Despite 2nd fastest wage bump in Asia, Vietnamese workers barely make ends meet

By Ngan Anh   January 5, 2018 | 11:20 pm PT
Despite 2nd fastest wage bump in Asia, Vietnamese workers barely make ends meet
Workers at a factory in the northern province of Hai Duong. Average wages for laborers in Vietnam remain low, failing to meet their basic daily needs. Photo by AFP
Overtime is the only way some workers can afford to eat.

Asian workers are expected to enjoy the highest real wage rise in the world in 2018, thanks to a growing economy and changes in the region’s economic structure, the Nikkei Asian Review reported.

Vietnam is expected to see wage growth of 4.6 percent in 2018, making the country the second best performer in the region after India, according to a recent survey conducted by human resources company Korn Ferry, which tracks 20 million workers in 25,000 organizations in 110 countries.

Salaries in Vietnam are growing strongly as private consumption has emerged as an engine of growth along with manufacturing exports, even though concerns remain over the country’s rising private debts and signs of property market bubble, said HSBC.

Despite the sharp rise, average wages for laborers in Vietnam remain low, failing to meet their basic daily expenses.

The average wage for a laborer in Vietnam reached VND5.5 million ($247.7) per month in the last quarter of 2017, up 7.8 percent over the same period of 2016, according to the General Statistics Office.

“The pay is so poor. My monthly salary is over VND6 million, but after deductions for insurance, I make only a little of more than 5.5 million,” Nguyen Thi Chinh, a 30-year-old worker at a woodwork producer in Hanoi’s Quang Minh Industrial Park said.

Chinh, who left her home village at the age of 20 to work in the city, said workers in her factory earn much more than the minimum wage, but it is still not enough. She plans to leave her job and return to her family home.

In January, Vietnam raised the minimum wage by around 6.5 percent, equivalent to an additional VND180,000 to VND250,000 per month, the lowest nominal jump ever. The new monthly minimum wage now ranges from VND2.76 million to VND3.98 million.

In a recent survey conducted by Vietnam’s Institute of Workers and Trade Unions (IWTU), a third of the 2,600 workers questioned said their incomes were barely sufficient to live on, while 12 percent said their wages simply did not cover living expenses, forcing them to work extra hours.

Vu Minh Tien, deputy director of the IWTU, said 36 percent of laborers work overtime just to be able to afford an extra meal. “Their salaries are too low. Workers do not have enough money to pay rent or raise their children, so they have to work overtime just to be able to afford to eat."

Another survey conducted by the global association for sustainability standards and social accountability ISEAL Alliance found that a wage of at least VND6.4 million ($290) per month could cover basic living expenses in Ho Chi Minh City. But, the average wage for a worker in the garment sector there is only VND4.8 million.

In Soc Trang Province, a worker needs at least VND3.99 million per month to cover basic necessities, but the average wage for a laborer in the seafood processing sector there is just VND3.2 million.

A Catch-22

Wages for laborers increase following minimum wage hikes set by the government. Businesses use the minimum wage to calculate salaries for their workers by multiplying the base level by a coefficient assigned to each worker, based on their skills and experience.

Vietnam has been raising the minimum wage every year since 2007, forcing local businesses and foreign-invested firms to raise their wages by an average of 21.9 percent and 15.2 percent per year respectively, according to the Vietnam Chamber of Commerce and Industry (VCCI).

Rapidly rising minimum wages in Vietnam could push workers out of factories, as foreign invested enterprises could leave the country for cheaper labor cost markets, the VCCI said.

According to the Vietnam Institute for Economic and Policy Research, the minimum wage growth has outpaced labor productivity, warning that the former should slow down to match the latter.

Truong Van Cam, vice chairman of the Vietnam Textile and Apparel Association, claimed that raising the minimum wage would lower businesses' profits and reduce competitiveness.

"Raising the minimum wage would also lower work opportunities, especially in remote regions, because if the minimum wage is too high businesses would be unable to pay their workers," Cam said.

In fact, Vietnamese factories' profit margins are being squeezed from the bottom by minimum wage hikes to the top by global buyers. 

"The assembly price, for example, for shirts or jeans, which Vietnamese suppliers can get from multinational buyers, has remained largely unchanged for almost a decade – in some cases even lowered," said Chang Hee-Lee, Vietnam country director at the International Labor Organization (ILO).

Experts also doubt that higher wages alone would prompt factories to move overseas where labor costs are lower. 

Southeast Asia, including Vietnam, became attractive to manufacturing industries also because of a hardworking labor force and workers’ discipline, Forbes quoted Daniel Kostzer, senior regional wage specialist for the ILO, as saying. Even if minimum wage increases continue, those factors may be enough to keep companies in the region, he said.

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