Minimum wage hikes unlikely to impact Thai goods pricing significantly

The Commerce Ministry’s planning unit has weighed in on the ongoing debate regarding the impact of minimum wage increases on domestic goods and services, suggesting that such hikes are unlikely to significantly influence the pricing landscape.

Poonpong Naiyanapakorn, the director-general of the Trade Policy and Strategy Office (TPSO), has argued that a rise in the daily minimum wage by an average of 2.37% to 345 baht (US$9.8) would only marginally increase inflation, bringing it to a range of 0.13 to 0.25%.

Poonpong conceded that the effect of such wage adjustments would differ across industries, particularly based on the levels of labour intensiveness. He proposed that industries with considerable labour costs might have to streamline their expenditures, while sectors with fierce competition might only witness negligible price modifications.

“Products and services that are most likely to feel the impact of the wage adjustment include processed food, rice, communication services, fresh vegetables, and fresh fruit.

“These sectors carry a significant weight in inflation calculations due to their labour-intensive nature. However, the rise in the minimum wage would enhance the purchasing power of low-wage workers and exert a minor impact on overall inflation, thereby suggesting a positive adjustment.”

Poonpong also highlighted that the Commerce Ministry is keeping a close eye on the fluctuations in product prices. He indicated that the TPSO’s projections suggest a continued deceleration in inflation in the upcoming year as compared with 2023, with predictions ranging from -0.3% to -1.7% and an average rate of -0.7%, reported Bangkok Post.

Several factors, including government aid measures, restrained price adjustments for key commodities, a worldwide economic slowdown, and high household debt, which could limit consumer expenditure, are likely to contribute to this lower inflation rate.

Nevertheless, Poonpong also pointed out several factors that could drive up inflation, such as the expected normalisation of pork prices, increased production costs due to wage adjustments, high-interest rates, the Thai economy’s ongoing recovery, and government measures to boost income and purchasing power.

Furthermore, he identified several risk factors for inflation, including political instability, fluctuations in the value of the baht, and assorted government measures that could influence prices in a variety of ways.