Rising wealth, rising labour costs

A surge in labour demands in Southeast Asia has left analysts wondering how long the era of dirt-cheap labour will last in the region.

 

 
Following years of robust growth that has seen Asean’s combined GDP soar to $2 trillion, unions and politicians across the region are calling for higher wages and better job protection and benefits for employees.
Mass protests in Jakarta last year secured a 44% increase in the minimum wage for people in the capital, with other areas of the archipelagic nation expected to follow suit. Thailand, which increased its minimum wage in seven provinces in early 2012, is set to raise country-wide minimum wages this year. Meanwhile Malaysia is scheduled to implement its first comprehensive system of minimum wages this month. Even Myanmar, which has a history of stifling trade unions, is rumoured to be considering a new minimum-wage bill.
Singapore may have deported the perpetrators of the country’s first strike in 26 years last month but, being home to the region’s highest inflation rates, the city-state may find it increasingly hard to ignore the emboldened calls for higher wages.
“The era of cheap labour and lack of justice for workers is over,” declared Indonesian President Susilo Bambang Yudhoyono late last year in a show of support for improved welfare and higher wages. However, manufacturers across the region that rely on cheap labour warn higher production costs could make the region less attractive to investors, while local businesses in Indonesia and Malaysia have respectively asked for exemptions for companies that can’t afford higher wages and more time to implement pay increases.
Economists say rising rates are unlikely to spoil the region’s competitiveness and are expected to impact little on employment, investment or inflation.