Thailand’s wage hike plan raises concerns for SMEs' future

The plan is to increase the minimum wage to 400 THB.

Thailand’s plan to raise the minimum wage to 400 THB (11.7 USD) a day has sparked concerns about its potential impact on small and medium-sized enterprises (SMEs), which make up over 90% of the country’s workforce. 

While the wage hike is seen as necessary for addressing rising living costs and worker well-being, experts warn that SMEs may face significant challenges in adjusting to higher labour costs.

Xavier Estupiñan, Wage Specialist at the ILO Regional Office for Asia and the Pacific, highlighted the varied impact across regions, stating that the increase could range from 8% to 21% depending on the province. 

“There’s always a need for an impact assessment to be done on SMEs,” Estupiñan emphasised, noting that while larger companies may find ways to offset the wage increase, SMEs may struggle with the initial labour cost burden.

In the short term, SMEs are likely to experience rising operational costs, which could put pressure on their ability to stay competitive. Estupiñan suggested that some businesses may find it challenging to absorb the wage increases. However, he believes the long-term impact could be more positive. 

“In the longer run, these businesses can also use this as an opportunity to become more efficient and invest in higher-value activities,” he said.

Nuttanan Wichitaksorn, Visiting Research Advisor at the Thailand Development Research Institute, shared similar concerns but noted that many SMEs operate with informal employment practices, and the wage hike could push these enterprises to formalise their labour structure.

However, Wichitaksorn warns that if the wage increase is not substantial enough, the impact on SMEs may be minimal. "If the minimum wage increase is not at a significant level, it’s not going to change much," he added.

One of the key challenges for SMEs lies in their limited capacity to adopt new technologies or business practices to offset labour costs. "SMEs will have to consider ways to adapt, such as using technology to supplement labour, not replace it, but make it more efficient," said Wichitaksorn.