🇹🇭 What Minimum Wage Really Does to a Country’s Economy — Thailand’s 2025 Case
- Cristabelle Chang
- 2 days ago
- 3 min read
When we hear the term minimum wage, it often sounds like a win for workers. But like everything in economics, there's more to what meets the eye. Minimum wage policies can bring both benefits and negatives, and understanding them helps us see how governments shape labour markets, businesses, and overall economic growth.
📈 The Good: Higher Incomes & Better Standards of Living
The main goal of minimum wage policies is to protect low-income workers. By setting a legal wage floor, governments ensure that no one earns less than a certain amount.
Economists say this can reduce poverty and narrow income inequality. In addition, it also gives workers more disposable income, which can lead to increased consumption and economic growth. This is known as the multiplier effect.
“Low-paid workers are more likely to spend the money they earn, which supports local businesses and can help drive overall demand in the economy.” — Institute for Fiscal Studies
Plus, higher wages may lead to higher productivity and motivation. According to the efficiency wage theory, if workers are paid more than the market-clearing wage, they’re less likely to quit, more motivated, and more productive.
⚠️ The Bad: Rising Costs, Possible Job Losses
However, raising the minimum wage can also create cost pressures for firms—especially small businesses that rely on low-skilled or informal labour.
Some of the possible downsides include:
Reduced employmeny or layoffs
Higher prices for goods and services (cost-push inflation)
Employers choosing to invest in capital instead
“While raising wages improves worker welfare, it also impacts small businesses with tight profit margins, forcing them to reduce staff or hours.” — ASEAN Briefing, 2024
If the minimum wage is set too high above a worker’s productivity, unemployment can rise—particularly among young or low-skilled workers who are new to the labour market.
Research by Cristabelle Chang: The Informal Sector in Southeast Asia
In my own research, I explored how informal labour markets in Southeast Asia affect the outcomes of minimum wage policies. In countries like Thailand, Vietnam, and Indonesia, many workers are employed without formal contracts, minimum wage protection, or access to legal benefits (some may call it illegal employment).
This makes government policies harder to enforce—especially in rural areas or among migrant workers. While raising the minimum wage may work well in cities, the rural informal sector often remains unchanged, meaning inequality can continue or even worsen.
This insight emphasizes that minimum wage alone isn’t enough. It must be combined with broader reforms—such as formalizing work contracts, improving education and training, and strengthening enforcement in low-income regions.
🇹🇭 Real-World Example: Thailand’s 2025 Minimum Wage Reform
Thailand’s government introduced a nationwide minimum wage increase in 2025, adjusting daily rates to between THB 337 and THB 400, depending on the province. Wealthier, high-cost regions like Phuket, Chonburi, and Koh Samui adopted the highest rate of THB 400/day.
“The wage increase aims to reduce economic inequality and boost domestic consumption, while promoting fair pay across provinces.” — ASEAN Briefing, Jan 2024
To lessen the impact on businesses, the Thai government implemented supporting measures such as:
Corporate tax relief
Financial handouts for low-income workers
Wage subsidies for small and medium enterprises (SMEs)
Still, experts have warned that while the reform may raise living standards, it also risks placing pressure on small businesses and pushing more employment into Thailand’s large informal sector.
📖 Source: Thailand’s New Minimum Wage for 2025: What Businesses and Workers Need to Know – ASEAN Briefing
Econaeva Breakdown: It’s All About Balance
Is minimum wage a good or bad idea?
It depends, as a carefully assessed minimum wage can improve living standards and reduce inequality. But if it’s set too high, , it can backfire—
Key things to consider:
Cost of living by region
Worker productivity
The strength of the informal economy
Support from the government (e.g. subsidies, tax cuts)
In conclusion, minimum wage policies are more than just numbers—they reflect a country’s values, economic structure, and political priorities. Thailand’s 2025 reform shows how complex these decisions can be, especially in economies with large informal sectors.
As I continue researching labour markets and economic policy across Southeast Asia, I hope to bring more clarity to topics that feel intimidating at first—but really affect all of us.
Thanks for reading!– Cristabelle Chang
Comments