Minimum wage hike worries pandemic harassed businesses

By Hong Chieu April 20, 2022 | 11:00 pm PT

Garment workers are seen at Garco 10 factory in Hanoi. Photo by VnExpress/Hong Chieu

A 6 percent increase in minimum wage starting this July is a timely boost for workers after two years with no raise, but businesses are nervous about its financial impacts.

For the first time since 2009, the minimum wage increase, if approved by the government, will be effective July 1 instead of January 1 as in previous years.

The increase will amount to VND180,000-260,000 ($7.84-11.32) per month per worker, depending on each of the four salary regions specified by the government.

It means the new minimum salary will range from VND3.25 million to VND4.68 million a month.

The Vietnam Chamber of Commerce and Industry (VCCI), speaking on behalf of businesses, agrees with the pay hike, but is not satisfied with the July 1 timeline because businesses have already completed their financial plans for the year.

It has proposed that the increase takes effect January 1 next year so that they have more time to adjust their finances.

Eight business associations, including the garment, fishery and wood groups, have also requested the government that the increase be pushed back to early next year.

The July deadline could be a "shock" as businesses have only two months to prepare just as they are trying to pick themselves up after suffering impacts of the the Covid-19 pandemic, said Pham Minh Huan, former Deputy Minister of Labor, Invalids and Social Affairs.

Salaries are part of manufacturing costs that need to be prepared one year in advance, he explained.

Public policy expert Nguyen Quang Dong said a sudden increase can harm investment flows.

In the long run, the government needs to find ways to lower living costs, which will benefit workers, he said.

Other experts have said that the pay hike will benefit both workers and factories.

Businesses won't have to worry about another raise for 18 months, while inflation could rise this year and the next, said Bui Sy Loi, former deputy chairman of the National Assembly’s social committee.

The hike does not force companies to cut down staff because its impact will mostly be seen in higher social insurance and healthcare costs, said Nguyen Viet Cuong, deputy head of the Mekong Development Research Institute.

As the Consumer Price Index (CPI), which measures inflation, has increased by 1.92 percent year-on-year in the first quarter, a pay hike is needed as soon as possible, he said.