Vietnam's PM signs off on lowest ever minimum-wage bump

By Hoang Thuy   December 11, 2017 | 06:26 am PT
Vietnam's PM signs off on lowest ever minimum-wage bump
Workers at a factory in the northern province of Hai Duong. The 6.5 percent increase in minimum wage will take effect on January 1, 2018. Photo by AFP
The lowest nominal wage increase in 11 years is unlikely to help workers sustain their basic needs, the labor confederation has warned.

Prime Minister Nguyen Xuan Phuc on Monday signed off on a decree raising the minimum wage for those working under labor contracts by 6.5 percent.

This is the lowest-ever nominal minimum wage increase amid this year's relatively low inflation rate. The consumer price index for the first 11 months of 2017 increased by 3.61 percent on-year. 

The new minimum wage, which will take effect on January 1, 2018, stands at VND2.76-3.98 million ($121-175) per month.

Under the new decree, Vietnam's still divided into four different minimum wage regions, which reflect the cost of living in each area. Region I, including most of Hanoi and Ho Chi Minh City, has the highest minimum wage, while region IV, which is for rural areas, has the lowest.

For 2018, the minimum wage for Region I will be VND3.98 million ($175) a month, Region II VND3.53 milion, Region III VND3.09 million, and Region IV VND2.76 million.

A worker's minimum wage will be based on their workplace's region. Businesses then calculate salaries for their workers by multiplying this base level by a coefficient assigned to each worker, based on their skills and experience. This salary however must not be lower than the minimum wage, and must be at least 7 percent higher for skilled workers.

The increase of 6.5 percent for 2018 was the result of weeks of discussion last summer, which started with the Vietnam Chamber of Commerce and Industry proposing a low offer of 5 percent and the Vietnam General Confederation of Labor asking for 13.3 percent.

Vietnam has been raising the minimum wage every year since 2007, a policy that has pitted labor groups against employers.

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 with such a low 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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