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Lao Factory Owners Say Proposed Wage Hike Will Shutter Businesses

Source: RFA

Owners of garment factories and other businesses in Laos are rejecting a proposal to raise the minimum wage by as much as one-third, saying the increase in expenses would force them to shut down operations, despite reports of workers seeking opportunities elsewhere due to low pay and high living costs.

At a meeting last month attended by the Ministry of Labor and Social Welfare, the Lao National Chamber of Commerce and Industry, and the Lao Federation of Trade Unions (LFTU), LFTU vice president Symoune Ounlasy proposed raising the minimum wage from 900,000 kip (U.S. $108) per month to 1.1 million or 1.2 million kip (U.S. $133 or $145) to address the increasing cost of living for workers in Laos.

Minister of Labor and Social Welfare Khampheng Saysompheng said at the time that his ministry would submit a proposal to the government that, if approved, could be implemented through a decree issued by Prime Minister Thongloun Sisoulith on May 1, according to a report by the Vientiane Times.

Khampheng said at the meeting that a pay rise was crucial to improving workers’ living conditions amid rising costs—with prices increasing on a yearly and sometimes monthly basis—and urged employers to sympathize with them, as they are the ones who create profits.

An LFTU official, who spoke to RFA last week on condition of anonymity, said that the organization had “collected information on the cost of living from individuals and based our proposal on this data,” adding that 1.2 million kip “can match the cost of living at present.”

The government will make the final determination on what the new minimum wage will be, he added.

A garment factory owner told RFA’s Lao Service on Wednesday that the Association of Lao Garment Industry was willing to accept a wage raise to 1 million kip (U.S. $121) per month, but no more, as any further increase would make operating costs unsustainable.

“If [the government] raises it to 1.2 million, it will cause some factories decide to close down, because even now the garment industry does not make enough profit,” said the owner, who also asked to remain unnamed.

“If the wage was raised to 1 million, that would mean business owners would stay solvent and workers would have jobs.”

The owner’s concerns echoed those from vice president of the Lao National Chamber of Commerce and Industry Valy Vetsaphong, who told the Times last week that that there should be a minimal notice period of two years before any increase was fully implemented.

“A study and a survey are necessary to ensure it would bring positive results for both employers and employees,” she said, adding that an increase could pose a threat to the price of consumer products as the extra costs get passed down the line.

Valy instead advocated for the government to subsidize the price of consumer goods and build more vocational schools to enable workers to become more skilled.

She warned that a wage hike could lead to employers laying off workers, contributing to an increase in “crime and anti-social behavior,” and make the investment climate in Laos less appealing to foreign investors.

The office of the Lao Federation of Trade Unions in Vientiane, in an undated photo. Credit: RFA

Lacking labor force

But the manager of a plastic bag factory in the capital Vientiane recently told RFA that a wage increase would be beneficial across the board, as employers are having trouble filling vacancies for low-salary positions.

“The minimum wage should be raised in Laos because if wages remain too low, [workers] won’t stay on,” the manager said.

“Right now, we lack a labor force in Laos because of low pay—workers choose to do other jobs [in other countries] that pay better,” she added.

The minimum wage in Laos is significantly lower than that paid to workers in regional neighbors Myanmar, Cambodia, and Thailand.

In July, sources told RFA that hundreds of undocumented Laotians had fled Thailand after the Thai government implemented a royal decree a month earlier imposing jail terms of up to five years and a fine of up to 100,000 baht (U.S. $2,941) on illegal workers in the country.

Most of the workers, the source said, were paid minimum wage on a daily basis for jobs in construction and agriculture, and illicitly entered Thailand because the fees required to obtain legal work—often around 20,000 baht (U.S. $587) per person—were too high for them to afford. The wages they earned in Thailand were approximately twice as much as they earned back home.

Thailand’s Ministry of Labor, said at the time that there were around 170,000 Lao workers working legally in the country out of around 2.7 million documented migrant workers—mainly from Myanmar and Cambodia.

While the ministry does not provide figures for undocumented workers from specific countries, reports suggested that more than 200,000 of an estimated 2 million illegal migrant workers in Thailand are from Laos.

In 2012, the government of Laos raised the minimum wage from 348,000 kip (U.S. $42) per month to 626,000 kip (U.S. $76), and in 2015 further increased it to 900,000 kip.