobu Sugata, president of Toyota Motor Thailand, said it’s too early to project any negative impact from a daily minimum wage hike proposed by several political parties during the run-up to Sunday’s election.

We have to wait for the election results and see the actual plan on labour wage issues to forecast and consider any adverse factors for Toyota’s manufacturing operations in Thailand,” Mr Sugata said.

The promises made by the parties are merely assumed figures to campaign on, he said.

The pro-junta Palang Pracharath Party has vowed to raise the daily minimum wage to B400-425, while the Pheu Thai Party has pledged to hike wages to B400 a day.

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Similarly, the Democrat Party has campaigned on a minimum guaranteed salary of B120,000 a year, equivalent to B329 a day. The highest daily minimum wage is proposed by the Commoners Party, at B500.

There are currently seven daily minimum wage rates, from B308 to B330, depending on the province. The average minimum wage is B315.97.

Chon Buri, Rayong and Phuket have the highest rate, while Narathiwat, Pattani and Yala have the lowest.

The last nationwide increase was in January 2013, when a base rate of B300 was adopted by the Yingluck Shinawatra government.

Trade unions are normally proponents of the hike amid demand for a fairer wage for low-income earners, but employers have repeatedly voiced opposition on grounds that a wage hike would derail their businesses through higher costs and cause foreign investors to relocate production bases.

Yeap Swee Chuan, president and chief executive of auto parts maker Aapico Hitech Plc, said a wage hike would hit small and medium-sized enterprises harder than big corporates and affect parts makers more than assemblers because the former employ a greater number of workers and use sophisticated technology.


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Kurt | 21 March 2019 - 11:28:21

Wage hike or not, in Smart countries you see increasing use of automatic systems/artificial intelligence replacing low educated workers. That will go to happen in Thailand too. Thailand, invest in your work force. Educate them. Can not make a Smart country with greedy Hi-So's only. Those only think their own wallets. Any smart social thinking is strange to them.

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