Ministry says no money for wage hike, legislators say cut other spending

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The Finance Ministry says figures on the dismal state of the national budget back up government claims that it doesn't have enough money to raise the minimum wage, but lawmakers argue that other spending should be cut instead. 

Vietnam's basic minimum wage, now standing at VND1.05 million (US$50) a month, is scheduled to increase to VND1.3 million May 1 next year.

But the ministry said on Monday the state budget will not have enough money for the wage hike when May rolls around. It also said that future increases would be considered at that time, Thoi bao Kinh te Saigon Online reported

Minister Vuong Dinh Hue said at a meeting with members of the National Assembly that the increase scheduled for May would require around VND60 trillion ($2.88 billion) from the state budget.

He said the state budget would only be able to allocate one third of the amount at that time, meaning the government cannot afford to increase wages. 

The minister said the matter will be open for discussion again in May. But he said the outlook was grim.

Inflows to the stage budget over the first nine months this year were the lowest in several years at only VND704.5 trillion, or 67.3 percent of the annual goal. The government spent more than VND643 trillion over the same period, which includes VND20 trillion it handed out on tax exemptions, tax reductions and tax delays for struggling businesses.

The ministry estimated that state revenues next year will be around VND807 trillion while spending will likely total VND969 trillion. That VND162 trillion in overspending would equal 4.8 percent of annual GDP.

The government earlier this month announced a plan to forego the minimum wage hike given the low budget, but some legislators disapproved, saying the wage increase would stimulate consumption, clear stockpiles and save the economy.

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Representatives opposed to canceling the wage hike said the government should save money by cutting less important spending.

Representative Tran Hoang Ngan from Ho Chi Minh City told local media on the sidelines of the meeting that the government should reduce spending on festivals, anniversaries and the like.

He said the government should not be worried that a wage hike would spur inflation.

"Wage increases have not affected inflation much in recent years," he said. 

Either way, the Labor Ministry has said that no matter whether or not the basic minimum wage is raised, the minimum wage in the business sector will be increased as scheduled by between 25 and 36 percent in May. The government will make the final decision on the amount of that hike.

Vietnam sets different minimum wages for different sectors (business sector, state employees, etc) based on the "basic" minimum wage.

The government is less concerned about a wage increase in the business sector as the burden will be largely on the private enterprises, whereas increases to wages in state sectors would drain funds from the government coffers.

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