The Wage Committee has announced an adjustment of the minimum wage rates across 7 provincial groups, increasing by 5 to 22 Baht, resulting in a national average minimum wage of 315.97 Baht per day, effective from April 1, 2018. This adjustment considers the previous wage rates in each province, based on criteria such as inflation, cost of living, and provincial economic growth rates.

EIC of Siam Commercial Bank has analyzed the topic “Minimum Wage Increase 2018: Positive Factors Supporting Purchasing Power Amidst Sluggish Labor Market”, noting that the minimum wage has increased by an average of about 3% compared to the same period last year (YOY). Following this adjustment, the provinces with the highest minimum wage will be Phuket, Chonburi, and Rayong, set at 330 Baht per day, while the provinces with the lowest minimum wage will be Yala, Pattani, and Narathiwat, set at 308 Baht per day. In Bangkok and the surrounding areas, the minimum wage will be adjusted to 325 Baht per day. Approximately 12% of the total workforce will benefit from this minimum wage increase, resulting in a wage increase of about 3% YOY, which is similar to the previous adjustment in January 2017.

The increase in Thailand's minimum wage aligns with trends in the ASEAN region, where most countries are also adjusting their minimum wages. The Philippines announced a minimum wage increase in October 2017, averaging 4.5% YOY nationwide, while Vietnam and Cambodia have consistently raised their minimum wages by about 5% YOY and 9% YOY, respectively. Several other countries, including Laos and Myanmar, are also considering minimum wage increases this year, averaging 33% YOY and 25% YOY, respectively.

EIC believes that the minimum wage increase may not stimulate household purchasing power if employment remains sluggish. The current increase of about 3% YOY is higher than the projected inflation rate of 1.1% YOY for 2018, indicating a real wage increase that reflects a trend of basic purchasing power benefiting directly.

However, the purchasing power of this group remains at risk due to the sluggish employment situation. In 2017, despite a 2% YOY increase in the minimum wage, employment for this group decreased by 2.2%, particularly among those working overtime, leading to a decline in average daily income. Consequently, overall purchasing power did not increase in line with wage adjustments. Raising wages during a period of reduced labor demand poses additional risks to a labor market that has yet to recover.

Regarding labor costs in Thailand, they will increase, but at a lower rate than neighboring countries. Although the minimum wage increase will raise labor costs in Thailand, it is not significantly higher compared to wage adjustments in the ASEAN region. Conversely, the gap between Thailand's minimum wage and that of neighboring countries is continuously narrowing, as other countries implement higher wage increase policies. Therefore, the increase in Thai labor costs this time will not significantly impact competitiveness.

Nevertheless, the current minimum wage for Thai workers remains the highest in the region at approximately 9.5-10 US dollars per day after the adjustment, followed by the Philippines and Malaysia at 8 and 7.6 US dollars per day, respectively.

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