Cost-push inflation and small vendors

How a minimum wage hike would play out in the intensely competive world of small food vendors.

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The view from the stalls, Among small food vendors, unease over rising costs is growing by Nanchanok Wongsamuth

Tawan Apichitponchai has been selling his beef noodles in Chon Buri for 30 years. For 10 years the price had been 30 baht a bowl, until beef prices increased from 100 to 120 baht per kilogramme, resulting in the need to adjust the price to 40 baht last year.

Mrs Boonpen says higher prices mean fewer sales, making her unwilling to increase wages.

In 1978, when his father set up the shop, the price per bowl was only six baht.

Mr Tawan receives a 20% profit margin per bowl, with 60% of his cost in raw materials and 40% in labour. He also sells pork noodles with a margin of 30% per bowl. He employs 15 immigrant labourers at a maximum of 200 baht per person per day.

But if all the workers were Thai and their wages rose to 300 baht per day under the new government, Mr Tawan said he would have to raise his noodle prices by 13 baht a bowl in line with the labour-cost hike. Since it's hard to give back change, he would probably end up raising the price by 10 baht. "But 10 baht is already a lot for consumers," he noted. Smaller vendors such as 65-year-old Boonpen Puakalong, who has been selling cooked-to-order dishes at the Industry Ministry for close to 20 years, are saying they can no longer bear the costs of higher raw material prices.

Mrs Boonpen has raised her prices by five baht to 30-35 baht per plate over the past three months.

The price of pork, for instance, was 110 baht per kg at the beginning of the year, compared with 70-80 baht in the past. Two weeks ago it was 150 baht, and now prices are soaring to 160-180 baht per kg.

The price of 30 eggs, meanwhile, has increased to 110 baht within the same period, compared with 95-100 baht earlier. Before that it was 60-70 baht.

Mrs Dang’s supply bill has gone up to 10,000 baht from 5,000 to 6,000 baht before.

While cooking oil prices are still acceptable, Mrs Boonpen said vegetable prices were unstable depending on floods or shortages.

She pays 3,000 baht per month in rent and employs two Cambodian helpers at around 200 baht per day.

Despite a potential wage increase, Mrs Boonpen said she would not increase pay.

How can I [raise prices and wages] while a five-baht increase is causing me to have lower sales? I don't care whether or not the law will be enforced, but I am not increasing [wages]," she said, though she promised to allocate special money once sales are good.

Against all odds, working in a government area makes it even harder for vendors to raise prices because there are officers that look after the welfare of government officials, she said.

Dang Rattanasoong, 60, has had a similar experience. She says she needs to raise the price of her rice and curry by 10 baht in order to return to the same level of profit as before, but it is difficult to do so because of competition and opposition from customers.

"In the past I would pay 5,000 to 6,000 baht for each trip to the market to buy raw materials, but now I need to pay about 10,000 baht," said Mrs Dang.

Raising prices by 10 baht to cover higher wages would be too much, says Mr Tawan.

She too employs a Cambodian helper at 300 baht per day. Although she has raised her price by five baht, her profit has fallen.

"Sometimes my customers don't understand and complain, and some ask for more," said Mrs Dang. "I'm still doing this because I have nothing else to do, but if I lose profit then I'll have to quit.

Visit Limprana, chairman of the Federation of Thai Industries (FTI) food processing industry club, said the Pheu Thai Party's plan to raise the minimum wage to 300 baht per day will result in a 40% increase in labour costs, causing food prices to increase by 20% over the next six months

Workers producing meatballs used to receive 100 baht per day, but now we may see noodle prices going up to 70 baht and maybe even 80 baht from the current 35-40 baht," said Mr Visit, who is also managing director of Nguansoon Group, a major seasonings producer.

FTI chairman Payungsak Chartsutthipol said product prices should be left to the market and the government should intervene only during fluctuations or when problems occur.

If product prices are more expensive, wages are raised, businesses are doing good and people are having increasing productivity, then everything should go along well. It's not one or the other

(Source: Bangkok Post, The view from the stalls, Among small food vendors, unease over rising costs is growing, 9/08/2011, Nanchanok Wongsamuth, link) 

Small Restaurant Vocabulary

cost-push inflation - a sustained rise in prices caused by businesses passing on increases in costs, especially labor costs, to customers (See Wikipedia and Google Definitions)

stalls - large tables or small shops with an open front from which goods are sold in a public place แผงขายของ
food vendors - people who sell food or newspapers, usually outside on the street พ่อค้าแม่่ค้าหาบแร่แผงลอย

set up the shop - create a new shop (and go into business)

cooked-to-order dishes - fooded that customer asks for that is cooked specially for the customer อาหารตามสั่ง

seasonings - things added to food to improve flavour such as salt, black pepper, basil, and spices (See Wikipedia) เครื่องปรุงรส

wage - an amount of money that you earn for working, usually according to how many hours or days you work each week or month ค่าจ้าง
rent - to pay money for the use of real estate (land, building, office, etc) for a period of time เช่า
raw materials - materials in their natural state before being processed or used in manufacturing

immigrant labourer - a person who has come to a different country in order to work and live there ผู้อพยพ, คนย้ายถิ่น

X in line with Y - to do X because of Y (X is the right or natural thing to do in this situation)
raise prices in line with the labour-cost hike - raise prices following a increase in labour costs

raising prices to cover higher wages - increasing price of good because the worker that produces it costs more

potential - might happen in the future; possible or likely event ที่เป็นไปได้
potential wage increase - a possible future increase in the amount paid to workers

adjust - to change something slightly, especially to make it more correct, effective, or suitable ปรับ
adjust the price - change the price

profit - money that you make from selling goods and services after all your costs have been paid กำไร
profit margin - profit as a percentage of the price of a good sold
margin - same as "profit margin"

maximum - the most possible ที่สูงสุด ที่มากที่สุด

change (noun) - the small money a salesperson gives back to a customer when they give them a big note (example: I pay 20 baht for a 15 baht ice cream and the salesperson gives back 5 baht change.)

consumers - people who buy things (individuals and families)

bear - to accept, tolerate or endure especially something unpleasant ทน
can no longer bear the costs - can't pay the high costs anymore (or will lose money and have to close the business)

for instance - for example, one example is ...
prices are soaring - prices are increasing by large amounts quickly

supply bill - 1. the total amount spent on things (supplies) used in the business; 2. the list on paper of things bought (bill) 

unstable - can change suddenly in unpredictable ways (no one knows what will happen next), likely to change or move instead of staying the same ไม่มั่นคง, ไม่สม่ำเสมอ
unstable prices - prices that go up or down quickly (making it difficult to do your business)

shortages - when there are not enough goods for people to buy การขาดแคลน

allocate - give a part of something to someone, give a share of something แบ่งส่วน

against all odds - very unlikely (very rare and difficult to happen; so surprising)

officers - high ranking managers in an organization

welfare - good care and living conditions (health, wealth, and happiness) ความสะดวกสบาย, ความมีสุขภาพดี, สวัสดิภาพ
opposition - strong disagreement with a plan or policy ความขัดแย้ง

trip to the market - going to the market to buy meat, vegetables and other things to cook food

complain - when a customer is not happy with the service they get and they say this (to the owner or to other people)

food processing - all the factory processes of cleaning, preparing and packaging meat and vegetables so they can be sold in stores as food products

minimum wage - the lowest amount that can legally be paid to a worker for one day's work
current - of the present time ปัจจุบัน

producer - a company that makes a certain product ผู้ผลิต

intervene - to become involved in a situation in order to try to stop or change it แทรกแซง สอดแทรก
fluctuations - value going up and down

productivity - producing more for the same amount of resources (labour, capital, machines); the speed at which a worker, company, or country produces goods (some are faster than others)