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Labor ministry rebuts minimum wage hike proposal

By Hoang Phuong   March 3, 2021 | 08:46 pm PT
Labor ministry rebuts minimum wage hike proposal
Workers at a company in Ho Chi Minh City leave their factory after a working day in April, 2020. Photo by VnExpress/Huu Khoa.
The labor ministry has rejected a proposal to hike minimum wages this year, saying the economy has yet to recover from the adverse effects of the Covid-19 pandemic.

It also rejected a demand to make the raise on July 7 every year instead of January 1.

Both were proposed by the Vietnam General Confederation of Labor at a meeting with the government late last year.

In a statement the Ministry of Labor, Invalids and Social Affairs said now is not the right time for a wage hike since the pandemic had a severe impact on the economy last year and many companies are still facing difficulties.

"More than 101,700 businesses have either temporarily suspended operations or shut down and are waiting to complete dissolution procedures, almost 14 percent more than in 2019."

The unemployment rate was 2.48 percent, a 10-year high, while the average income of workers stayed at VND6.62 million ($290) per month, marginally down from the previous year, it said.

Currently the monthly minimum wage is divided into four levels, depending on region: VND4.42 million ($191.52) for region 1, VND3.92 million for region 2, VND3.42 million for region 3, and VND3.07 million for region 4.

Last year they were hiked by an average 5.5 percent.

The figures reflect the cost of living in each area. Hanoi and Ho Chi Minh City are in region 1, while rural areas are in region 4.

The ministry said even if the rates are kept unchanged in 2021 workers "could manage a minimum standard of living".

Covid-19 continues to rage around the world and it is not possible to say when it would end or predict the extent of its impact on Vietnam’s socio-economic development this year, it said. "Therefore, the minimum wage should not be increased for now to help businesses recover and ensure workers keep their jobs."

Earlier the National Wage Council, which advises the government on the minimum wages, had said the rates should remain unchanged this year.

The minimum wage rates act as a basis for businesses in the formal sector to negotiate salaries with employees. They are arrived at by multiplying the minimum rates with a coefficient determined by an employee’s qualification and experience.

As for moving the date for amending the minimum wage annually from January 1 to July 1, the ministry said in most countries it coincides with the start of the fiscal year. Vietnam's fiscal year starts on January 1 and so it makes sense to keep it unchanged, it added.

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