ILO chief lauds minimum wage policy

In an exclusive interview with The Nation, Guy Ryder, who took the helm of the United Nations agency on October 1, said the policy to impose a blanket Bt300 minimum wage nationwide next year was a significant step to benefit working people. However, he acknowledged that it was a matter of controversy.

Some employers have complained that the higher minimum will increase their labour costs to the extent that some small and medium-sized enterprises could be forced out of business. This in turn would lead to layoffs.

"I will not say whether it’s a right or wrong level, but the general position of the ILO is that minimum wages can be very healthful and can provide a floor to protect workers. But obviously that floor needs to be set at a level which respects the reality of the economy [and] is not affecting employment creation," he said.

Some business operators are fretting about the higher wage. According to the National Economic and Social Development Board, 5.37 million workers are already earning Bt300 per day, but next year, that will be the income floor for all workers. The policy will raise Thailand’s average wage by 22.4 per cent.

Workers in Phayao, one of 70 provinces where the minimum wage will take effect for the first time next month, will benefit the most, as they are now earning a minimum of just Bt159 a day.

Ryder said that although Asia’s minimum wages have doubled in the past 11 years, Thailand and its Asean counterparts had to do more to ensure that workers get a fair share of economic prosperity.

"The labour situation in Thailand is quite positive. With this economic growth rate, Thailand has low unemployment. This is a good start. However, Thailand now faces challenges: how to make sure that ... the benefits of economic growth are shared fairly and [that] it produces social progress," he said.

Ryder was in Bangkok last week as part of his first visit to Asia in his new role. During the visit, he had discussions with Prime Minister Yingluck Shinawatra, Labour Minister Padermchai Sasomsap and other senior government officials. He also met representatives of workers’ and employers’ organisations.

In general, Ryder said wages tended to be sustainable if they were set according to productivity. When productivity grows, that mean workers can produce more and wages can follow the upward trend.

Some employers in Thailand told him that the wage was being increased too sharply in some parts of the country. Ryder said these worries were particularly acute in a small part of the country and only in some sectors of the economy.

"I have to say that my information is that minimum wages have not gone up for a long time. Productivity has gone up but minimum wages for the last 10 years did not follow. This increase could be seen as a catching up [with the rise in] productivity," he said.

Regionally, Thailand and Malaysia are starting to look at wages.

As countries in Southeast Asia will soon start opening the Asean Economic Community, which will allow some professionals and workers to move freely within the region, Ryder strongly suggested that this regional economic integration should be matched with social dimensions and protections such as pensions, healthcare, and unemployment insurance.

Asia’s future prosperity will not be achieved through cheap labour, he said. Rather, the region should focus on better-qualified and educated labour that can produce high-value goods.

"Upgrading labour standards, upgrading education, and production and productivity and know-how - we are moving into the knowledge economy," he said.

The ILO this month released the "Global Wage Report 2012-2013", which showed the ratio of workers’ incomes to the gross domestic product. Asian wages doubled between 2000 and 2011, while globally real average monthly wages grew by just under a quarter in the same period. In the developed world, the increase was only around 5 per cent over the period.

But while wage growth was higher in Asia, it was from a very low base. When looking at the average wages in developing countries in Asia, they remain far lower than in Western countries, with average manufacturing wages in India, China and the Philippines still well under US$2 (Bt62) per hour, compared with $12.68 in Singapore and $18.32 in Japan.

Ryder said countries needed to strengthen labour institutions to increase workers’ bargaining power. This should help raise their income ratio, garnering them a higher share of economic prosperity.

"This is the way that labour can get a fair share of economic growth and distribute growth equally or fairly," he said.