Laos boost minimum wage for third time in eight years

The Lao government has increased its minimum wage for the third time in the last eight years.

Minister of Labour and Social Welfare Sompheng Xaysompheng justified the rise by pointing to improvements in the country’s economic performance and consequently, the cost of living, according to Asean Briefing.

The minimum wage has now increased from Kip 900,000 (US$108) to Kip 1.1 million (US$133) a month. In early 2012, it doubled from Kip 348,000 (US$41.50) to Kip 626,000 (US$74.70) and, in 2015, leapt again to Kip 900,000 (US$107.40).

Both the Lao government and the Lao Federation of Trade Unions (LFTU) said the move would help improve labour standards and address the rising cost of living. The government also hopes it will encourage Laotians in neighbouring countries such as Thailand and Vietnam to return home and work in its manufacturing sector.

But the new rates are still significantly below those offered in neighbouring countries. The current minimum daily wage in Thailand ranges from around Baht 9,240 (US$288) to Baht 9,900 (US$308.5) per month, depending on the province.

For Laos’ low-cost manufacturing sector, which is still in the early stages of development, the minimum wage increase means narrower profit margins and increased competition from cheaper producers elsewhere in Southeast Asia.

There has also been some concern over whether it could lead to low-skilled workers being laid off, according to Xinhuanet. Businesses in Laos will now have to pay additional wages of Kip 200,000 (US$23.80) per month or Kip 2.4 million (US$286.40) per annum per employee, which could reduce the country’s appeal to foreign investors.

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

The Lao government has increased its minimum wage for the third time in the last eight years.

Minister of Labour and Social Welfare Sompheng Xaysompheng justified the rise by pointing to improvements in the country’s economic performance and consequently, the cost of living, according to Asean Briefing.

The minimum wage has now increased from Kip 900,000 (US$108) to Kip 1.1 million (US$133) a month. In early 2012, it doubled from Kip 348,000 (US$41.50) to Kip 626,000 (US$74.70) and, in 2015, leapt again to Kip 900,000 (US$107.40).

Both the Lao government and the Lao Federation of Trade Unions (LFTU) said the move would help improve labour standards and address the rising cost of living. The government also hopes it will encourage Laotians in neighbouring countries such as Thailand and Vietnam to return home and work in its manufacturing sector.

But the new rates are still significantly below those offered in neighbouring countries. The current minimum daily wage in Thailand ranges from around Baht 9,240 (US$288) to Baht 9,900 (US$308.5) per month, depending on the province.

For Laos’ low-cost manufacturing sector, which is still in the early stages of development, the minimum wage increase means narrower profit margins and increased competition from cheaper producers elsewhere in Southeast Asia.

There has also been some concern over whether it could lead to low-skilled workers being laid off, according to Xinhuanet. Businesses in Laos will now have to pay additional wages of Kip 200,000 (US$23.80) per month or Kip 2.4 million (US$286.40) per annum per employee, which could reduce the country’s appeal to foreign investors.

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.