Vietnam looks to raise its minimum monthly salary by just above 10 percent next year, the lowest level since 2013, a move that apparently bows to the growing pressure of the corporate sector.
Laborers work at a garment factory in Sai Dong, outside Hanoi, Vietnam, July 1, 2015. Vietnam's economic growth could rise to 6.5 percent in 2015, beyond the 6.2 percent target, thanks to a solid manufacturing sector, the Finance Ministry said last week, citing a government think tank. Photo: Reuters
Under a government decree that took effect early this year, Vietnam raised the wage floor to VND2.15-3.1 million (US$101.4-$146.2), or 15 percent, depending on the location. The government also approved a minimum-wage hike of around 15 percent in 2014.
But at a recent dialogue on wage polices, Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI), told the press that his organization proposed an increase of “above 10 percent” to offset the recent currency depreciation and make sure that the salary raise is in line with the current labor productivity.
If the wage hike outpaces productivity, it would affect the operations of businesses and eventually have a bearing on economic growth, he said.
Pham Minh Huan, deputy labor minister who chairs the National Wage Council, echoed Loc. “The ministry has to hash out a solution that works for both stakeholders,” he was quoted by news website VnExpress as saying.
The National Wage Council, which advises the government on wage policies, is set to finalize the proposed wage hike this month.
The plan will be submitted to the government for approval in October and will take effect in 2016.
Both foreign and local companies often lament that minimum-wage increases will hit their operations. They warn any further wage hikes will cause grave consequences on Vietnam’s competitiveness in the near term, adding it needs to be considered “very carefully.”
Analysts say corporations are using the large wage increase at one time, usually of around 15 percent, as an example of uncertainty in economic policy by the government.
That is a legitimate concern and it would be better to set a policy to increase the minimum wage in accordance with the inflation rate or maybe a little more, they say.
But at the end of the day, “the minimum wage is still quite low, and even if labor productivity is not as high in Vietnam, this low level of productivity does not justify the low wages,” Dennis McCornac, a professor of economics at Loyola University in Baltimore, Maryland, told Thanh Nien News.
“Foreign companies appear to be lobbying the Vietnamese government to make policies favorable to them even if not favorable to workers.”
Vietnam's per capita GDP remains less than $2,000, according to the World Bank. Experts say the minimum-wage hike is a step in the right direction, but even the annual adjustments are not sufficient enough for workers to make ends meet. They cover only about 60 percent of basic necessities for workers, according to the Vietnam General Confederation of Labor.
A total of 235 wildcat strikes have taken place across Vietnam this year with disgruntled workers demanding better pays and working conditions and protesting against overtime working hours.
In late March, tens of thousands of workers in Ho Chi Minh City protested new rules to the mandatory pension fund that aimed to keep all employees in the state pension system until their retirement date.
The strike compelled the National Assembly, Vietnam's legislature, to vote in June in favor of amending the controversial rule, enabling the workers to receive lump-sum social insurance payments whenever they choose to leave their companies and exit the state pension program.
In the face of growing corporate influence, the victory coming out of the March strike shows that “worker solidarity can pressure the unions and the government to listen to their legitimate concerns, even when foreign investors, chambers of commerce, and economists try to sway the rule of law to fit their profit interests,” said Angie Ngoc Tran, a professor of political economy at the California State University, Monterey Bay.
The race to lure foreign investors by a cheap labor force would only set off a race to the bottom “unless workers get united — because strength is in the numbers — and engage in peaceful dialogue with management and state officials as they did in the strike [in March],” Tran said.