Pay hike fails to increase customers for businesses so far

As business fraternity has been complaining of lack of consumer spending and decrease in the number of customers, the pay hike was expected to boost the spending. However, the business community share that not much of a difference has been made so far.

The business owners that this paper interviewed pointed out that consumer spending is less and that there is a drop in the number of customers.

A popular cosmetics shop, the Korean House, said the number of customers keep on dropping and that they are facing losses, and said, “We used to at least sell 50-60 products in a day, but currently, our sale is in single digit these days. We are running on a loss right now.”

A small convenience store owner, Ugyen, shared that they can hardly earn enough money to pay the rent and is running on a loss.

As to why there is a drop in the customer numbers, the business community suspects the lack of population. Chimi, a mart owner, shared, “It is due to lack of the working population. Of course, the population is there, but our consumers all used to be the working populace and young graduates that were in Thimphu in search of jobs. Now, as they have gone outside, we no longer have any customers.”

The much-expected pay hike was a source of excitement for the civil servants. Although the business community expected increases in consumer spending, however, that is not the case so far.

Chimi said that she had expected an increase in sales after the salary hike, but it was not so. However, she is still expecting for sales to improve in the months to come.

Similar sentiments were also shared by other business owners. A popular garment shop, Sephug shares that the COVID impacted the businesses, and now the lack of customers is killing the business sector. “There won’t be a sudden increase in the sale and nor do I expect the sale to increase. The business fraternities which operate garments or other shops aside from groceries will not see a drastic increase. People say it’s the lack of population but if you go to hospital, there is no lack of people. It’s the lack of people who actually spend money.”

She further added, “Our consumers are the working populace, and all the working populace have gone to Australia. Offices are empty and even banks have started emptying out. Unless a huge influx of the working population, it will be impossible to see a drastic change in sales or profit, for the next decade or so.”

She also pointed out that, with the already high living cost and rental costs, the pay hike will all go into bill payments and necessity shopping.

As the expenditure soars, it seems that consumer spending will not increase. According to a civil servant, he has already spent 90 percent of his salary. “I had to pay my rent, bills and loans and the little left, I’m saving it for emergency purposes.”

The business community also shares that a pay hike alone for the civil servants will not increase consumer spending. “Much of the employees are from the private sector, and a pay hike just for the civil servant won’t have much changes in consumption expenditure. Only about 25,000 people are employed by the civil service, whereas much of the employed are from the private sector. If the private sector salary remains the same, the consumer spending will also likely remain the same.”

With regards to pay hike for the private sector, during the Live Meet-the-Press, the Prime Minister shared that there will be tax incentives for the private sector. 

“Everyone should be getting a pay hike, but there is no such culture of the government giving pay hikes to the private sector globally. However, there are advantages of pay hike for the private sector. Currently, those employed under the private sector are all businesses that earn profit. Being able to earn profit is due to policies that are private sector friendly, and those who got the pay hikes should be responsible for making these private sector friendly policies. This will ensure a smooth working environment, which will increase profit in turn, increasing the salaries of the employees. Secondly, the business owners should be responsible for their employees, and as salaries will be included under expenditure, we can deduct the taxes. Therefore, we do have tax incentives for those business owners that will increase their employees’ salaries.”

As the civil servants have gotten their pay hikes, much of the concern shared by the public is on inflation and house rent hikes. 

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