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Vote-getting wage rises ‘could fuel inflation’

Vote-getting wage rises ‘could fuel inflation’

THAILAND: Business leaders have warned that populist promises by political parties to raise the official minimum wage could fuel inflation.

Friday 10 June 2011, 03:47AM

The Democrat Party and the Pheu Thai Party, the two biggest parties contesting the coming July 3 parliamentary election, have promised wage increases in an attempt to win votes.

The Democrats have promised to raise the minimum wage by 25 per cent within two years, while Pheu Thai is promising an across-the-board rise to B300 a day.

Currently, Phuket has the highest minimum wage, of B221 baht a day, with Bangkok workers getting a minimum of B215.

The Bangkok Post quoted Payungsak Chartsutipol, the chairman of the Federation of Thai Industries (FTI), as saying that the FTI would want to see the next government preserving the current system, whereby minimum wages are decided through discussion between representatives of the government, the private sector and labour.

“Any increase in wages should be tied to efficiency and productivity,” Mr Payungsak added. “Right now, Thai labour has one of the lowest productivity rates in Asia. Productivity growth is just three per cent a year, less than that of Vietnam and Indonesia.”

Mr Abhisit, speaking to Thai and foreign business leaders on Friday (June 3), justified the party’s wage promises as necessary to help people cope with rising costs.


He said the Democrat plans would take into account living costs for each area of the country, and he criticised Pheu Thai for its blanket B300 a day as “misplaced” and out of touch with real costs.

Tackling accusations that a rise in minimum wage would simply cause spiralling inflation, Mr Abhisit said, “We will also push for cuts in other business expenses, including import taxes on machinery and capital goods and new tax deductions for companies based on the added costs incurred from salary hikes.”

In any case, Thai companies need to shift away from the mentality that wages need to be held in check to support export industries.

Such policies have only hindered development of the domestic market, due to limited growth in consumer purchasing power, Mr Abhisit said.

Pichai Naripthaphant, a member of the Pheu Thai economic team, was quoted by the Post as saying that the party’s policies – it also plans to set starting salaries for new graduates at B15,000 a month – were based on predictions of more Japanese manufacturing coming into Thailand.

Noting that Pheu Thai wants to see a shift away from labour-intensive industries, Mr Pichai said the cost of higher wages would be offset by Pheu Thai’s plan to reduced corporate profit tax from the current 30 per cent to 23 per cent by next year and 20 per cent by 2013.

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