Vietnamese businesses balk at raising minimum wage every year: commerce chamber

By Staff reporters   December 27, 2017 | 03:04 am PT
Vietnamese businesses balk at raising minimum wage every year: commerce chamber
Workers at a garment factory in Bac Giang Province, near Hanoi. Photo by Reuters.
Businesses claim that rapidly rising minimum wages have been causing them difficulties.

Representatives of businesses in Vietnam have proposed that the government should stop raising the country's minimum wage every year, according to the Vietnam Chamber of Commerce and Industry (VCCI).

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. Meanwhile, between 2008 and 2016, Vietnam's GDP grew by an average of 5.96 percent per year, and annual CPI and productivity growth were just 8.77 percent and 3.65 percent.

At a meeting organized by the VCCI and the labor ministry, business representatives claimed that significant increases to the minimum wage in comparison to lower GDP, CPI and productivity growths were causing difficulties for many businesses. Additionally, several criteria currently used to determine the minimum wage were unreasonable and failed to precisely determine the living wage.

"Therefore we need to stop raising the minimum wage, or only raise it once every 2-3 years. Workers will only have jobs if businesses survive," said Nguyen Xuan Duong, chairman of Hung Yen Province's Business Association.

According to Nguyen Hoai Nam, deputy secretary general of the Vietnam Association of Seafood Exporters and Producers, raising the minimum wage while productivity and prices remained the same would put greater financial strain on companies. 

Nam suggested that the labor ministry should amend the current law and submit it for the National Assembly's approval as soon as possible instead of waiting until 2019 as scheduled.

Agreeing with his peers, 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.

Additionally, he argued that raising the minimum wage would lower foreign investment in labor intensive industries as FDI companies would move to regions with a lower minimum wage.

The prime minister earlier this month signed off on a decree raising the minimum wage for 2018 by 6.5 percent. This was the result of weeks of discussion last summer, which started with the VCCI proposing a low offer of 5 percent and the Vietnam General Confederation of Labor asking for 13.3 percent.

Not everyone was happy with the end result.

Mai Duc Chinh, vice chairman of the labor confederation which represents unions across the country, said in August that he had wanted an increase of at least as much as this year, which at 7.3 percent was already the lowest in a decade.

Chinh said that workers would not be able to sustain their basic needs on the latest pay rise.

In a survey conducted by Vietnam’s Institute of Workers and Trade Unions in March, 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.

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