Specifically, the monthly minimum wage for employees in private firms will increase from VND1.4 million ($66) to VND2 million (US$95) a month.
There are four minimum-wage bands for different parts of the country – VND2 million ($95), VND1.78 million ($81), VND1.55 million ($74) and VND1.4 million ($66).
The change means the lowest minimum wage band for employees of domestic firms has increased from VND830,000-VND1.4 million ($40-$66), while for foreign-invested enterprises it has risen from VND1.1 million-VND1.4 million ($52-$66).
The minimum wage will serve as the basis for calculating salaries, allowances and welfare benefits in line with the law.
Enterprises are being encouraged to pay their employees more than the minimum wage. Skilled employees should be paid seven times the minimum wage.
However, a survey of the Vietnam Labor Confederation shows that the current lowest pay for workers in Hanoi and HCM City is now VND2.2-2.5 million per month and VND1.8-VND2.2 million per month in other provinces. Thus, though the minimum wage will increase, the minimum living standards will not increase.
A minimum wage is the lowest monthly remuneration that employers may legally pay to workers who do the simplest job, which can cover workers’ minimum living standards and part for savings to reproduce labor. However, the real minimum wage is too low because it is not based on the minimum living standards.
The government has increased minimum wages continuously, but the skyrocket of prices for essential goods has diminished the meaning of this move. Minimum wage is still far below to cover minimum living standards.
Low wages are a main reason for strikes. According to the Vietnam Labor Confederation, up to 440 strikes were reported in 23 provinces and cities by June 30, three fold more than the same time of last year. Most of strikes occurred in southern provinces and at foreign-invested enterprises.
However, it is necessary to consider difficulties of employers. They complained that it is unsuitable to raise minimum wages at this moment because this is the most difficult time for them (high inflation, hard to access to bank loans, etc.) They said that the input cost of many industries has risen by 20 percent, plus 20 percent of interest rate, if minimum wage also increases, many enterprises will be unbearable.
But many enterprises, mainly private firms of small scale, said that they would calculate and cut other costs to share difficulties with workers.
Reviewing the progress of minimum wage in the last ten years, one will see that minimum wage has lagged far behind in the race with inflation. During this period, minimum wage was adjusted seven times, from VND210,000 to VND830,000 per month but the increase of minimum wage is much lower than the increase of GDP (6% to over 8% annually) and that of the consumer price index (CPI) (less than 5 percent in three years, 6-9.5 percent in four years, around 12 percent in two years and 19.9 percent in one year).
Actually, minimum wage was adjusted based on the payment ability of the state budget, not the minimum living standards. Notably, for the same job, the same location but workers at foreign-invested firms are paid more highly than those of local firms.
Experts said that minimum wage in Vietnam is only VND4,000-5,000 ($0.19) per hour while it is $5.33/hour in Europe and $0.76/hour in Southeast Asia.
In the age of inflation, the current minimum wage as well as net income of Vietnamese workers is not sufficient for minimum living standards.
Inappropriate wage mechanisms not only harm laborers, but employers and even the economy.
DNSGCT
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