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New Thai Prime Minister Promises to Double Minimum Wage

Thailand's Prime Minister elect Yingluck Shinawatra speaks during an interview with Reuters at Puea Thai Party headquarters in Bangkok, July 8, 2011

Thailand's Prime Minister elect Yingluck Shinawatra speaks during an interview with Reuters at Puea Thai Party headquarters in Bangkok, July 8, 2011

Thailand’s Prime Minister-elect, Yingluck Shinawatra, says the country’s new government will press ahead with election promises to double the minimum wage despite fears that the move will trigger inflation.

Yingluck says before the policy is implemented, she will hold talks with both business and labor. Speaking at a news conference, she said the government would gradually implement the policy and ease the impact on businesses through corporate tax rate cuts.

“The policy of the minimum wage we will do at the same time as reducing the corporate tax from 30 percent to 23 percent," the prime minister said. "But we have to sit down and discuss with all the business [sector]. So I won’t be launching or implementing ...concerning the impact so we have to sit down and gradually see how we can find a solution together.”

Campaign promises

The move to double the minimum wage to $10 a day (300 baht) was one of several populist election promises made by the Pheu Thai Party ahead of the elections. Pheu Thai won a landslide victory over the governing Democrat Party on Sunday and is preparing to form 300 seat coalition government in the 500 member parliament.

Thai labor groups say they have been assured the incoming government will go ahead with the increase in minimum wages.

Chalee Loisung, chair of the Thai Labor Solidarity Committee, says the government should implement the policy as soon as taking office. But he also said the government should avoid adverse impacts on the Thai economy.

Chalee said the government has told labor groups it stands by a promise to raise the minimum wage, which will help people have a higher standard of living. But he said while household incomes will rise, employers may also need assistance.

Positive feedback

Thavee Techatheerawat, head of the Thai Trade Union Congress, backed the government’s promises of higher wages, but said the ultimate negotiations will depend on who becomes labor minister.

He says the government has repeatedly said "we can do it" but labor groups will have to wait and see who will be appointed as labor minister and then the trade unions can negotiate.

Thai and foreign businesses have been more wary of the minimum wage increase because of the cost to their payroll and how it could lead to more inflation.

Nandor von der Luehe, chair of the Joint Foreign Chambers of Commerce, said the wage increases were widely cited by campaigning politicians, but can be achieved only with productivity improvements.

“All the [political] parties came out to increase the minimum wage. To increase the minimum wage is fine as long as you increase productivity. But if you only increase minimum wage without increasing productivity it does not work,” von der Luehe said.

The Pheu Thai-led government is also planning to follow through on pledges to increase funding for rural development programs. Economists have warned against using debt to fund generous spending programs that are aimed at boosting growth