Thailand’s Cabinet approves the daily minimum wage hike by Baht5-6

Construction News

Thailand’s Cabinet approves the daily minimum wage hike by Baht5-6

12 December 2019

The Cabinet on December 11 approved the minimum wage increase according to the proposal by the National Wage Committee.

In spite of the promises made by political parties before the general election, the minimum wages nationwide will increase by Bt5-6, pushing the minimum wages to Bt313-336 (US$10.36 – 11.12) per day.

The daily minimum wages will increase by six baht for nine provinces and five baht for 68 provinces.

Thailand’s minimum wage varies, depending on the cost of living in respective provinces. The new minimum wage is average Bt321.09 per day, compared to the old rate of Bt308-330 per day or an average Bt315.97.

The highest daily rate of Bt336 will be applied in Phuket and Chonburi. The lowest wage of Bt313 per day will be applied in the three deep southern provinces. The minimum wage in Bangkok is Bt331.

The new minimum wages will be effective from January next year.

The new wages are below the promises made by political parties both sides of the aisles before the general election. For example, Palang Pracharath Party earlier proposed to increase the wages to a maximum Bt425 per day in three years while Pheu Thai Party vowed to hike the minimum wage to Bt400.

At any rate, the decision makers viewed that the rates are practical for the time being since the country’s economy performs worse than initial projections.

Thailand’s GDP growth was higher than 3 percent earlier this year during the general election season. However, the growth in the third quarter this year dropped to 2.4 percent year-on-year.

Industries expect that the new minimum wage hike is unlikely to have a significant impact on prices because it marks an increase of only 1.6-1.8 percent of business costs.

Nonetheless, the extent of effects varies according to each business sector. The labor intensive industries are likely to suffer the most, especially small companies which depend on the manual workers or those in service sector.

According to the Office of Small and Medium Enterprises Promotion, small and medium sized enterprises employed 80 percent of the total workforce in the private sector in 2017. Larger companies use less percentage of workers because they incorporate more automation and machinery in their operation.

Meanwhile, Kasikorn Research Center projected that the effect from the minimum wage hike on the headline inflation rate in 2020 will be small. It may push the inflation rate by an additional 0.05 percent from the base case estimations.

Kasikorn Research forecasted the headline inflation rate in 2020 at 0.7 percent, and this estimation has incorporated the prospective wage increase in 2020.

It also noted that an increase by 1.6 percent of minimum wage will have a negative net effect of 0.01 percent on the Thai GDP in 2020.