The Federation of Thai Industry (FTI) is urging the next government to work more closely with the private sector in crafting key economic policies, stating that further hiking the minimum wage – a policy proposed by several political parties – will hurt the low-income sector and be harmful to the economy.
The FTI has prepared its white paper for the new government, in which it calls for the private sector to play a bigger role in creating economic policies and suggests that the government streamline its workforce.
“Moving forward, the private sector should play a more central role in economic policymaking,” FTI chairman Supant Mongkolsuthree said yesterday in an interview with The Nation.
He said that new economic policies should further promote technological innovation, and that both public and private organisations should start focusing on technology to boost their efficiency.
Technology will add value to both labour and goods, which will help boost the income of employees as the cost of living continues to rise, Supant said.
“Furthermore, the new government should consider coming up with a clear roadmap for seriously downsizing its total number of employees,” he said, hinting that the government’s workforce is far too big, leading to diseconomies of scale and causing inefficiency in its organisations.
Also, if the workforce is scaled back, government employees will start earning more, which in turn will boost their productivity – something that is much needed, he said.
When asked which economic policy proposal worries the FTI the most, Supant responded saying a hike in minimum wages remained the private sector’s key concern.
“Increasing the minimum wage will increase the cost for businesses, making them less competitive,” FTI’s vice chairman Kriengkrai Thiennukul said in a separate interview.
This will force many businesses to leave Thailand and opt for neighbouring countries in the CLMV (Cambodia, Laos, Myanmar, Vietnam) region. It may also cause some businesses to try and cut costs by relying more on technology to produce goods and reduce the number of employees.
Hence, he said, unemployment will increase and low-income earners who these populist policies are meant for, may actually end up losing, Kriengkrai said.
“Instead, the government could encourage private businesses to ‘pay by skill’, which will prevent layoffs and allow some workers to be paid well above the minimum wage,” Suphant suggested.
Burin Adulwattana, chief economist and strategist at Bangkok Bank, added: “While hiking the minimum wage may not lead to inflation as some have speculated, it will lead to an economic slowdown as costs for local businesses will rise.”
He concurred with Kriengkrai in that a hike in minimum wage rate may result in workers being laid off, as businesses will try to cut costs by moving abroad or opt for automation to replace their workforce.