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Thailand: Minimum wage hike seen reducing poverty
Krungthai Compass, a research unit under Krungthai Bank, expects the minimum wage increase to reduce the number of poor workers, improve their income, and broadly support long-term Thai economic growth.
The proportion of low-income labourers who live below the country’s poverty line, earning 2,726 baht per head per month under the National Economic and Social Development Council’s definition for 2020, has been declining for the past 10 years, partly due to minimum wage hikes.
As a result, the latest minimum wage increase will support the income of poor labourers and facilitate the country’s long-term economic expansion, said Chamadanai Marknual, director of business risk and macro research at Krungthai Compass.
Last week, the cabinet agreed to implement new minimum wage hikes from Oct 1. The rate increase varies depending on the geographical location, ranging from an increase of between 8 and 22 baht per day, or between 4.5% and 6.6%.
Mr Chamadanai said the country’s minimum wage rate saw a significant increase to 300 baht per day in 2012. The wage increase reduced the proportion of the labour market that was poor to 9.6% in 2014, from 12.2% in 2011.
Another wage hike during 2017-2018 further reduced the proportion of people classified as poor to 5.4% in 2019, but that increased to 5.8% in 2020, largely due to the impact of the pandemic.
Besides falling numbers of those living below the poverty line over the past 10 years, the wage hikes have also reduced economic volatility from the fragile labour segment. With an uneven recovery now underway, the minimum wage increase would help to accelerate the economic rebound, Mr Chamadanai said.
Krungthai Compass expects the new minimum wage increase to raise the producer price index in a range of 0.17% to 0.25% in 2022, and by 0.69% to 1.01% in 2023.
Moreover, the rising wages are set to increase the inflation rate in a range of 0.03% to 0.04% in 2022, and by 0.13% to 0.20% in 2023. However, the minimum wage increase is not expected to impact Thai GDP because it would be offset by higher purchasing power, and it would benefit private consumption.
The research house predicts that the higher minimum wage will increase employees’ incomes in a range of 0.36% to 0.53% per month. In addition, it is expected to boost household consumption in a range of 0.27% to 0.39% this year.
Mr Chamadanai said the latest minimum wage increase is reasonable and in line with rising inflation and living costs amid a rebounding economy. Meanwhile, the country’s labour market has been gradually normalising, with the unemployment rate now close to the pre-pandemic level.
Source: https://www.bangkokpost.com/business/2395618/minimum-wage-hike-seen-reducing-poverty