Thai minimum wage increases will not destroy the economy

In my July 30, 2011 editorial to the Bangkok Post , I point out the logical fallacies with an argument in an article asserting that the pro...

In my July 30, 2011 editorial to the Bangkok Post, I point out the logical fallacies with an argument in an article asserting that the proposed minimum wage increase to 300 baht a day will destroy the Thai economy.

In the editorial “Wage Increase will Crash Thai Economy”, I find Terry Weir’s assertions that a minimum wage increase to 300 baht will lead to economic collapse and even hyperinflation are based on fiction rather than grounded in fact.

Firstly, we need to bring the whole wage issue into perspective. In China, average minimum wages range from 850 to 1350 Yuan a month (3,900-6,230 baht). Assuming a 20 day work month, one person under the new 300 baht minimum wage would be earning a monthly income of 6,000 baht. In other words, Thailand is still very competitive even when compared on the international arena.

The idea that raised wages will lead us back to a repeat of the 1997 Thailand economic crisis demonstrates a lack of understanding of the root causes of the meltdown, which includes lack of financial oversight and controls, as well as reckless overseas borrowing and uncontrolled loans. Similarly, hyperinflation in Zimbabwe is a result of systematic collapse of their economy caused by poor governance and insufficient fiscal discipline. It should be noted here that increasing minimum wages has never been identified as a root nor associated cause in both cases.

What would mostly likely result from the wage increase is a corresponding increase in spending. As people earn more, they will spend more, helping to prime the pump and stimulate the local economy. It will help Thailand to defend itself from the effects of the wavering European and American economies as we decrease our reliance on export-led trade in favour of local consumption.

Companies too would benefit, as they would be encouraged to increase production efficiency, whether through improved work processes or automation.

In the long run, this may be the turning point in helping Thailand to shake off low-cost manufacturing, and move into more specialised, higher valued manufacturing. Rather than crashing the economy, it is more likely the increased minimum wage is the paved path to success.

Disclaimer: This article is designed only to describe the logical issues with the article in question. It does not express any political opinions. Any opinions are my own and do not reflect the views of any companies I am or may have been associated with.



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K Bulsuk: Full Speed Ahead: Thai minimum wage increases will not destroy the economy
Thai minimum wage increases will not destroy the economy
K Bulsuk: Full Speed Ahead
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