Deputy Minister explains about salaries
Vietnam’s salary reform in the eye of UNDP expert
Though the salary policy has been reformed for a long time, there are absurdities of salaries and income in Vietnam.
Firstly, salary and income is not paid based on qualification, but on power and job title.
Salary is the price of labor and it reflects the level and result of labor in reality. However, salary in the public sector is leveled and does not encourage people to study and improve their expertise and responsibility at work.
To enjoy salary increases, some civil servants do not rely on their qualification and personal endeavor at work, but through their personal relations and gaps on personnel policies.
As a result, many talented and hard-working people do not have many chances to have their salary rise; salaries of major employees are lower than assistant employees; retirement pension is higher than the salary of working-age people; the real income is lowering while the number of civil servants keeps rising; income not from salary is on the rise, particularly for civil servants who work in the fields of “power”. This is closely attached to corruption and bribery for promotion.
There are young people whose talent and expertise are not high, but enjoy a towering salary and are appointed to high position than others, who are better than them in all aspects.
Secondly, the nominal rise of a salary is always lower than the reduction of real income and the minimum salary increases continuously, while the minimum level of income for imposing personal income tax is not adjusted regularly.
Whenever the minimum salary rises, the price of goods often increases at higher level. Consequently, the real income of salary earners may be lower than before.
Notably, sometimes salary is increased for a part of workers in the society but it brings about negative impacts on the society when prices for goods also increase in the market.
Besides high inflation rate over the last four years (approximately 50 percent), nominal salary has also been adjusted. However, the starting point for imposing personal income tax – VND4 million ($200) – was maintained until late 2011, even though it became “outdated’ very shortly after it was applied.
This absurdity has unintentionally turned workers into “rich people” because their income easily reaches the level for paying personal income tax, which should be only imposed on the rich.
Thirdly, representatives of laborers to defend laborers are paid by employers.
The trade unions in enterprises in the private and foreign-invested sectors are set up in formalism. They are not the true protectors of laborers’ interest. The profound reason is most leaders of trade unions in these enterprises are recruited and paid by employers.
Moreover, at many enterprises, the salary and salary negotiation policies do not meet the market principles. Low salary and complicated regulations on legal strikes have resulted in the increase of spontaneous strikes in the foreign-invested sector.
In fact, many enterprises abuse their workers by asking them to work overtime, reduce interests of workers or pay low salary for workers though they are able to pay higher. These are among the main reasons for increasing strikes and massive resignations of workers at industrial zones and export processing zones in Vietnam, especially at big cities where the living cost is expensive. This situation causes losses for employers and harms Vietnam’s prestige and FDI attraction policy.
Worse, some businesses recruit and fire workers constantly. In these cases, employers complain about the poor quality of labor. But the true reason is to avoid paying labor interests and exploit workers by paying salary at the starting point. This trick causes false scarcity of labor and losses to workers.
Many foreign-invested enterprises always report losses but they still pay high salary to employees, thanks to the price transfer trick. This is also popular in state-owned enterprises, which hold a monopoly in some industries. For example, the Electricity of Vietnam Group (EVN) owes huge debts but it still pays very high salary to employees. A joint venture airway reported heavy losses but it still paid huge salary to its officials.
In 2009, US President Barrack Obama called the act that CEOs of loss-incurred banks received millions of USD of salaries is unmoral. Recently, the Japanese Prime Minister stated to not receive their PM salary until the nuclear power incident is solved.
Strikes, especially strikes in the foreign-invested sector, should not be only considered as the signal of instability of investment environment in a certain province, but also the signal of social injustice, which needs the state’s assistance to protect legal interests of workers.
Sometimes, they should be considered as the signal of backwardness and the requirement for restructuring the economy.
Dr. Nguyen Minh Phong
Business & Investment Opportunities
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