COMMENTARY NUMBER 1 COVERSHEETEconomics commentary number: HL Number 1Title of extract: Wage hikes to begin only in 7 Thai provincesSource of extract: asiaoneDate of extract: 01 September 2011Word count: 705Date the commentary was written: 12 September 2011Sections of the syllabus to which the commentary relates: Section 2Candidate name: Siriben SomboonCandidate Personal Code and Session Code: dfy510 (000307-179)
Siriben Somboon dfy510 (000307-179)Commentary Number 1 ExtractWage hikes to begin only in 7 Thai provincesTHAILAND - The Pheu Thai-led government risks raising the ire of blue-collar workers bylifting the minimum wage to Bt300 (S$12) next year in just seven provinces, not at once acrossthe whole country."The immediate hike in the minimum daily wage across the country was a highlight of the PheuThai Partys election campaign," Wilaiwan sae Tia, vice president of the Thai Labour SolidarityCommittee (TLSC), said yesterday."If the Pheu Thai Party fails to keep its word, its empty promise may be considered publicdeception. We will consult with legal experts and academics about the issue," he said.Labour Minister Padermchai Sasomsap said the partys hallmark policy would be implementedfirst in Bangkok, Samut Prakan, Samut Sakhon, Pathum Thani, Nakhon Pathom, Nonthaburi andPhuket.More than three million workers are expected to benefit.Somkiat Chayasriwong, permanent secretary of the ministry, said the plan was possible becausethe current wage rate in those provinces is now quite close to Bt300, so employers should not betoo bothered.In Phuket it is Bt221 and in the other provinces Bt215.All parties must discuss the issue with the Central Wage Committee in the middle of the monthbefore coming to any conclusion, he said."I think things should become clear by October. We hope to see the new wage take effect onJanuary 1," he said.The minimum wage in other provinces may rise by 40 per cent first and to Bt300 later, he added._________________“Wage hikes to begin only in 7 Thai provinces.” asiaone. N.p. 1 September 2011. Web. 12 September 2011. <http://www.asiaone.com/News/Latest%2BNews/Asia/Story/ A1Story20110901-297182.html >
Siriben Somboon dfy510 (000307-179)TLSC is not happy about this, though.TLSC president Chalee Loysoong said all workers around the country were suffering from therising cost of living and deserved a similar wage.In Phayao, the rate is just Bt159.On Monday, Chalee would present information on inflation, workers income and householdexpenses at a press conference to make clear why the Bt300 wage should be applied to allworkers.On September 14, the Central Wage Committee will meet to discuss the wage-hike plans.Pannapong It-atthanon, who sits on the committee as a representative of employers, said smallbusinesses would incur severe problems dealing with the governments move."If the government takes sides with workers, it will be hard for us to do anything. Therepresentatives of employers may walk out the first time the Central Wage Committee considersthis issue but our boycott wont mean anything when the committee picks up the issue again."Our walkout for the second time wont affect the quorum," he said.Now, employers could only pin their hopes on the representatives from the Finance Ministry,National Economic and Social Development Board and Commerce Ministry, who shouldrecognize the ramifications of the big jump in minimum wages, he added.Somkiat said the government would consider remedial assistance for those employersexperiencing the greatest difficulties."The labour minister will hold discussions on the measures with Deputy Prime Minister Kittirattna Ranong and Commerce Minister Thirachai Phuvanatnaranubala late this week," he said.Yongyuth Chalamwong, director of labour research at the Thailand Development ResearchInstitute, said the government might use tax relief to cushion the blow to employers.___________________“Wage hikes to begin only in 7 Thai provinces.” asiaone. N.p. 1 September 2011. Web. 12 September 2011. <http://www.asiaone.com/News/Latest%2BNews/Asia/Story/ A1Story20110901-297182.html >
Siriben Somboon dfy510 (000307-179)Commentary Number 1*The Pheu Thai-led government is going to lift the minimum wage (a law that makes trading laborbelow a specified wage illegal) from 215 baht per day (in other provinces) to 300 baht per daynext year in seven provinces in Thailand. In other provinces, the minimum wage will rise 40%first and it will rise to 300 baht per day later. The lift in Thailand’s price floor (a regulationmaking it illegal to charge a price lower than a specified level, set above equilibrium to beeffective) would benefit more than 3 million people in Thailand. The increase in minimum wagecan be represented by a shift upward of the minimum wage line.Diagram 1 Minimum Wage in Thailand / S day Wage: 300 Wage: 215 /day) We Wage ( D 0 Qd2 Qd1 Qe Qs1 Qs2 days Labor in Thailand (days/month)As shown in Diagram 1 (above), assuming that the supply (amount of labor that household arewilling to offer at various possible wages during a given time period) is constant at S and thedemand (amount of labor that firm is willing and able to hire at various possible wages during agiven time period) is constant at D. The rise in minimum wage from line “Wage: 215 ” to line“Wage: 300 ” causes the quantity demanded (amount of labor that firm is willing and able tohire at each particular wage during a given time period) decrease from Qd1 to Qd2._________________* All definitions have been adapted from:Sloman, John. Economics. 6th edition, Essex: Pearson Education, Ltd. 2006
Siriben Somboon dfy510 (000307-179) The quantity supplied (amount of labor that households are willing to offer at each particularwage during a given time period) increases from Qs1 to Qs2. There is a surplus (excess quantitysupplied at a particular wage) of labor [unemployment] from Qd1 to Qs1 when the minimum wageis 215 baht per day and when the minimum wage is 300 baht per day, the surplus of labor wouldbe from Qd2 to Qs2. The workforce that lost their job at minimum wage of 215 baht per day isfrom Qd1 to Qe. The workforce that lost their job at the minimum wage of 300 baht per day isfrom Qd2 to Qe. The workforce that join the labor market at minimum wage of 215 baht per dayis from Qe to Qs1 and the workforce that join the labor market at minimum wage of 300 baht perday is from Qe to Qs2. Some of the labors join the labor market because there is an increase inminimum wage because they can earn more money.Due to increase in minimum wage, black market (illegal trading arrangement in which buyersand sellers do business at a price that is lower [in the case of floors] than the legally imposedprice) might exist. The firms would want to minimize the cost of production (total cost ofmaterials, labor, and other inputs required in the manufacture of a product including any goodsand services used to make a product), so they might invest in black market activity. Someworkers might take the jobs under the black market because they are unemployed and they wantto get a job. Although there might be punishment for disobeying the law (invest in black marketactivity), this only apply to some functions. If the government policies regulations are not tight;chances of being caught violating the regulations are low and the scale of penalties involved forthe violations is not high, black market activity would increase. If one of the factors that affectthe black market increase, for example the chances of being caught violating the regulationsincreases, black market activity would decrease.With a rise in minimum wage, it increases the cost of production for firms to produce goods orservices. Some firms would move their factories to other places (countries) where the cost ofproduction is lower than the cost of production when the minimum wage rises. If the firms do notmove to other places where the cost of production is lower, they would increase the price ofgoods or services to balance the increase in cost of production.