Industries Highly Dependent on Labor May See Profits Drop by 5%-15% Due to Minimum Wage Increase

• In addition to geographical differences, variations in cost structure and adaptability also lead to unequal impacts on industries from the minimum wage increase. The Kasikorn Research Center estimates that the overall average Operating Profit Margin (OPM) for the industrial sector may be affected by approximately 4.6% due to labor costs accounting for about 10.2% of total costs, with the minimum wage increase expected to raise overall costs by about 0.5%, assuming other factors remain constant and businesses must raise wages accordingly, even if some do not base their wages on the minimum wage.

• Furthermore, the Kasikorn Research Center believes that industries highly dependent on labor, such as agriculture (farming, fishing, etc.), retail, hotels, restaurants, and construction, will be the groups most affected, with profits potentially decreasing by 5%-15% or more than the industry average. Some businesses in the hotel and restaurant sectors face significant challenges, as the timing for returning to profitability may be delayed due to rising costs. In reality, operators are facing increased costs in various areas but may have limited ability to raise product prices. The figures mentioned above are preliminary impact analyses focusing on labor costs, under the assumption that other factors remain constant, and profits will decline if businesses cannot adjust selling prices.

• Not only labor costs, but the industrial sector has already faced cost pressures previously and is likely to continue experiencing high levels of costs, including raw materials and energy. Additionally, there may still be financial costs amid a revenue situation that, while gradually improving, remains fragile and reflects a recovery trend that is not robust. This means that maintaining profitability will continue to be a pressing challenge for the industrial sector.
• The Kasikorn Research Center views labor issues as increasingly important moving forward as Thailand's demographic structure begins to decline, with an aging workforce leading to a hyper-aged society in less than 10 years. Therefore, improving labor productivity is a crucial task that the industrial sector must accelerate now if possible to maintain competitiveness and survive in an increasingly complex and rapidly changing environment. Historically, labor productivity growth in the Thai industry has been uneven and, at the national level, has increased at a slower rate than in Vietnam.

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