One of the key and most popular policies that helped sweep Yingluck Shinawatra and the Pheu Thai Party to power in the recent July 3 Thai general election was the increase in Thailand’s pitiful minimum wage.  Having won a landslide election victory, Pheu Thai’s avowed aim is to increase this minimum wage to a national level of 300 Baht (£6.50 or US$10) a day. This is, on the face of it, still pitiful and shouldn’t even be considered anything approaching a dignified living wage but it is at least a start and must be recognised as a well-intentioned progressive step, that has the backing of the Thai electorate.

What is most astonishing is the uproar that is now accompanying this very modest rise. One might even think that Pheu Thai’s minimum wage policy was picked over by their main opposition, the Democrat Party, during the recent election. Not so. The Democrats, under “graceful” Mark Abhisit’s leadership, rather than taking on the detail of  Pheu Thai’s policy commitments, were too busy rabble rousing, whining about bullying or calling Pheu Thai supporters “toxic”. Admittedly in an interview I conducted with outgoing Finance Minister Korn Chatikavanij, he did at least attempt to pick over some of the policies of Pheu Thai but the minimum wage was an issue that hardly surfaced at all during the election.

Thailand's PM-elect, Yingluck Shinawatra, is presently engaged in a tough battle to introduce a higher minimum wage for the country's poorest workers. Pic: AP.

Now, it seems, every cod economist, rich kid oped writer, or minor aristocrat in Thailand is weighing in, no doubt eager to make sure that they aren’t faced with increasing the pittance they presently pay their staff. One might even think an apocalypse is about to fall upon the Thai economy such is the hue and cry.

Yet, apart from the occasional “ominous” oped, based on a few facts and figures cobbled together by Thailand’s rich and powerful, it seems that little actual research has been done, while very little of any of the evidence gathered from countries around the world which have credible minimum wages gets a mention. What we seem to be witnessing, rather than an evidence-based debate on the likely benefits and possible pitfalls of increasing Thailand’s minimum wage, is the usual range of shrill, denuded voices that seem more eager to undermine a popularly elected government than actually establish what is good for the poorest members of the community (aren’t these the same people who are usually screeching about ‘national unity’ at any opportunity?).

A couple of comparisons might help here.

For a start China has had a minimum wage since 2004. It has been set higher than Thailand’s (the present rate, based on the individual rate set by each of Thailand’s 32 provinces averages out at about 175THB per day) for some time and is still about to undergo a further 20% increase in some parts of the country (China’s monthly rate averages roughly 4750THB a month – about 190THB a day based on 24.75 working days per month based on 6day working weeks, minus 11days national holiday and a minimum 5days paid leave – 2010 rates can be found here, then you have to factor in another average 2011 12% increase to that figure). Any evidence that China’s economic growth has come to a drastic end-of-days halt since 2004 has yet to emerge.

Taking things a bit further – and while this comparison is not completely watertight (they seldom are) – let’s look at some proper research done by the UK government and the London School of Economics (LSE) into the effects of the minimum wage introduced into the UK in 1999.

Professor David Metcalf of the LSE’s Centre for Economic Performance published a lengthy study in 2006 into the impact the UK’s minimum wage had on pay and jobs, examining 25 other studies en route – he said:

'When the minimum wage was being discussed in the 1990s, there were dire warnings that it would lower employment. For example, Alan Walters – Mrs Thatcher’s economic guru – wrote that it was ‘utter nonsense’ to argue that jobs might not be lost.

Perhaps this hostility was unsurprising. Orthodox economic theory predicts job losses, the scale depending on how high the minimum wage is set and the ‘elasticity’ (or sensitivity) of employment with respect to the wage.

But more subtle observers suggested that the labour market – especially the low wage sectors – may not mirror the economists’ competitive ideal. In particular, labour market frictions – imperfect information, the costs of switching between firms and the rich variety of workers’ preferences – mean that employers have considerable discretion in wage setting. Under these circumstances, a carefully set minimum wage would not necessarily cost jobs and may even boost employment as recruits are found for previously hard-to-fill vacancies.

The consensus is that the minimum wage has not cost jobs either in the aggregate economy or in the low wage industries and occupations.'

Next up is the UK government’s Low Pay Commission report from February 2005, which looked at the impact on profits and prices in the UK economy in the 6 years since the minimum wage had been introduced. The report itself is filled with complex mathematical equations way beyond my understanding but its conclusions are crystal clear.

'The key findings from this research are as follows:

We show that profitability was significantly reduced by the minimum wage. Importantly, we also show that low wage firms were not forced out of business by the higher wage costs resulting from the minimum wage. On possible explanation (that requires more research attention in future) is that firms were making profits from paying low wages prior to the minimum wage introduction and that one consequence of the introduction of the minimum wage to the UK labour market was to moderate these excess profits by channeling them back to the wages of low paid workers.

We are unable to detect significant price effects, by looking at a limited range of consumer prices and by studying links between changes in producer prices and wages. The evidence that higher wage costs can be passed on in terms of higher prices does not seem to be present for the UK national minimum wage.'
 

Such research is incredibly important when making the case for the raising of a minimum wage to a higher level, particularly in a nation like Thailand where there is massive, entrenched and destabilising levels of inequality.

One senses the nasty and unpleasant stench of greed running through this debate in Thailand. The rich and the powerful, and their petulant acolytes in both the Bangkok middle classes and some parts of the expat community, have just lost the election – now they are making it clear that they loathe the idea of sharing a few crumbs of comfort with Thailand’s poorest citizens.