Announcing Southeast Asian New Minimum Wage for 2013

Thailand

Thailand’s Ministry of Labor raised minimum wages to THB300 (US$10) per day for the country’s remaining provinces after piloting higher wages in selected provinces last year.

Raising the minimum wage is part of the the government's ruling party, Pheu Thai Party, grand scheme to rebalance the economy, under which the domestic sector, which drives 30% of gross domestic product (GDP), would play a bigger role, reported the Nation. Upper middle-income earners already enjoy tax incentives, while farmers are supported by government subsidies. With more money in their pockets, these low-income workers will enjoy more purchasing power.

Employers in Thailand, like their counterparts in Malaysia and Vietnam, are grumbling, reported the paper. The sudden increase in costs will put many small and medium-sized enterprises (SMEs) out of business. The wage hike will trigger higher Social Security Fund contributions and other salary-based perks. As for the government, it claimed that higher incomes would encourage workers to work harder and this would promote productivity. With higher income, they would require fewer unpopular populist policies.

“..Minimum wages are only one factor to be considered in deciding on the best country location to site a manufacturing facility, but they are a factor in many labor intensive industries and consequently get considerable attention...”

About the Author:

Christopher W. Runckel, a former senior US diplomat who served in many counties in Asia, is a graduate of the University of Oregon and Lewis and Clark Law School. He served as Deputy General Counsel of President Gerald Ford’s Presidential Clemency Board. Mr. Runckel is the principal and founder of Runckel & Associates, a Portland, Oregon based consulting company that assists businesses expand business opportunities in Asia. (www.business-in-asia.com)

Until April of 1999, Mr. Runckel was Minister-Counselor of the US Embassy in Beijing, China. Mr. Runckel lived and worked in Thailand for over six years. He was the first permanently assigned U.S. diplomat to return to Vietnam after the Vietnam War. In 1997, he was awarded the U.S. Department of States highest award for service, the Distinguished Honor Award, for his contribution to improving U.S.-Vietnam relations.

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Our comment:

Minimum wages are only one factor to be considered in deciding on the best country location to site a manufacturing facility but they are a factor in many labor intensive industries and consequently get considerable attention. We feel that the best process is to work out all costs including land, labor, utilities, licenses, taxes and use this more comprehensive pricing comparison in your companies deliberations.

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Thailand just increased its minimum wage country-wide starting January 1, 2013. Thailand wasn't the only recipients of a pay hike over the new year - Workers in Malaysia and Vietnam were beneficiaries of similar moves within the region and Indonesia also has a big adjustment in the works.

Weak export outlook aside, politicians in Thailand and other Asian countries are being forced to address growing social tensions in lower-income levels, reported the Nation newspaper in Thailand. By implementing the new minimum wage rules on January 1, Malaysian politicians aim to catapult the country into the high-income league of nations by 2020. The Vietnamese government, meanwhile, backed its course with a survey, which showed that the 2012 wage could cover only 60 per cent of workers' expenses, said the paper.

Labor-intensive industries are more likely to shift production to states with lower labour costs. In Asean, Myanmar now enforces the lowest monthly wage - 15,000 kyat or below US$18.

Malaysia

As part of the government´s drive to transform the country into one of the high-salary nations, Malaysia has implemented its first nation-wide minimum wage in 2013, a raise of 65% in basic salary, according to The New Straits Times Malaysia. The workers get a minimum salary of up to Riggit 900 per month, up from Ringgit 546, in most parts of Malaysia. The salary of those recruited as general workers can't be less than Ringgit 900 (US$294) per month in peninsular Malaysia and Ringgit 800(US$261)in Sabah, Sarawak and the Federal Territory of Labuan. The new pay scale does not include subsistence allowance and overtime pay. Moreover, newly recruited workers will get 70% of total pay for a six-month probation period, reported the paper. Companies employing fewer than 5 workers will be able to delay implementing the new wage minimums until July 1, 2013.

Indonesia

Early in 2013, workers in Indonesia demanded the government cancel the increase in electricity and gas tariffs because it will hurt workers. Companies have been postponing minimum wage increases because of higher electricity tariffs, reported Jarkarta Post. Jakarta Governor Joko Widodo last year approved a 44 percent increase in minimum wages for workers in Jakarta to 2.2 million rupiah a month (approximately 228.81 USD/month).

Vietnam

The Vietnamese government, over the new year, implemented higher minimum wages for employees and pensioners in the state sector, citing higher living costs as justification for increases. According to Vietnam News, this increase affected every company, business, co-operative, farm, household, individual and organization that hires employees.

Vietnam now has four regions, ranked according to the socio-economic development level of each region, changed from previously all as one region. The region-based minimum wage levels will be VND250,000-300,000 (US$14.4) per month higher than the current rates in effect in 2012. The four new minimum wage rates for regions 1, 2, 3 and 4 will be VND 2,350,000 ($113), VND 2,100,000, VND 1,800,000 and VND 1,650,000 per month respectively. (more information: please read our new article on Vietnam, "Vietnam: What to Come in 2013 and Economic Events of 2012")