Vietnam workers indifferent to minimum wage hike, employers fret

A vendor sells cockles on a street corner in Ho Chi Minh City. PHOTO: BLOOMBERG

A vendor sells cockles on a street corner in Ho Chi Minh City. PHOTO: BLOOMBERG

In the cramped kitchen of her tiny rented house, Nguyen Thu Ha, 32, a worker at Canon Vietnam, fumbles as she looks for a place to put a honeycomb-coal stove to replace her gas one.

The new stove would help her cut energy costs by 30 percent a month, Ha said, and the government’s plan to hike minimum wage next year cannot change her mind about it.

The salaries her company pays workers are higher than the planned minimum wage, so her earnings are unlikely to go up for her, she said.

“The wage hike would not benefit us, just put more pressure on us. It can trigger a rise in prices.”

Following an earlier wage hike this year, house owners increased rents by 10 percent, Ha said, adding if prices rise after the upcoming salary hike, her monthly income of VND4 million (US$190.4) would not be enough for her to live in the city.

The National Wage Council plans to propose to the government an increase in minimum wage by 15-17 percent from January 1 next year. The minimum wage is now VND1.65-2.35 million a month, depending on the location of the company.

Ha’s roommate Nguyen Thi Anh, who works for a private wood products firm, is not too keen about the proposed wage hike either, saying the increase is too small.

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It would be insufficient to offset the increase in prices of goods, she said.

“It’s better that wages do not increase.”

Anh’s salary at has never been enough for her, and she makes paper votive offerings in the evenings for some extra income.

But it is not just people working for the private and foreign sectors who are uninterested in the proposed wage hike. Even government employees are not keen since the majority of their income comes from allowances and bonuses, which are usually based on how well their business is doing.

Le Tien Truong, a member of the National Wage Council, said the salaries that many firms pay their workers are higher than the minimum wage fixed by the government.

So they would not increase wages following the government’s salary increase, he said.

Some firms are likely to increase salaries, but could cut allowances, one economist said.

“Thus, the workers’ incomes will be unchanged, and their living conditions will not improve despite the wage hike.”

Truong said the salaries should be increased to ensure there is enough for workers’ basic needs since the minimum wage now only meets 70 percent of those needs.

But the hike should be carefully considered to ensure it does not stymie the government’s efforts to generate jobs, he added.

The government hopes to add 1.7 million jobs each year.

“If the minimum salary is set too high, many firms would have to lay off workers, and we may fail to achieve the target,” Truong pointed out.

Some firms have expressed unhappiness about the wage increase.

Luong Van Thu, director of a garment firm in Hung Yen Province, said the wage hike would increase costs for companies, which already face many difficulties in sustaining their operations amid the economic slowdown.

“The salary hike will not be easy for a firm with hundreds of workers like ours,” he said.

At a recent investment conference, some foreign executives said businesses have been hit this year after the minimum wages were raised.

The minimum salary was hiked by 16.1-18 percent, depending on location.

One more wage hike could hit Vietnam’s competitiveness in the near term, so it needs to be considered “very carefully,” Thu said.

Insufficient for basic needs

Vietnam has never managed to set a minimum wage high enough for people to live on, according to the Labor Union.

Its recent study of 68 Vietnamese firms found that workers earn an average of VND3.667 million a month, but more than 5 percent earn less than VND2 million.

A person needs VND2.4-3.7 million a month just to survive, it said.

“Our minimum wage and minimum living standards have never met. The wage might not be able to catch up for at least a couple years,” Labor Union representative Dang Quang Dieu said.

Van Thu Ha from the Vietnam office of global charity Oxfam said the system of varying minimum wages fosters “unfairness” since the basic living standards sought by workers are the same everywhere.

Ha said many countries in the world use set criteria to establish a uniform minimum wage – one that enables employees to afford the necessary food and clothing, accommodation, healthcare, education, and transportation, support aging parents, maintain a normal social life, and have some left over to save.

Ha said Vietnam’s minimum wages have fallen behind its economic growth rate. She said they may have increased in
recent years, but only by 38 to 41 percent of the per capita GDP growth, which means the government can afford further wage increases.

She said the current wages only allow workers and their families a livelihood that hovers around, or even below, the official poverty line, calculated by Oxfam to be at VND400,000 ($19) per person per month.

Thus, workers like Anh would have to do extra jobs until the government has a more realistic policy that helps them survive on the minimum wage.

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