A recent Mercer survey suggests most Thais can expect small wage increases next year as the economic fallout from COVID-19 impacts companies’ budget outlooks.
By Zachary Frye
Wages in Thailand are expected to rise an average of 3% in 2021 according to a recent report by global consulting firm Mercer. The forecast represents a drop from earlier estimates that salaries would increase by 5%, indicating the continued negative impact of COVID-19 on the country’s economic outlook.
Mercer expects the modest wage increase despite an economic contraction that could see a 7.8% drop in GDP by the end of the year.
The data from Mercer’s 2020 Thailand Total Remuneration Survey compiled information from 577 international and domestic firms in the country between April and August of this year.
Only 22 out of the 577 companies polled reported a wage freeze in 2020. Although most companies in the survey said they raised employees’ salaries, the level of the pay increase varied by sector.
Results indicate that wage increases were above average in manufacturing, automotive, transportation and technology industries, while consumer goods workers saw below-average wage gains.
According to Piratat Srisajalerdvaja, Mercer Thailand’s career products leader, wages in the technology industry were boosted by an increase in demand for remote work and auto industry wages were buoyed by strong unions.
By contrast, salaries in the consumer goods industry were held back by an overall slump in household spending amid the coronavirus crisis, Piratat noted.
Looking forward, he suggested that continued uncertainty over the virus and its economic fallout could impact salary increases in Thailand in the near-to-medium terms.
“Given the sustained uncertainty in the economic environment, companies are taking a more cautious approach, reviewing and revising their salary increment budgets,” Piratat said.
An evolving economy could offer an opportunity to address Thailand’s inequality if businesses prioritize workers’ wellbeing
Despite minimal pay increases for many of the country’s workers, Thailand remains a deeply unequal country. Recent decades have brought massive reductions in poverty: 65% of the population was at or below the poverty line in 1988, compared to just under 10% in 2018. But this reduction in poverty was also accompanied by persistent inequalities.
In December 2018, Swiss financial firm Credit Suisse released a report indicating that Thailand had the most unequal economy in the world, with the richest 1% of the population holding 67% of the country’s wealth.
With that said, Gini coefficient rates published by the World Bank in 2018—the latest year of available data for Thailand—show that a host of other countries across the globe have a higher rate of economic inequality, including the United States.
The statistics also show that Thailand’s economic inequality as measured by the Gini coefficient fell by over 10 points from 1992 to 2018, an indication that the country became less unequal during that time frame.
The World Bank also notes, however, that poverty is on the uptick more recently, with official poverty rates rising over 2% from 2015 to 2018. In absolute terms, that corresponds to 4.85 million people falling below the poverty line.
Speaking with ASEAN Today, Mercer’s CEO for Thailand Juckchai Boonyawat noted that while the company’s 2020 renumeration survey did not gauge correlations between inequality and compensation packages, one of the legacies of the coronavirus could be a reorientation towards addressing social and economic inequalities in the country if companies prioritize them.
“The COVID-19 pandemic will have profound, long-term consequences for our economies and societies, including for the future of work. Companies, we believe, have a responsibility and rare opportunity to rethink their organizational and workplace structures for a fairer and more sustainable post-COVID-19 world,” he said.
As uncertainty over the virus continues to loom in the near-to-mid term, however, Juckchai also made clear that market considerations often play an important role when creating pay standards.
“Based on our experience, companies generally design their compensation and benefits packages based on…key factors including the business landscape, their people strategy, internal cost budget considerations and external market competitiveness,” he continued, suggesting that external market forces and the need to attract and retain employees play dueling roles.
Supporting workers can help move the country’s economy out of a deep recession
While Mercer claims that companies often take holistic approaches when creating pay and benefits standards, stubborn inequality and poverty numbers suggest there are drawbacks to solely relying on traditional market incentives when creating compensation standards.
In Thailand, the minimum wage ranges from 313 to 336 baht per day (approximately US$10.30-11.10) depending on the location. For many families, a salary at or near the minimum wage is just enough to cover basic necessities.
Although Juckchai notes that Mercer’s data indicates that “the majority of companies surveyed pay employees [including those in ‘unskilled’ or low-status jobs] above the minimum wage” there is also evidence that workers face difficulty sustaining livelihoods on these wages.
A poll from researchers at Bangkok University in 2019 found that 42% of respondents admitted that the minimum wage was just enough to meet their daily expenses while 31% said it wasn’t sufficient to cover costs.
Furthermore, Juckchai told ASEAN Today that Mercer data shows that “most companies provided an allowance to support their employees during the pandemic regardless of the sector.” Surveys by the Asia Foundation earlier this year, however, indicate that monthly salaries have been reduced for some 70% of the country’s workforce during the coronavirus crisis—statistics that seemingly contradict industry responses in the Mercer survey.
Asia Foundation data also shows that the average loss of monthly income for workers sat at 47% of a normal paycheck and that the average small to medium-sized enterprise has cut staff by nearly half.
For workers in hard-hit industries, like the hotel and tourism sector, nearly 60% of staff have been laid off or let go according to the survey. Overall, just 38% of polled workers reported feeling confident that they can weather the crisis without running out of money or options.
As Thailand looks to emerge from coronavirus-induced recession, its workers will be both the fuel and the accelerant towards a full recovery. Businesses across the country claim that wages rose modestly for many Thai workers, but other evidence indicates that millions of others face the prospect of reduced wages and layoffs. If the country is to emerge stronger from COVID-19, both businesses and the government have a role to play in ensuring workers get a fair shake and have enough resources to take care of their families and fuel economic growth. Increased government support coupled with a sincere effort from businesses and corporate leaders to bolster workers’ economic wellbeing could go a long way in ensuring these goals are met.