The Lao government has increased the country’s monthly minimum wage from Kip 900,000 (US$108) to Kip 1,100,000 (US$132) with effect from May 1, 2018. An increase of 11 percent, the wage increase will apply to all businesses and factories established in the country. This is the third such raise in the last eight years. In early 2012, the minimum monthly wage doubled from Kip 348,000 (US$41.5) to Kip 626,000 (US$74.7). In 2015, it rose to Kip 900,000 (US$107.4).
According to the Lao government and the Lao Federation of Trade Unions (LFTU), that had petitioned for the minimum wage to be increased, the hike will help improve the labor standards in Laos and address the rising cost of living in the country. Besides, the government hopes the wage increase will motivate a large number of Laotians working in neighboring countries such as Thailand and Vietnam, to return and contribute to its manufacturing sector.
The revised wages, however, are still significantly below those in neighboring countries; the current minimum daily wage in Thailand ranges from Baht 308 (US$9.6) to Baht 330 (US$10.28), depending on the province, which is approximately Baht 9240 (US$288) to Baht 9900 (US$308.5) a month.
For Laos’ low-cost manufacturing sector which remains at a nascent stage of development, the increase in the minimum wages means narrower profit margins, increased competition from cheaper producers elsewhere in Southeast Asia, and perhaps, prospective laying off of low-skilled workers. The raise also significantly impacts the operating cost of business units. Businesses in Laos are now also liable to pay an additional wage of Kip 200,000 (US$23.8) per month or Kip 2,400,000 million (US$286.4) per annum per employee, lowering Laos’ appeal for foreign investors.
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