Workers, businesses lock horns over minimum wage hike

The Vietnam General Confederation of Labor sat down with business representatives and authorities on Wednesday to negotiate an adjustment in the minimum wage, which was last raised 5.88% to VND4.68 million ($197.07) per month in July last year.

The meeting discussed what the wage would be in 2024.

Although the negotiation will last several sessions, it seems obvious that workers expect an increase next year, as more than 75% of them do not earn enough to cover costs of living, according to a survey by the confederation in the second quarter this year that questioned over 3,000 workers.

"Salary is the only source of income for workers, therefore they expect a raise," said Pham Thi Thu Lan, deputy head of the confederation’s Institute of Workers and Trade Union.

Nguyen Xuan Son, a director at recruitment company ManpowerGroup Vietnam, said that by the end of 2023 the current minimum wage will have been kept unchanged for 1.5 years.

"This is longer than the normal hike frequency of once per year," he said.

Since 2012, Vietnam has been raising its minimum wage annually, except in 2021 when it was kept unchanged as businesses were struggling amid Covid-19. The wage has more than doubled in the last 10 years.

In the first seven months this year the Consumer Price Index (CPI) has risen by 3.12%, which means that blue-collar workers, people with the lowest income in the economy, are having to pay more for the same products and services.

"Raising salary for workers is necessary. A hike will help them overcome difficulties that they have been facing all this time," Son said.

But employers think differently.

Le Duy Binh, CEO of consulting firm Economica Vietnam, said that a careful consideration of the hike is necessary as this time businesses are struggling to face with a plunge in orders.

Around 91% of businesses in the construction material sector saw a drop in revenues this year, while the ratio in the textile and garment industry is 44%, according to a recent survey of manufacturers in Vietnam conducted by recruitment company Navigos Group.

Some companies have been scaling down their operations and laying off staff to survive.

Binh said that although the government decides whether minimum wage will increase, businesses can only pay their employees if they have revenues, otherwise they have no choice but to reduce work hours and lay off workers.

Pham Xuan Hong, chairman of the Ho Chi Minh City Association of Garments, Textiles, Embroidery, & Knitwear, said that the business situation is more dire than previous forecasts, and what businesses need to do now is to ensure jobs for workers, not raise their salary.

When orders increase, workers salary will subsequently rise, and they will even get bonuses if businesses make profits, he said.

"Increasing minimum wage now will pose a big challenge for businesses."

Nguyen Huu Tuan, a human resource director at Thanh Cong Garment company in Ho Chi Minh City’s Tan Binh District, said that small companies that are on the verge of bankruptcy might not survive should minimum wage be raised now.

Many companies are already paying their employees more than the minimum wage, and therefore an increase will add to their burdens, he said.

But Lan from the labor confederation said that businesses are already benefiting from many support policies from the government, and workers need hikes to cover living costs.