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Wednesday, July 24, 2024

Laos Hesitant to Raise Minimum Wage

This Week

The Lao government remains unable to raise the minimum wage, despite rampant inflation the country faced in 2022.

The current minimum wage in Laos is LAK 1,200,000, which was raised from LAK 1,000,000 in August of 2022. At that time the government claimed it would raise the minimum wage again to Lak 1,300,000 in May of 2023.

However, the minimum wage may not be raised, according to the Ministry of Labour and Social Welfare recent annual meeting. According to the Vientiane Times, the government may be unable to raise the minimum wage because of a lack of supporting data.

The minimum wage was raised by 20 percent in 2022, however, according to the Bank of Laos, the average inflation for 2022 was 22.96 percent. According to the World Bank, consumer price inflation had risen to 37 percent by October 2022, with food inflation reaching a higher 39 percent.

This inflation has made the previous substantial minimum wage hike moot, and for the poorest, who spend the majority of their income on food, it results in a net loss.

The World Bank also reports that “two-thirds of households report spending less on health and education, which could undermine long-term human development. Although employment had risen by mid-2022, earnings did not keep pace with inflation.”

Another obstacle holding back a minimum wage increase, as reported by the Vientiane Times, is that many Lao people have increased their skills, but employers still pay them the minimum wage – not giving raises to those who have higher skill levels.

Therefore, because employers are not paying workers a rate equal to their skills, the government can’t increase the amount workers have to be paid.

Despite admission from the Ministry of Labour and Socia Welfare that a pay increase would be vital to the improvement of working conditions, employers have been resistant to an increase.

In light of these facts, the Ministry of Labour and Social Welfare told the Lao Federation of Trade Unions that Lao workers are not skilled. However, as pointed out by the Vientiane Times, “Unfortunately, many of those who win the [National Skills Competition] in Laos are unable to find work.”

As the labour authorities continue to work with the private sector on labour issues, they shine light on an important problem that Laos faces moving forward. The fastest way up the income ladder is attaining skills required for a modern economy.

Education is essential to new generations of Lao workers who will enter the labour force, but a recent education study found that Laos has the lowest scores in math, reading and writing of the six ASEAN countries tested.

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