Laos to increase minimum wage starting Aug. 1 in response to inflation

Recovering businesses say they are not ready for the increase, but workers say wages still won’t be enough.

By RFA Lao
2022.07.12

Factory workers assemble garments to be exported abroad on the outskirts of the Laotian capital Vientiane in this file photo.

 Reuters

Laos’ minimum wage will increase to 1.2 million (U.S. $80) per month starting on Aug. 1, the country’s government announced, despite complaints from business owners that say they cannot afford the increase.

The Lao National Labor Committee announced the raise on July 8, which boosts the minimum wage by 100,000 kip (about U.S. $6.70) per month. 

Business owners told RFA that they are still recovering from the coronavirus pandemic, which sharply reduced their revenue.

“I was not informed of this, and I have not made any increase for my workers,” the owner of a water and ice business in the capital Vientiane told RFA’s Lao Service. “I see that the Lao economy is not going well, and business operators will have a hard time if they have to increase minimum wage at this time.”

A garment worker in Vientiane agreed that businesses need more time.

“Some companies are seeing losses or they are not earning any profits right now,” the garment worker said. “For example, the company I am working for is facing losses and the company owner is still keeping the business running, but has to cut costs here and there to survive. … I only survive month-to-month with this wage.”

The wage increase is designed to help Laotians cope with rampant inflation in the country. But it isn’t clear how extensively the new pay minimum will be applied.

The government cannot force business owners to increase wages if they have reached an agreement with their workers on pay and other benefits, an official from the Ministry of Labor and Social Welfare’s Department of Labor Management told RFA.

“If they mutually agreed that the business operators provide food and accommodation to the workers, the business operators and workers can keep wages the same,” the official said. 

“We cannot force the business operators to increase the minimum wage because companies or business operators have their own conditions and policies with their hired workers. If there is any case of taking advantage of the workers, we, as a government body, can go to workplaces and investigate problems,” the official said.

An official from the Lao Federation of Trade Unions told RFA that the union will encourage workers to add clauses to their employment contracts that would force businesses to adhere to minimum wages as set by the government.

“The government has suggested to all business operators to increase the minimum wage.

However, it depends on each company or business’s decision to increase to this suggested minimum wage. Each company and business operator has its own policy and conditions,” the trade union official said.

Even with the increase, the minimum wage is not enough to keep up with the cost of living, several Lao workers told RFA. A worker from Vientiane told RFA that the government should mandate an even higher increase and also do more to moderate food prices.

Fuel shortages and an overreliance on imports have sharply raised the cost of living in Laos. Foreign currency reserves have grown scarcer, leading to a devaluation of the kip, which in turn adds pressure on prices. 

“They will add around $6.50 to the current minimum wage per month to about $79 per month,”  the worker said. “This will not help very much. Even though I earn over 1.3 million kip, or about $85 per month, I still find it very hard to survive.”

After the Aug. 1 increase to 1.2 million kip, the minimum wage should increase to 1.3 million kip by May 1, 2023 according to the National Labor Committee.

The increases are targeted at workers in the manufacturing and service sectors working a minimum of 26 eight-hour days per month, or six days per week.

The minimum wage does not apply to overtime pay. Business owners have to pay an extra 15 percent of minimum wage to workers performing duties that are hazardous.

The move to 1.2 million kip minimum wage comes after Phonesane Vilaymeng, vice president of the Lao Federation of Trade Unions, told state media on May 1 that the current wage of 1.1 million was no longer viable considering the higher cost of living.

An official of the organization also told state media that the country would lose more workers to neighboring Thailand if it kept the minimum wage so low. The Lao Federation of Trade Unions in March proposed that the minimum wage be raised to at least 1.5 million kip, or about $99 per month, by May 1,  International Labor Day.

Translated by Phouvong. Written in English by Eugene Whong.