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Phuket Wage Rise May Set Tourism Gurgling for Life
By Alan Morison and Chutima Sidasathian Thursday, December 1, 2011
PHUKET: A Phuket security firm has sent a letter to resorts and other customers warning that its rates will rise by 40 percent from April 1 because of the Government's plan to lift the minimum wage.
Just as December 1 marks the formal beginning of perhaps the best high season yet for Phuket in terms of tourist numbers, the letter from the security firm provides an unwelcome dose of reality.
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Thankfully, the huge blow delivered to Thailand by the Bangkok region floods is now slowly gurgling down the plughole, leaving behind it a filthy economy that will take much longer to clean up than the average bathtub.
One economic catastrophe narrowly averted. Yet already looming just over the Phuket horizon comes the next potential disaster, this time a man-made one.
Phuket and six other provinces are to be pioneers in delivering the Government's election promise that the minimum wage will rise nationwide to 300 baht a day.
Carrying out the promise - postponed from January 1 to April 1 - could put some Phuket and Andaman resort jobs at risk and even make Phuket less competitive, especially if room rates have to go up to compensate.
The letter from the security firm is a reminder than the Government's poll guarantee to voters remains unfulfilled and that the illusory promise threatens to make Phuket - and Thailand - a less inviting and prosperous place for all.
The effect of the minimum wage rise is likely to be felt across the whole spectrum of businesses on Phuket. In theory, there is nothing to prevent even tuk-tuk and taxi drivers from upping their fares, because their daily expenses are going to increase.
For those who do not have such huge profit margins and who actually have competitors, absorbing the shock rise is probably the only choice.
This is especially so at Phuket resorts where competition on Phuket and from rival destinations remains intense. One tourism leader told us that there would be no easy way out.
''Resorts would have to absorb the increase,'' he said. ''They have to maintain security. They have to keep their landscaping in order. And rises to those on the basic wage will bounce back at resorts in terms of increases to goods and services across the board.''
Some resorts may consider limiting the service bonus that generally flows on to all staff, however that's a short-term solution because to pass on such a cost by impacting salaries inevitably means a loss of staff.
Yet Phuket is far from being in the privileged position of a popular destination where its best customers are prepared to pay more for a product that is, if anything, now becoming too popular.
Some Phuket resorts will bask in the sunshine of a prosperous high season, and put off the process of thinking about April 1 and the minimum wage rise. There's certainly a chance that the Government will put it off, too.
There is that big bath to clean.
But the letter from the security firm indicates that others more closely linked to the minimum wage and unable to absorb the increase on April 1 are already obliged to plan for the post-high season.
And a 2012 low season where a huge boost in the minimum wage has to be absorbed -along with a continued slide in customers from Europe - is probably even more worrying.
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Comments
Comments have been disabled for this article.
I totally disagree with anyone who thinks the Minimum wage is a bad idea.
So you increase the staffs wage by 70 baht, so the people at the top don't make so much money. Alas they don't want to do that, they just want to be greedy.
I know restaurants in Patong that pull in over 1m baht a day, and over 50% of that is profit. 3 days profit can pay for all the staff's pay increase.
It's just greed greed and more greed.
Since I already pay my staff twice the minimum wage, for unskilled labor, I don't earn millions and it doesn't affect me at all.
Posted by
Tbs
on
December 2, 2011 07:03
I totally disagree with this article and think it was extremely biased, unbalanced and poorly researched/written perhaps due to the agenda of greedy business owners who invest in Phuketwan? I love Phuketwan so I would hope not... Most hotels in Phuket profit about 30 percent of revenue. I work at a major resort in Phuket where the owners profit about 65 percent of the revenue because they run it very carefully. If I told you all the numbers, you would know how incredibly profitable this business has made the family of owners. The rift between the owners income and that of staff is too big! Especially when the staff are working so hard in the hot sun to serve fat foreigners french fries and beers, clean their rooms etc 6 days per week/54 hours per week with a short lunch break... its sickening. This resort can EASILY give a generous pay increase to staff and it would barely touch their bottom line! To not do so or argue otherwise, I think, would be terrible!!! I believe a minimum wage increase would be doing JUSTICE in a sad situation where the rift between owners and staff income is TOO LARGE DUE TO GREED. I would like to see the owners of big resorts and restaurants live in a room they rent for 3000 baht/month!!! Most staff on this island live in rooms which are tiny and smell bad, its all they can afford! Most staff accommodation, even provided by rich resorts fit this sad description. It would really wake up the elite of Phuket to switch roles with their staff for one week!
Posted by
J
on
December 2, 2011 09:21
Editor Comment:
The views of our advertisers have nothing to do with our editorial content, as you'd know if you were a Phuketwan regular. Nor are they, as far as we know, greedy. That's untrue and unfair. This is all about the economics of granting a wage rise without an increase in skills or productivity. It's a political promise to win votes that doesn't take account of the need for Phuket and Thailand to remain competitive. The resort staff we know are not poorly treated, as you make out, J. Most of them won't benefit from this move because they are already relatively well-paid. And unskilled security guards who know about life study hard for their next better-paying job. Once Phuket fails to compete with rival destinations, the jobs disappear along with the owners' profits. What a pity the government chooses not to invest in improving education and health.
J - well said and I applaud your comments. So many people here think that these resorts are on bankruptcy and they aren't.
The only way staff make money in Phuket is from Service charge - but even the high up management sometimes dip their hand into this as they think its a right to take it. Even though some are on over 100k a month.
The last paragraph is wrong in many ways. In some articles ED, you say Phuket has record breaking visitors, going to reach 8million and now you are saying its a slide in 2012 but they are predicting MORE passengers from around the world, so which is it?
Are there MORE people flying to Phuket like your previous articles state - especially the one about how Phuket Airport is rammed full - or are there now less?
Posted by
Tbs
on
December 2, 2011 10:23
Editor Comment:
''And a 2012 low season where a huge boost in the minimum wage has to be absorbed -along with a continued slide in customers from Europe - is probably even more worrying.''
Perhaps you need glasses, Tbs. The paragraph says customers from Europe are going to be coming in fewer numbers, not that overall numbers are down. Your misguided philanthropy is loose on economic commonsense. It sounds as though you want to bring to Thailand the kind of merry cooperative three-day working week that has brought Britain to its knees. Spare us your failed Harold Wilson socialism, please.
While it sounds wonderful to generously raise wages by roughly 25% it ignores economic reality. This is what is called in economics an externality - essentially a false tax on doing business that has to be passed on and will result in higher costs and layoffs. While some businesses could absorb the costs it is unrealistic to think all can or even that those that can will. History has shown that wages do rise as skills and abilities increase, it also shows that raising wages falsely does not even help those it is targeted at. The purchasing power of the people who get the raises will actually decrease, many will be laid off and those that are already making a huge profit will continue to do so while those that are on the edge will either be forced to lay people off or close. Inflation rising will be the only positive growth from this boondoggle and as the editor correctly points out in a competitive environment raising prices is not likely to increase your competitive edge.
To anyone who is suggesting that this won't have an effect on Phuket's economy I would suggest that you need to look at the bigger picture realistically. My staff is also paid more than the new minimum but because I do this I can't afford my costs to all rise by 25-40% and continue to employ full staff at these rates. I am already not filling an opening caused by a staff member leaving to have children. Normally I would have immediately refilled the spot but several vendors have already forecast large price increases when this goes into effect.
Are there greedy owners out there? Yes, without a doubt. Are there far more owners who are operating their businesses for a small profit? Yes and I think the biggest effect here will be in low season. Companies such as mine who carried full staff during the off season will no longer do so. The reason for this is that what was once a break even/small profit situation becomes a loss.
By any analysis of the current economic climate here (whether you believe tourist spending is up or down) this will have an inflationary affect and jobs will be lost as prices rise. If you want to do something about low wages, tip better, avoid places that under pay their staff or raise your own staff's wages but don't endorse a plan that will assuredly end up with more suffering for those who need the help most. While it's difficult to find any case where such a huge increase in the basic wage has been implemented the cases where even a more modest increase has occurred without a corresponding rise in skills has been devastating. This is includes most developed economies that one could argue are better capable of absorbing it. In fact in some countries such increases resulted in complete collapse of manufacturing and low level service employment. It's basic economics, history and reality. There is no argument that will change this outcome no matter how altruistic and wonderful the goal is.
Posted by
Martin
on
December 2, 2011 12:12
I hope it's the owners/MDs etc. that absorb the cost.
What % of employees in a hotel are actually paid less than 300 baht a day ? (Could this extortionate extra cost be taken from the MD's bonus ?)
How many people do you know that don't deserve to be paid 300 baht a day ? I don't know many.
The security guards where I am employed work 12 hours a day and get 1 day off a month ! Do they not deserve 300 baht a day ?
You don't wanna pay 300 baht a day ? Wow.
Posted by
James
on
December 2, 2011 19:28
Editor Comment:
The minimum wage on Phuket has been calculated to keep pace with the cost of living, until now. Phuket people are better paid because the cost of living is higher than in every other province in the country. People are entitled to compete for better jobs by demonstrating their skills and by proving their talents. What you are saying is precisely what tuk-tuk drivers say: we can drive, so we set the fare to suit ourselves.
Martin, excellently written and clearly explained logic better than the article (ooh you gotta feel that sting !), except that you contradict yourself because you admit to paying your employees more than the minimum wage. Good. I'm glad you do. It shows you are human and I'm sure they deserve it !
Posted by
James
on
December 2, 2011 21:05
Not one person who commented here has said they don't want to pay 300 baht a day. Few GM/Owners will absorb a 25% rise in costs from their own pocket. There are more employers on this island than just large hotels. Large hotels will be the least affected. This is already a highly inflationary economy, the poor would be devastated by a 15% rise in all costs across the board which will likely be higher after the damage to the economy from the floods and this arbitrary wage hike goes into effect. Stop and think what will happen to those who don't benefit from this rise and there will be many. Look what happened to their economy when Brazil tried a similar plan in the late 80's. Cuba and Jamaica both have never recovered from trying it, etc. The US kept doing it and now they have a huge dole and no manufacturing. Similar story for the UK. What works is bringing the training of your people up to international standards and investing in them not buying them off with cosmetic fixes. Look at Singapore, they trained their people then they raised the minimums when it was deserved, not the other way around. Managed their economy and the result was minimal inflation on a year by year basis, they eased into rational economic growth. Look at China, they are doing the same thing. They aren't just raising wages randomly in one of the worst world economies in history.
Do you think more companies are going to move to Thailand or rebuild existing plants after seeing the complete failure of the infrastructure, the political unrest and a 25% or more rise in costs and payroll? This gov't needs to quit worrying about Takky's passport, ipads for kids and creating more inflation and start doing something to get the 300,000 plus who recently lost their jobs back to work by encouraging companies and employers not driving them away. It is beyond goofy to think that in the current economic situation in the world and the problems being faced here that this is the time to be doing this.
Again, we all want to see people here have better lives, we all would like to see those deserving get increased wages. What we disagree about is the idea that arbitrarily raising wages by 25% has ever worked. On my side is economic history and current conditions on the other side is "your a cheap/greedy jerk if you don't want to see these people get 300 baht a day".
Posted by
Martin
on
December 2, 2011 21:17
Tuk-tuk and taxi fares are still incredibly low in Phuket compared to what you would expect to pay in Australia. I'd say about one third of Australian prices. So if they double, as they probably should, 800 baht for a longish tuk-tuk ride instead of the current 400 still represents excellent value for money in my book. Of course, there are plenty of cheap charlies who still expect it to cost 200 baht. If you can't afford Phuket, don't complain. Go to Cambodia instead.
Posted by
Greg
on
December 3, 2011 04:10
The Burmese staff in my restaurant get, and are very happy with, 150 baht per person per day. My entire wage bill, with 5 staff, comes to about 21,000 baht a month. My restaurant is profitable, but not excessively so. Am I ashamed to pay them only 150 baht a day? Not at all. They get at least one free meal a day, sometimes 2. The 150 baht a day is around 3 times what one of them told me she earned in Burma, so what's the problem? She's happy at work, as are all my staff. To double their pay, I would have to double my food prices to customers. I believe in serving excellent quality food at a low price. The basic laws of capitalist economics state that you pay workers just enough to make it worth their while (in their mind) to do the job but not more, which would give rise to price inflation. The optimal wage is actually 0.00001 cent above the price at which it would be unacceptable to the worker to do that job. Anything more causes economic inefficiency and price inflation, which isn't good for anyone except for the company that prints the banknotes.
Posted by
Anonymous
on
December 3, 2011 04:24
With this logic, does Phuketwan also support zero days off for Thai people? Now they have about one day off per week and in case you didn't know, its very difficult have both family and friends with that amount of time off. Unless your the owner/MD, trying to raise your family with these wages and hours is very sad... Nobody disagrees the gov should invest in (education, but how could anyone afford education or have time for it with these terrible salaries and work hours?
Posted by
J
on
December 3, 2011 14:00
Editor Comment:
There are laws governing working hours and time off in Thailand, just as there are almost everywhere, but there are also plenty of people who prefer to work six or seven days a week in their own business. Family businesspeople all over the world work long hours. Those who are in the employ of others have the choice in today's healthy economy of finding a better job or one that conforms with labor laws.
By this logic Phuketwan supports the violation of labor laws! I am really disappointed! If staff are lied to by their employer which should have followed labor laws, they may have wasted a month working without pay wherein they could have found decent work.. I think its terrible to condone labor law violations.
Thats just my personal opinion. In this country Phuketwan is entitled to share its own opinion too (about THIS topic) too, however outdated it might be!
Posted by
j
on
December 5, 2011 09:32
Editor Comment:
Haven't we just finished telling you that laws are in place to regulate working hours, holidays and other conditions of labor? You seem intent on foolishness, j. Putting thoughts into our heads is pointless. Logic appears unlikely to save you.
"Those who are in the employ of others have the choice in today's healthy economy of finding a better job or one that conforms with labor laws."
Those jobs which do not conform with labor laws shouldn't exist in the first place! I see you defending these jobs by saying the workers can find other jobs which violate labor laws but have better conditions. If your of the lucky 1 percent, maybe just maybe you can get a job which actually has a salary and hours which conform to labor laws (instead of working 60 hours per week with 10 minute lunch breaks).
Posted by
j
on
December 6, 2011 16:12
Editor Comment:
We're not defending any breaches, simply acknowledging that some do not operate by the law.
Come on Editor do you think 6000b per month with 1 or 2 days off is acceptable for anyone ?
I think Phuket pay rates are a disgrace.
Saying everyone can compete for better pay/jobs is just glib.
Thailand is not exactly a cheap holiday location, tourists pay Western rates for hotels, food, day trips, diving trips, golf etc.
Just because someone will work for a low wage does not mean paying a low wage is moral. Its exploitation.
Posted by
Disappointed
on
December 7, 2011 02:29
Editor Comment:
Thousands of Thais and Burmese migrate to work in Phuket because those who live here are comparatively well off and have a better chance to improve their lives. Phuket's minimum pay rates are set and adjusted according to a consumer price index designed to make sure that even those with low skills are able to get by. Economic progress for all is achieved by improving education and skills.
So why not write an article about those with low skills are able to get by "improving education and skills." You could interview presidents and foreign teachers at the local universities for a start! How about bringing them together for a dialog?
But why argue that poor people should get less money for their work? Merely "getting by" with the minimum wage is sad because these people like all working people, ideally would have a bit of money to save so they could "get by" when they are too old to continue working. Unfortunately people here in Thailand often lack retirement savings... is 300 baht per day really too much? I dont think so! Do the math. Thats less than 6,500 THB/month after tax and social security. Is that too much to ask for Phuket's minimum wage???
Posted by
j
on
December 9, 2011 10:51
Editor Comment:
Nobody is arguing that poor people should get less money. Why misquote me? They should be paid a decent rate for their work and their skills. However, to generously give them a huge pay rise just because you feel sorry for them would, in the end, destroy any nation's economy, and inflict greater poverty on more people. Most people understand that simple economic equation.
Interested to hear from the editor that he believes in people being paid a decent rate for their skills. What would he say was a decent rate in Phuket bearing in mind that to share a room costs 3000 baht a month and that transport, parking and food prices are the same for Thais as tourists? Also very interested to hear that Harold Wilson's socialism and three day working week brought Britain to its knees. Suggest he asks directions to the planet Earth, and reads an account of the financial meltdown inflicted on the country (and the world) by the greedy.
Posted by
chris g
on
December 26, 2011 09:07
Editor Comment:
There are plenty of by-comparison rich people on Phuket who look at the lowly-paid locals and wonder how they survive, and in their morass of guilt argue that the locals should, indeed must, be paid more. The fact is, they should be paid a rate commensurate with their skills, and the minimum wage should be linked to the cost of living. Economists - I presume you are not one - take the cost of accommodation into account in setting those figures. Living standards rise when better education and improved skills generate growth and prosperity. The foolishness of taking advice from the guilty rich has been on display from the days of Harold Wilson to the present.
The "by comparison rich people" living in Phuket have nothing to feel guilty about. That is not necessarily true of restaurant and hotel owners charging first world prices while paying third world wages.
Posted by
chris g
on
December 26, 2011 10:14
Editor Comment:
There are two worlds these days, the developed world and the developing word. Competition remains the main economic driver in tourism as in virtually every other industry outside North Korea. The market dictates what works. These days, reputable brands suffer the consequences if they do not pay workers reasonable wages. That applies everywhere.
My gosh, I do not believe this! 300 baht is less then $10 australian. I don't care how different our economies are, less then $10 a day is slave labor.
I am hoping to come to Phuket and Koh Samui next year. First time ever to Asia apart from Hong Kong 25 years ago. I have friends who travel regularly to Bali and Thailand and they barter all the time. I have said to them how can they do that when people over there are so poor. One reason I have delayed going to asian countries is because I don't consider it a holiday to see workers being exploited. It would make me sick. The foreigners live in luxury and the nationals live in poverty. I don't buy what my friend says which is along the lines of " If the workers get paid too much no one will go there because it will not be as inexpensive".
Do we apply that example to our own country? No,
because we have labor unions and government laws that try to ensure no one lives below the poverty level. Although that is not totally true even in Oz. I have found this site with this newspaper and I find it very informative regarding the life over in Thailand. Thank you.
Posted by
G
on
December 28, 2011 08:55
Editor Comment:
Our pleasure.
The difference between developed and underdeveloped countries is likely to be narrowed as the developed countries slip into recession and the developing countries continue to grow. Poverty is relative: to value everything in monetary terms is to miss what Asians have in abundance and Westerners lack. The most contented are often those who have the least. Materialism is a curse. Poverty in hearts and minds is widespread.
I calculated I can live a better lifestyle at half the cost in Bangkok, so I'm off there now. Goodbye forever, Phuket. I just rented a 6-month condo off Sukhumvit road for 15,000 baht a month. My taxi/tuk-tuk expenses will be like 50 baht a time, if I even bother to take them. Everything is close by. A good restaurant meal can be had in Bangkok for 150-200 baht. You can double that price in Patong and still be served crap.
Posted by
George
on
December 29, 2011 18:07
I have a spacious and airy studio apartment in Patong, only 200 m from the beach, which I rent for 6,000 baht a month with a 6 month open ended contract. Even though I am only able to be in Phuket about 3 months and then have to work 3 months in Europe (so I live in Phuket 6 months each year), I still keep the apartment going because it's so cheap. Even in Patong I am often eating very good meals (Thai food of course) for 100 baht or less. It is easy even for a foreign tourist like me to live in Patong for 10,000-15,000 a month if you can find a place to live like I have. I spend about 12,000 baht a month when here. In Sweden my apartment rent alone is 50,000 baht. It is quite possible to live well with 10,000 baht a month even as a tourist. I have Thai friends who rent rooms in Phuket for 1,500 baht a month. They probably live for 4,000 baht a month in total. And the average salary is about 8,000. They send a few thousand baht each month back to their family who live outside Phuket. My point is that the minimum wage may seem to be very low, but most tourists have no idea how cheap the real cost of living can be if you know where to go to get the cheap housing, cheap meals, and so on.
Posted by
Andy
on
December 29, 2011 19:59
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Will the tuk-tuk minimum wage will go up too?
Posted by Mr. K on December 1, 2011 17:57