16-5-2024 (BANGKOK) A flagship policy proposed by Thailand’s Pheu Thai-led government to raise the daily minimum wage by 14% has ignited a firestorm of opposition from business sectors, who warn that the move could backfire and leave some Thais unemployed while their jobs are taken by low-cost migrant workers.
Just days after Labor Minister Phipat Ratchakitprakarn announced on May 1 that the government would hike Thailand’s daily minimum wage to 400 baht ($10.88) by October 1, key business organizations, including the influential Joint Standing Committee on Commerce, Industry and Banking (JSCCIB), swiftly issued a statement strongly opposing the policy.
“The 400 baht minimum wage is an unrealistically high rate that will adversely affect the economy and investment,” the statement reads, echoing the concerns of many business leaders.
The proposed raise would be approximately 14% higher than the current daily average minimum of 350 baht, but the policy would also mandate that the new minimum be applied nationwide. Previously, when the minimum wage was increased, the floor varied from province to province, reflecting the cost of living.
For instance, the daily minimum wage in provinces near the Malaysian border stands at 330 baht, and an increase to 400 baht would represent a staggering 21.2% jump. In contrast, the minimum wage in the popular tourist destination of Phuket is currently set at 370 baht.
Compounding the concerns, Pheu Thai has also vowed to further lift the minimum wage to 600 baht per day by 2027. While many workers would undoubtedly welcome such a substantial raise, the Kasikorn Research Center and other think tanks caution that such a mandate could trigger inflation and make it increasingly difficult for small businesses to maintain employment levels.
Before the 2014 coup, pledges of minimum wage hikes were a cornerstone of Pheu Thai’s voter outreach strategy, and these promises helped to bolster the party’s popularity. In 2013, the Pheu Thai government of Yingluck Shinawatra raised the national minimum wage to 300 baht, matching the minimum that was already being paid in Bangkok and other major cities.
Now, the JSCCIB, an umbrella group representing hundreds of business organizations, fears that another minimum wage hike would add to the long string of economic hardships that have beset the country since 2020, when the COVID-19 pandemic upended global commerce. Since then, Thai businesses have had to contend with currency volatility, fluctuating energy prices, and geopolitical conflicts, all of which have dented the country’s gross domestic product.
The JSCCIB also fears that a further erosion of Thailand’s economic competitiveness could hamper the export sector, which accounts for more than 60% of the country’s GDP. “Exports are the first sector that would be negatively impacted,” said Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade and Industry. “More than 50% of exporting firms are labor-intensive companies.”
Food processors, fisheries companies, logistics outfits, agriculture concerns, and contractors would all suffer if they had to pay their workers more, according to a report by Asia Plus Securities, a Thai brokerage.
Thai exporters are already facing challenges in regaining their pre-COVID momentum. Exports fell by an average of 1% for the whole of last year, largely due to weak global demand and geopolitical disruptions to trade. While the government and JSCCIB expect exports to recover this year, the JSCCIB has taken higher wage bills into account and lowered its forecast for export growth in 2024 to 0.5%-1.5%, down from the previous estimate of 2%-3%. It now expects the economy as a whole to grow by 2.2%-2.7%, down from its earlier forecast of 2.8%-3.3%.
Additionally, the Employers’ Confederation of Thai Trade and Industry warns that more costly labor could drive manufacturers to other ASEAN nations, particularly Vietnam and Cambodia, which have large populations of young workers and governments striving to attract new investment.
In another potential consequence, a higher minimum wage could persuade Thai employers to hire migrant workers from Myanmar, Laos, and Cambodia for 300 baht per day instead of their Thai counterparts, according to the Federation of Thai SMEs.
“That could add pressure on unemployment and finally weigh on the economy,” said Tanit of the Employers’ Confederation of Thai Trade and Industry.
According to data from the National Statistical Office, Thailand’s unemployment rate was 1.1% in 2024, up from 0.8% the previous year. The jobless rate has been rising in tandem with the demand for migrant workers.
Thailand currently has around 3.4 million legal migrant workers, up from 3.3 million in 2023 and 2.3 million in 2022. Additionally, Thailand is home to an estimated 500,000 illegal workers, according to the Ministry of Labor.
The JSCCIB and hundreds of business organizations have sent an open letter to the government, urging it to reconsider the minimum wage hike. However, Prime Minister Srettha Thavisin maintains that now is the time to raise wages, increase workers’ spending power, and thus stimulate the economy.
