The Nation - 3 January 2013

The Labour Ministry is watching carefully for any increase in the number of employee layoffs in the wake of Tuesday's nationwide implementation of the Bt300 daily minimum wage. Pakorn Amornchewin, director-general of the Department of Welfare and Labour Protection, said signs had been detected of a rise in layoffs in two major provinces - Khon Kaen and Phayao - particularly at garment and ceramics factories.

The department has ordered officials to keep a close watch on the employment situation in 29 provinces that have seen relatively large salary adjustments, including Tak, Surin, Nan, Si Sa Ket and Phayao. About 4,000 enterprises will be visited each month. Staff will report to the department on any significant impacts caused by the wage increase.

The government raised the minimum daily wage in seven provinces last April. The measure has affected various industries including garments, finished apparel, and furniture made from rubberwood (wood from the Para rubber tree), and caused more than 1,700 workers to lose their jobs so far.

Pakorn said that according to the latest information submitted to the department, between April 1 and December 25, 57 companies went out of business because of a range of factors, costing a total of 7,063 jobs. Twelve of these folded companies, accounting for 2,524 of the lost jobs, cited the impact of the economic problems in Europe; five cited the impact of the higher minimum wage, costing 1,762 jobs; and 40 firms accounting for 2,777 jobs cited other negative factors such as accumulated losses.

Boonchai Chokwatana, president of Sahapathanapibul, the manufacturing and trading arm of Saha Group, said the January 1 nationwide minimum-wage hike would particularly affect manufacturers that are labour-intensive and export-oriented, as they are sensitive to competition from other countries.

His firm, however, is relatively well positioned to deal with the change.

"At Sahapathanapibul, we face less impact from the minimum-wage increase as we have installed automated machinery as part of our manufacturing process. Additionally, the government has compensated the private sector in the form of reduced corporate income tax from 30 per cent to 23 per cent, and that will lessen the impact of the-minimum wage hike," he said.

Asdaluck Intarakamhaeng Na Ratchasima, director of the Nakhon Ratchasima Provincial Labour Protection and Welfare Office, said the province's 32 districts were home to about 8,452 businesses employing more than 200,000 people. About 4,818 operators, including retail and wholesale businesses, hotels, restaurants and food shops, run smaller businesses employing fewer than 100 people. These firms, which employ a total of 42,107 workers, are seen as being put at risk by the wage increase.

According to Tawisant Lonanurak, secretary of the Thai Chamber of Commerce, Northeastern region, only 15 per cent of the businesses in the region are big factories with the capability to comply with the minimum-wage hike. Another 80 per cent, mostly small and medium-sized enterprises, may face problems and could be forced to lay off employees and delay new employment, Tawisant said.

Boontham Tipplasong, chairman of the Chiang Rai Chamber of Commerce, said the Bt300 daily wage would certainly have a big impact on businesses in that province, most of which are SMEs.

"The wage hike will definitely damage Thai enterprises' competitiveness, especially that of SMEs in the provinces. Production costs for Thai manufacturers will rise, while the Asean Economic Community [AEC, to be launched in 2015] will allow the free flow of goods, with goods from other Asean countries and China being much cheaper than Thai products," Boontham said. The chamber has consistently fought to hold down labourers' pay.

The impact of the nationwide wage increase is expected to be felt in the first or second quarter of this year.

Some SMEs in Chiang Rai will likely have to close down, Boontham said, adding that while the wage increase would boost people's incomes, it would not benefit consumers, as their cost of living would also increase.

Narong Kongprasert, chairman of the Chiang Mai Chamber of Commerce, said most enterprises would find it hard to meet their employment costs and would need to find ways to reduce operating costs this year.

Enterprises will consider layoffs as a final option if their adjustment plans don't work, Narong said.

He said some employers had changed their employment contracts to pay workers daily rather than monthly to reduce their labour costs. Some have increased their production efficiency; outsourced production to subcontractors to reduce staff levels; and increased retail prices to ensure they will be able to survive the impact of the wage hike.

Narong said tourism operators would be hit hardest by the wage increase as they are so dependent on human resources. Some businesses such as SMEs in the garment industry may also be forced to lay off labourers this year if they cannot shoulder the higher costs, he added.

Kriangkrai Danchaivichit, chairman of the Ayutthaya Chamber of Commerce, said local enterprises in all sectors, including agriculture, tourism and manufacturing, would be hit hard by the higher minimum, as they have only just recovered from 2011's disastrous flooding.

"We [business operators] believe that although the wage-increase policy will encourage more spending, most of this additional income would benefit the modern trade sector. The government needs to come up with effective measures to relieve the impact of this policy," he said.

On Sunday, Veena Garment, a factory that had produced lingerie in Wihan Daeng district of Saraburi province for more than 10 years, shut down citing the impact of having to pay its workers more. The closure affected more than 200 people working for the company. Many employees yesterday gathered in front of City Hall to protest against the move by the company, which closed down without informing employees in advance.