Laos is grappling with growing economic and societal challenges as the current minimum wage, deemed inadequate by both workers and business owners, exacerbates labor shortages and increases school dropout rates nationwide.
In 2023, a report from the Ministry of Sports and Education revealed that out of over 49,000 high school graduates, fewer than 10,000 pursued university education, highlighting a troubling gap in higher education enrollment.
Vilavanh Chanthavong, an employee at a private marketing and media company, warned that low wages could further dissuade students from continuing their studies, undermining the nation’s future workforce.
“This may significantly affect the children, who are the future of the nation, making them unmotivated to study. They spend many years studying hard to graduate, only to receive this low minimum wage, which is not enough to survive. Some think it’s not worth it and decide to drop out,” said Vilavanh.
The country has been adjusting minimum wages for workers amidst the ongoing economic crisis and the depreciation of the Lao kip. Despite a recent increase, the minimum wage fails to keep pace with the country’s inflationary trend.
The minimum wage in Laos currently stands at LAK 1.6 million (approximately USD 75), a raise from the previous rate of LAK 1.3 million (about USD 61).
Meanwhile, the Lao kip continues to depreciate against major currencies such as the US dollar, Thai Baht, and Chinese Yuan. According to the latest update from the Lao local commercial bank, the exchange rate stands at over LAK 21,000 per USD 1 and over LAK 660 per THB 1, while the unofficial rate is normally higher. This depreciation has been substantial, with the kip nearly tripling against the US dollar and more than doubling against the Thai baht compared to August 2020.
Minimum Wage Compliance Issues Among Lao Businesses
Although the base wage in Laos remains the lowest in the region, many businesses across the country fail to comply with government-mandated increases. Recently, the Lao Federation of Trade Unions and senior officials from the Ministry of Labor and Social Welfare visited businesses in Vientiane to gather direct information. Only 10 percent of companies in Vientiane have adjusted their wages accordingly, citing the negative impact of wage hikes on businesses, potentially leading to job cuts.
This disparity has led many Lao workers to seek employment abroad, particularly in countries like South Korea and Thailand, where higher wages and better job prospects are available, resulting in a labor shortage in the country.
Bountiam Thammavong, a Lao entrepreneur and the founder of ICare Service, which provides housekeeping services in Vientiane, believes the Lao government should consider raising the minimum wage to align with the current situation.
He further emphasized that business owners should consider providing additional benefits, mentioning that he has increased his employees’ salaries and offers bonuses, fuel allowances, lunch benefits, and performance-based incentives. “This approach not only boosts their productivity but also encourages them to contribute more effectively to our business,” said Bountiam.
Dalaphone Pholsena, the owner of KuaLao restaurant in Vientiane, who employs over 38 staff, discussed the challenges of increasing salaries in Lao businesses.
“I believe the current minimum rate is not appropriate for the economic crisis we’re facing. At our restaurant, the basic salary for employees with zero experience is LAK 2.5 million,” said Dalaphone. “However, while salary adjustments should account for inflation, doubling every employee’s pay to match inflation rates is likely impossible, as businesses must also prioritize survival and profitability to sustain operations.”
Additionally, she mentioned that the wage issue stems from several factors, including economic challenges and the depreciation of the Lao kip, noting that the lack of essential skills among the Lao labor force exacerbates the situation. Dalaphone argued that addressing the problem solely by raising wages places a heavy burden on businesses.
Bouasone, a founder of Okard, an informal youth group, and who works in the salary-related field based in Vientiane, also commented that in the current circumstances, particularly with the high inflation rate, the minimum wage is insufficient to keep up with the rising cost of living and the increasing prices of consumer goods.
“Considering the rising prices of essentials such as fuel, internet fees, and food, I believe it should be at LAK 3 million. I’ve calculated that an individual requires at least this amount to meet basic needs and survive,” she said.
To address the issue, sources who spoke with the Laotian Times emphasized that collaborative efforts from all parties are required. This includes the Lao government adjusting wages, businesses offering appropriate compensation to workers, and workers developing the necessary skills to meet labor market demands.
