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Low Wages, High Inflation Ramping Up Worker Shortage

Source: Vientiane Times

Depreciation of the kip and skyrocketing inflation have resulted in labour shortages, impacting the industrial sector, business leaders say.

The rising cost of living and comparatively low wages are forcing thousands of Lao nationals to seek employment in other countries so they can earn more money and improve their standard of living, with most seeking jobs in Thailand and the Republic of Korea. 

President of the Lao National Chamber of Commerce and Industry (LNCCI), Mr Oudet Souvannavong, said recently that the spiralling cost of living has posed a huge challenge for businesses in their search for employees and efforts to boost exports, and that many skilled workers have left Laos for higher paid jobs elsewhere.

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The LNCCI President added that many farmers have also abandoned their fields or are growing fewer crops due to rising production costs and the lack of manual workers.

A recent survey conducted by the Macroeconomic Research Institute found that more people are crossing the border into Thailand where they can earn far more than in Laos.

“In 2022, the monthly minimum wage in Laos was almost four times lower than in Thailand. This is mainly due to the significant depreciation of the Lao currency,” the survey stated.

With almost two-thirds of the Lao population being of working age, the country has huge potential to boost economic growth. However, there is a concern that high inflation, which averaged 40.85 percent in the first quarter of 2023, combined with comparatively low wages, means that many workers are opting to work in neighbouring countries, where they can earn more.

The Ministry of Labour and Social Welfare estimates that the number of Lao nationals leaving their hometowns in search of better paid work in Thailand could rise to 400,000-500,000.

Businesswoman Ms Dalouny Phoummachak said high inflation in Laos was also forcing skilled foreign workers to return to their home countries.
Rising consumer prices are also affecting recruitment in the industrial processing and service sectors.

At its recent monthly cabinet meeting, the government decided to increase the minimum wage from the present 1.2 million kip to 1.3 million kip a month to help ease the hardships suffered by many Lao people.

The new minimum wage came into effect on May 1, to mark International Labour Day. Nevertheless, the new wage rate is still low compared to the wages paid in other Asean countries.

According to the Laophattana News, Laos and Myanmar have the lowest minimum wage with an average rate of only US$2.86 (50,000 kip) and US$2.30 (40,285 kip) per day respectively. Meanwhile the average minimum wage in Cambodia is US$6.47 per day, US$6.67 in Vietnam, US$10 in Indonesia, US$10.09 in Thailand, US$10.31 in the Philippines, and US$11.2 in Malaysia.