Government wage hike too small to bring cheer

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Raises barely make up for inflation; salaries still only meet 60 percent of workers' needs

A nurse feeds a newborn baby at a hospital in Hanoi. Many employees in the state sector are dissatisfied with a recent salary increase. Photo: Reuters

The Vietnamese government raised wages by 26.5 percent on May 1, but the bump has done little to improve the lives of struggling wage workers, especially in light of recent inflation.

The increase, from VND830,000 to VND1.05 million (US$50) per month, applies to civil servants and people working for state agencies, the armed forces, social and political organizations and public enterprises.

Some six million people have benefited, according to the Ministry of Labor, War Invalids and Social Affairs, as salaries have increased proportionately at all levels.

But many people are dissatisfied with the increase.

Nguyen Thi Dung, a nurse at the Central Pediatrics Hospital in Hanoi, said: "Wage hikes have never significantly raised my income. The new hike is not enough to buy a kilogram of beef."

Beef costs VND250,000 now while her salary increase was only VND220,000.

Following the hike, her monthly income has increased to around VND4 million, she said, just enough to eat and pay the rent. "My life has not changed. I still cannot afford films or dining out."

Hoang Minh Hao, deputy head of the ministry's salary department, said that in recent years, wage hikes have only offset inflation and haven't sufficed to improve the quality of life.

Though wages have increased by 16-20 percent annually in the past few years, they remain very low, meeting only 60 percent workers' basic needs, he admitted.

The average monthly wage increased almost 20 percent to VND3.84 million last year, according to a recent survey the ministry conducted at 1,660 companies in 17 cities and provinces, involving more than 15,000 employees.

Employees in the state-owned sector earned the highest average salary of VND4.41 million, compared to VND3.32 million in the private sector.

Hao also admitted that the salary scale is unrealistic and does not inspire people to work harder.

"The minimum wage should be adjusted to reflect the living needs of people."

Economist Le Dang Doanh pointed out that real incomes have been too low compared to rising consumer prices.

Low wages are probably the main reason for corruption and the brain-drain from the state to private sector and foreign-invested companies, Doanh said. "Obviously, when the salary cannot meet state employees' living needs, they may make use of their position to illegally earn money."

In May consumer prices rose by 8.34 percent from a year earlier after peaking at 23 percent last year, according to the General Statistics Office.

Nguyen Tuyet Minh, a piano teacher at the Vietnam National Academy of Music, said the number of students attending her extra music classes has dropped since the cost of living has risen.

"Learning music has now become a luxury," she said.

Not inflationary

According to the Ministry of Finance, the additional spending on salaries amounts to VND11 trillion ($527 million) and the latest hike will cost the government some VND50 trillion.

But it would not create inflationary pressure, economist Vu Dinh Anh said.

"I don't think that the salary increase will affect our anti-inflation fight because of low purchasing power and large stockpiles."

The economy expanded by 4 percent year-on-year in the first quarter, the slowest pace since 2009, according to the General Statistics Office.

Retail sales jumped 20.8 percent in the first five months of 2012, compared to the same period last year. In 2011, that sales grew by a total of 24.2 percent.

Experts question policy

Dang Ngoc Tung, president of the Vietnam General Confederation of Labor, said the Labor Code stipulates that the minimum wage "must cover an employee's basic living costs."

"When a rise occurs in the cost-of-living index and causes a drop in the real wage of the employees, the government should adjust the minimum wage to ensure this."

However, in practice, the current minimum wage of VND1.05 million does not meet a person's minimum living needs, he said.

Dang Quang Dieu, head of the labor confederation's Institute of Workers and Trade Union, said the shortcomings in the wage policy directly affect the lives of 15 million workers and their families.

"If we continue to keep the minimum wage level low and consider the low labor cost an advantage in attracting investment, our workers will be placed at a disadvantage," he said.

Doan Cuong, head of the Ministry of Home Affairs' Salary Department, said the difficulty in paying bigger salaries is the limited budget for it and the large number of beneficiaries.

The government has set a goal of paying all workers adequate wages for their living needs by 2015, he added.

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