Higher minimum wage wouldn't increase inflation: BOT
An increase in the minimum wage would not put too much additional pressure on inflation, but the government should reduce the cost of living for low-income people through temporary compensation, the Bank of Thailand said yesterday.
Governor MR Pridiyathorn Devakula said a higher minimum wage would not affect the inflation rate as the central bank had already included a wage increase in its economic forecasts. A BOT source said an increase in the minimum wage would cover just unskilled or new labourers, who are only a small proportion of the workforce. A tripartite wage committee will have to study the current cost of living and the necessity of a wage increase before making any decision. A wage adjustment should improve the quality of life for these people, said the source. She added that research had found the minimum wages in some provinces were higher than actual living costs, but that they were lower in other provinces. An increase in the minimum wage is one of the government's measures to reduce the burden of the rising cost of living for low-income workers affected by high oil prices and interest rates. Headline inflation in May surged 6.2 per cent and core inflation rose 2.7 per cent. Pridiyathorn said earlier that headline inflation in June was likely to be higher than the previous month. Theoretically, a higher wage will put pressure on inflation. This is called cost-push inflation, in which wage increases cause prices of products to rise, resulting in increased inflation. Earlier, Ampon Kittiampon, National Economic and Social Development Board (NESDB) secretary-general, said wages accounted for only 16 per cent of the cost of production, of which 10 per cent is the minimum wage. The BOT source said the government should provide other compensation for low-income workers rather than a wage increase. The compensation should be withdrawn when the inflationary pressure subsides. An increase would lessen the country's competitiveness in the eyes of foreign investors. The Thai minimum wage is relatively higher than other countries, said the source. "We should provide other choices to help workers, rather than pushing up the minimum wage," said the source. Higher wages would hurt the manufacturing industry, which has apparently reduced its workforce to cope with skyrocketing oil prices. According to the NESDB, , manufacturing employment in the first quarter fell by 1.2 per cent to 6.74 million.
Anoma Srisukkasem The Nation
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