June 18, 2014

Does Laos Have Minimum Wage?

Lao money currency symbol
It may be a surprise for some to learn that Laos, even though it is a poorer country, actually does have minimum wage laws.  The minimum wage was created as recently as 2005 when it was set to 290,000 kip per month (based on a typical work day of 8 hours, 26 days a month).  Four years later, in 2009, it was increased to 348,000 kip.  Another four years later, effective January 1st, 2013, the new wage had been set to 626,000 kip (approx. $80 USD / month; 1USD = 7,827LAK). Additionally, as of 2009, it became mandatory for employers to also include a daily meal allowance as well.

It has been reported in the Lao newspapers KPL and Vientiane Times that some private business owners are resisting the wage hikes.  However, the Lao government, by way of its Ministry of Labor and Social Welfare (MLSW) and also the Lao Federation of Trade Unions (LFTU), does allow employees to report grievances and does do investigations.  Unfortunately, minimum wage enforcement remains weak in the country and many employees are fearful to report such things.

Furthermore the situation remains such that in addition to low wages, there's also poorer working conditions, very little fringe benefits (aside from meal allowances and holidays), and almost no workplace protection for employee rights.  The workplace decorum coupled with the culture in Laos creates a workplace environment that is very much that of a subservient worker and the business owner or supervisor.  Employees seldom voice concerns, disagreements or grievances.

No doubt the government has to weigh the benefits of having a competitive economy with its low wages versus the needs of its workforce and increasing the standard of living through increased minimum wages.  It's a balancing act seen in many countries throughout the world even in developed countries.  On the one hand you have private industry that often claims that it cannot financially support the increases.  And on the other hand, you have hard working laborers who earn very little and live in or near poverty.

From an economic standpoint, low wages in developing countries gives them low overhead and labor costs and thus a better advantage over other countries where labor costs may be high.  The other side of that however is, how helpful is it to an economy if the vast majority are perpetually paid so low that they are living pay check to pay check with very little opportunity to save?  Food for thought...


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