Vietnam set to raise minimum wage by nearly 10 percent

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Frugality may allow Vietnam to raise the minimum wage for state employees by VND100,000 (US$4.8) per month beginning next July, the Finance Ministry said in a Wednesday report.

The report released at a session of the National Assembly said the ministry has gone over the state budget again, and having considered opinions from various legislators, decided that the budget can afford a small increase to the minimum wage.

Vietnam had planned to raise minimum wage to VND1.3 million in May 2013.

But the ministry said earlier that was unaffordable and had proposed postponing the plan and keep the current wage of VND1.05 million unchanged throughout next year.

It was opposed by many legislators, who argued that the wage increase would boost consumption and save the economy and that the government should reduce spending in less crucial areas.

The ministry on Wednesday said that there is room in the budget for a modest increase to the minimum wage.

The wage increase will take VND20.7 trillion from the budget, to which local authorities will have to contribute VND3.3 trillion.

It is slated for around 8.3 million workers who are paid directly from the state budget, including employees and retirees of state offices.

Minister Vuong Dinh Hue said the government will have to "reconsider expenditures" to make sure there is enough money for the wage increase.

He suggested cutting public investments by VND10 trillion, and cutting 10 percent of spending on regular government activities, or around VND1.6 trillion.

He said the government also plans to issue between VND55-60 trillion in government bonds next year.

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"That can be the most positive plan that the state budget can handle," Hue said.

Vietnam's minimum wage is technically the minimum wage for state employees, and it is used to set the wage within the business sector, which now ranges between VND1.4-2 million regionally.

The Labor Ministry has said that no matter what happens with the basic minimum wage, business sector wages 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.

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 government coffers.

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