Thailand’s Wage Hike: A Double-Edged Sword?

The government in Thailand plans to raise the daily minimum wage by 14%, reaching 400 baht ($10.88) by October 1. This move has sparked concern among business groups, fearing that higher labour costs could lead to increased unemployment and reliance on cheaper migrant labour.

The proposed increase would standardize the minimum wage across all provinces, deviating from previous practices where rates varied based on local living costs. For instance, in provinces near the Malaysian border, the current minimum wage is 330 baht, making the proposed 400 baht a significant 21.2% hike. In tourist-heavy Phuket, the wage would rise from 370 baht, and the government aims to further increase it to 600 baht by 2027.

While higher wages could boost workers’ spending power and stimulate the economy, concerns abound about inflation and small businesses’ ability to cope. Some industry researchers warn that the policy might lead to higher inflation and force some businesses to lay off workers or close down.

Business leaders worry that higher wages will drive manufacturers to relocate to other ASEAN countries like Vietnam and Cambodia, where labor is cheaper. Additionally, they fear that employers might prefer hiring migrant workers at lower wages, exacerbating unemployment among Thai nationals.

Thailand’s unemployment rate, which rose to 1.1% in 2024, reflects an increasing reliance on migrant workers, now totaling 3.4 million legally, plus an estimated 500,000 illegal workers. Business organisations have urged the government to reconsider the wage hike, but Prime Minister Srettha Thavisin stands firm, advocating for higher wages to boost economic growth.