(Adds government official’s comment in third paragraph, economist reaction in fifth paragraph.)
Oct. 17 (Bloomberg) -- Thai workers and employers agreed to a government proposal to boost the minimum wage, meeting a campaign pledge by Prime Minister Yingluck Shinawatra as floods disrupt operations at more than 1,000 factories.
Wages in Bangkok and six other provinces will rise to 300 baht a day by April 1, Somkiat Chayasriwong, the labor ministry’s permanent secretary, told reporters in Bangkok today. In the rest of the country, wages will rise an average of 40 percent by April 1 and then to 300 baht per day by 2013, with rates frozen at that level until 2015, he said.
“The government will work out a full package to help alleviate the impact on small and medium companies,” Somkiat said. Employers will be able to deduct higher wage costs from taxable income and reduce social security payments, he said.
The agreement by workers, businesses and the government will increase wage bills for manufacturers as government agencies and the central bank lower economic growth forecasts. Floods, Europe’s debt crisis and a weakening U.S. recovery threaten demand for Thai exports, the finance ministry said Sept. 28.
“This is not a good time exactly for the wage hike when the industrial sector has been clouded with several negative factors, including the global economic downturn and impact of floods,” Pimonwan Mahujchariyawong, an economist at Kasikorn Research Co. in Bangkok, said by phone. “For the short term, the impact will be negative for the industrial sector and foreign direct investment.”
Labor leaders agreed to drop demands for the minimum wage to rise to 300 baht across the country immediately due to the floods, Chalee Loysoong, the president of Thai Labor Solidarity, which has about 280,000 members, said by phone. The group may oppose the provision to freeze wages until 2015 if inflation accelerates, he said.
“The increase of wages in seven provinces to 300 baht a day first is acceptable,” Chalee said. “We know how employers have suffered from the flooding. We don’t want to add more problems.”
Southeast Asia’s second-biggest economy will expand 3.8 percent to 4.3 percent this year, compared with a June forecast for a 4 percent-to-5 percent expansion, the finance ministry said Sept. 28. The Bank of Thailand plans to cut its own economic growth projections when it releases new estimates next month, Governor Prasarn Trairatvorakul said on Sept. 24, signaling there is less scope to raise interest rates further.
Floods have swamped five industrial states in Ayutthaya province, forcing the closure of factories run by Honda Motor Co., Canon Inc. and Nikon Corp., which use Thailand as an export base.
Yingluck’s Pheu Thai party won a parliamentary majority in July elections after pledging to raise the minimum wage to 300 baht per day, cut corporate taxes and guarantee rice prices. The daily minimum wage in Thailand ranges from 159 baht in northern Phayao province to 221 baht on the resort island of Phuket, according to the Labour Protection and Welfare Department’s website.
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