Here Comes Phuket's 300 Baht Minimum Pay Rise, Ready or Not
Thursday, December 15, 2011
PHUKET: Governor Tri Augkaradacha signed paperwork today approving the introduction of the controversial 300 baht minimum wage on Phuket from April 1.
Some labor costs are expected to increase from that date, with at least one Phuket security company writing to inform customers that fees will rise by 40 percent with the introduction of the new daily pay rate.
Phuket resorts are likely to set mimimum rates for junior employees that for the first time for some include tips and service charges. This will mean the resorts absorb the new minimum without an increase in costs.
Phuket, Bangkok and five other provinces are to be pioneers of the Government's 2011 poll promise to lift and standardise the minimum wage to 300 baht a day.
Instead of monthly adjustments based on increments in the cost of living province by province, the new national minimum wage will be reviewed once a year.
Before the old scheme ended, Phuket was the province with the highest pay rate of 221 baht a day while in other provinces workers on the daily rate earned as little as 158 baht.
With the rate on Phuket rising before most of the rest of the country, some workers are expected to head for Phuket and the better pay rate. Yet on Phuket, the cost of living remains greater than in all the other provinces.
Observers see the increase as another inflationary pressure that will have a flow-on to virtually every business on Phuket, driving prices still higher. The higher the prices go, the less competitive Phuket will become when compared to other destinations.
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@Observers see the increase as another inflationary pressure that will have a flow-on to virtually every business on Phuket, driving prices still higher. The higher the prices go, the less competitive Phuket will become when compared to other destinations.
Prices are high for tourists because all tourism related-businesses must give up to 60% commission to large tour-operators, local tour-counters and touts otherwise......NO CUSTOMERS....That's it.
The day when all government agencies will do the job properly to control the too many illegal businesses done by Thais and foreigners alike, we will be in a fair competitive businesses where quality will services will be more important that how much commissions each middle-people will get.
Tackling corruption in Phuket should be the first step in the right direction.
December 15, 2011 13:53
"Observers see the increase as another inflationary pressure that will have a flow-on to virtually every business on Phuket, driving prices still higher. The higher the prices go, the less competitive Phuket will become when compared to other destinations. "
Actually I am an observer and I am happy to see this change. If resorts are not actually giving any extra money by signing new workers as you described...it shouldn't hurt. Anyways, owners are too rich and workers too poor! This is a huge step in the right direction for the poor workers of the island!
December 15, 2011 17:02
Whoooo hooooo. Higher prices - less tourists, less development. A huge win-win for what's left of Phuket's embattled environment. Bring it on:-)
December 16, 2011 08:21
OK J. One more time and let's keep it simple.
Employees cost Co. A 40% more to make something. Production stays the same so they are forced to raise their price because 40% is probably about their gross margin. Lets say conservatively 15%.
It Costs Co. B. 40% more to ship the mfg goods. Their production stays the same. So they are forced to raise their price. Lets say another 15%. So at this point real costs have risen 30% and total costs probably more. In service industries these costs increases would be even higher.
The distributor is now paying 15% more for the goods and 15% more for shipping plus their own payroll goes up 40%. So they have to pass on at least their cost markup of 30% and something for their employee costs. Let's say another 10% again conservatively.
The retailer's costs have gone up 40% when they buy from the distributor. Their employee costs have gone up 40%. This means that they have to raise their prices to meet these costs and this is probably conservative but lets say the end goods are up by 50%. If there is no distributor then the rise will be at least 40% and again that is conservative.
The workers wages have gone up 40% before tax. The cost of groceries has gone up 40-50%, their rent will go up, their gas will go up and their personal costs will go up nearly as much. In the end (conservatively) they will have less disposable income than they had before the increase. So now they have less to spend than they had before the pay hike.
Now consider that this will undoubtedly reduce spending and that will reduce employment. So now fewer people will have higher incomes and costs will be higher for everyone. The "rich" owners will not absorb any of these costs. But even if they absorb some of it prices will rise dramatically, 40% increases compounded up and down the line will have an exponential affect.
So who suffers? The rich who pass the costs along and have high disposable incomes or the poor who have a thin margin between earnings and spending?
What about the small business owner whose margin is closer to 20% or lower? Such cost increases could push him from profit to loss especially if he has declining sales which one would expect.
There also will be a drop in overall spending because costs are higher and those dollars do not go as far. People put off purchases in inflation. Less tourists, less customers means less employment. Which means less competitive pricing which leads to low or no growth which leads to ... this is why they call it an inflation spiral.
Raising salaries without a raise in production is inflation. Inflation is rising costs without rising value. That is it's definition and this certainly fits.
You say you are happy with this change. Since the editor has explained that this will hurt the very people it was meant to help in several articles that you have posted on, it suggests to me that you are happy to see the poor have less, to see the local legal businesses close and to see more unemployed.
Or I think your sentiment may be in the right place but your misunderstanding of basic economics is leading you to a callous and unfeeling conclusion. No one disagrees with your desire (to see better living conditions for Thai's and more money to the poor) but if you are really passionate about helping change that you need to do some thinking about where this policy will take them.
If it was just as easy as raising wages then every country would just raise wages and be done with it. They don't and the above cycle is the reason why.
December 16, 2011 16:59
It won't stop me paying the Burmese waitstaff in my restaurant 150 baht per day per head, because they are happy to receive that and my many customers are also happy to pay reasonable prices for their meals too compared to other restaurants in Patong. I know for a fact that 150 baht a day, although not a high salary by any means, is still about 50% higher than they would be receiving back home in Burma. It's a win-win situation both for staff, customers and of course for me as the restaurant operator.
December 16, 2011 21:31
Anonymous, you are kidding yourself, your workers and your customers. Ask your workers whether they're happy with 150 baht or whether they'd prefer 300 baht. If your customers knew you were paying your workers so badly, most of them would move to other restaurants. Minimum wages are set to remove this kind of slavery. It's not a win-win for anyone except you.
In your first post on this topic, you said: ''The 150 baht a day is around 3 times what one of them told me she earned in Burma, so what's the problem?'' Now you say it's just 50 percent higher. You're the worst kind of modern-day apologist for greed - your own greed.
If your vicious cycle would be true, everyone would diminish the poor people income to get them richer.
1. It is the low end of the income, that gets a boost.
2. Higher income lead to higher productivity, because now better equipment is worth to use. For example: you pay a guy 150 Baht a day, you let him refurbish used nails, as he is cheaper to pay, then buy a pack of brand new ones. Also higher payments lead to better education of the workforce, because it is worth to invest into the worker. If they work better, you can get things done faster. Does not apply if you pay near to nothing to the workers.
3. Your cycle: Product cost in the shop 100 Baht. Distributor gets 50 Baht, has costs of 40 Baht. Production costs 20 Baht. Transport to distributor 20 Baht. Profit for producer and transporter each 5 Baht.
Now price increase: 40% increase of 20 Baht to 28 Baht. Plus 5 Baht profit means production now 33 Baht. Transport cost 20 Baht and 15% increase, means 23 Baht. So now we have price increase for distributor to 33+28 Baht= 61 Baht.
Distributor cost up to 56 Baht + 10 Baht profit means price for product ex distrib. up to 127 Baht. A increase of 27%.
That if (!) distribution, production, transport rely only on lowest paid workers (untrue), if nobody of the three parts can do some improvement of productivity (totally untrue), and if all owner will be able to keep their profit the same. Maybe some products will fade out but will make room for new ones.
Compare with income increase from 221 to 300 Baht is a increase of income of 36%. Leaving more money into small consumer pockets is THE solution to growth problems worldwide.
In five years time, when Phuketwan will retrospectivey look back on this issue, they will judge and see, that though in the beginning businesses struggled, it was on thing, that helped let Phuket come out of its environmental and moral path downward. That business men have a problem in paying its employees (who do not work at all....) mandatory a higher income is natural. And if they loose some part of their excess (compared with the low paid workers) income, then that will balance the country to a more healthy equilibrium.
December 17, 2011 01:43
So you are saying, because Burmese get paid more in this country than their own they should be happy?
But since cost of living is a lot more, how does this make them happy.
Personally, I would report you to the labour office myself. I would help you get what you deserved.
It's people who abuse the workers and the system that make it impossible for this country to improve.
So what do you say? You got the guts to name your restaurant?
March 18, 2012 01:07
if bosses had their way there will be no wage rises this decade this milennium or the next one, keep everything short sighted and in the dark ages.
how proud annon must be paying his (Most likely) illegal burmese workers 150 bht a day and no intention of changing. Hang your head in shame!
March 18, 2012 01:50
Good to see it is going to happen. I can easily spend 10k-15k baht a day in Phuket - its good to see the workers that give me such a great experience will enjoy life that little bit more.
I will continue to tip well - every little bit counts to all!
March 18, 2012 16:20
Is there going to be any government education/training assistance programs associated with this wage increase? Most employers would agree that it is extremely difficult in Phuket to find staff that are conscientious, punctual and worth the money they are getting paid. They are around but are few and far between. Most workers receive more than the rate mentioned here already (and deservedly so for the ones that pull their weight) but are, quite frankly, not worth the money. It is staff shortage that keeps a lot of people in Phuket in a job. When you look at other provinces, staff in Phuket are getting too much and giving too little. The majority of staff are not trained in the jobs they are doing and this is the main problem (and I'm not saying this is their fault, the options for training are not readily available to most people, as they are in developed countries). If they were trained, they would have more confidence and thus pride in the job. We all need to believe what we are doing is meaningful and appreciated. If you are just thrown into a position through necessity, that for one, may not be what you want to do, but you need to so you can survive, then it is destined for failure for both employer and employee. People are happier to go to work, knowing that they are part of a team that is appreciative and supportive of them and that they have the skills from being trained to perform their tasks competently. They would be on good money because the business would be benefiting from their competence and customers would be more appreciative because of a higher standard of service. I think the wage increase without any training program will result in people who have little or no skills in positions where nobody will benefit, least of all themselves. There is a shortage of staff in Phuket, but this is only going to attract more un-skilled workers who will only be coming for the money causing more problems than solutions. Every one deserve s a fair go, but this includes staff, customers and employers alike. With a trained, skilled workforce, everybody benefits. Happy customers receiving good service, happy staff who feel important and confident and who have a real future, happy employers who have a competitive workforce. Above minimum wages can be achieved for a business that can progress and build a good standard of service. The only way to achieve that is training people for the right job. Most small businesses aren't making profits enough to be able to send their staff to training, and the staff themselves definitely don't have the money to do it either. And @annon' the Burmese slave driver....I hope, for you, that one day the shoe is on the other foot, then you could honestly see how happy your staff are. if they are making you money, and you say that you are a busier than others around you, share the wealth. 150 b is slave labour, your staff are NOT happy, they just have no other option. Just because they smile doesn't mean they are happy.
March 22, 2012 02:24
300 Baht revisited. And did the world go down? Tourism industry gurgeling for life? Was even growth strangled? No. No. And no.
Doomsayers including Phuketwan proved wrong.
April 8, 2013 17:24
It's a national issue, not a Phuket issue. Many small businesses have closed because they can't afford the increase in wages.
Monday March 30, 2020