Minimum wage increase decision makes businesses dumbstruck

Minimum wage increase decision makes businesses dumbstruck

The National Wage Council has agreed to the plan on raising the regional minimum wage from 2014 by VND250,000-400,000, or 15-17 percent. This has caused a big headache to both businesses and workers.

A heavier burden on businesses

In the context of the current big difficulties, Tuan said, hundreds of millions of dong would be big enough to make the burden on businesses heavier.

Tuan fears that he may have to cut down the workforce once the expenses become unbearable. Getting jobless is the biggest fear of workers nowadays. A lot of businesses, which cannot survive the current difficulties, have to shut down their businesses, thus leading to the rapid increase in the number of redundant workers.

One of the aims of the decision to speed up the minimum wage adjustment is to encourage the productivity improvement. However, Dr. Bui Sy Loi, Deputy Chair of the National Assembly’s Committee for Social Affairs, noted that the wave adjustment needs to ensure the harmonization of the benefits of workers and the businesses’ production.

The wage increase can also be used as a tool to force businesses to renovate technologies to improve productivity. However, Nguyen Huu Su from the Hanoi Industry and Trade Association noted that the tool is not used at the right moment.

“In the economic recession period, businesses have been at the point of death. If they have to raise salaries, they will die completely,” Su commented.

The “wage increase fear” syndrome has been mentioned by local newspapers in recent years. When the State decides to raise the minimum wages, this benefits only a small part of state’s employees. This leads to the increases of the prices of a series of goods and services in the market, which affects the lives of tens of millions of people.

JETRO, the Japan External Trade Organization, has released the report about a survey conducted on 250 Japanese businesses operational in Vietnam. 82 percent of the polled businesses said they fear the rapid wage increases in Vietnam.

In 2012, the Vietnamese minimum wage increased by 19.7 percent over 2011, while the increase would be 17.5 percent over 2012.

A wage reform, why not?

Though the wage increases are sharp, the pay to Vietnamese workers is still much lower than that in the region.

The JETRO’s report has pointed out that the monthly pay to a Vietnamese manufacturing engineer working for Japanese firms is just equal to 45 percent of the average pay to an engineer in the same manufacturing sector in Thailand, 54.4 percent in China and 75 percent in Indonesia.

This means that the wages of Vietnamese workers are much lower than other countries in the region.

A recent survey by the Vietnam Labor Union has found that the minimum wages paid by Vietnamese businesses are just enough to cover 60 percent of workers’ basic needs.

Dr. Nguyen Minh Phong from the Hanoi Socio-Economic Development Institute noted that currently, the minimum wages are simply adjusted in accordance with the inflation rates. Meanwhile, Vietnam needs to carry out a real wage reform to ensure the workers’ benefits.

vietnamnet