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From 2020, Vietnam to Increase Regional Minimum Wage by 5.5%

The new minimum wage will go into effect from January 1, 2020.

On July 11, eleven out of thirteen members of the National Wage Council voted to raise the regional minimum wage by 5.5%, which means an increase of between VND150,000 and VND240,000, Tuoi Tre reports.

Specifically, in Region I, which consists of cities and provinces with the highest cost of living, such as urban districts in Hanoi and Saigon, the minimum wage will increase from VND4.18 million to VND4.42 million. In Region II, the new minimum wage is VND3.92 million, compared to the current VND3.71 million, while Region III will see an increase from VND3.25 million to VND3.43 million. In Region IV, which consists of areas with the lowest cost of living, the current rate of VND2.92 million will increase to VND3.07 million.

In the first meeting of the National Wage Council, which consists of representatives from the Ministry of Labor, Invalids, and Social Affairs (MOLISA), the Vietnam Chamber of Commerce and Industry (VCCI), and the Vietnam General Confederation of Labour (VGCL), the labor confederation suggested two options for minimum wage adjustments: either an 8.18% increase or a 7.06% increase. The VCCI, which represents businesses, suggested that the minimum wage remain the same in 2020, while if there is an increase, it should not be over 3%.

"Currently, 72.5% of businesses have already paid minimum salaries that are 6% percent higher than the current minimum wage. After further discussion and research, we think that the minimum wage should be increased to create work motivation. However, the increase can't be as high as the VGCL has suggested, because it exceeds businesss' ability to pay and will create a bad impact on business competitiveness and other budgets," said Hoang Quang Phong, vice director of VCCI. The representative also added that the current minimum wage has covered the basic needs of 95% of workers.

Because of these differences, the meeting moved to the second round of negotiations on July 11. On the day before, the labor confederation held a meeting to discuss options for the second meeting. According to Dan Tri, many experts in the meeting suggested that the minimum wage has to be increased by at least 6.5% to 8.1% in order to fulfill a minimum living standard. The question of what defines a minimum living standard has yet to be finalized by any official institution.

Some, such as labor researcher Do Quynh Chi, argue that only debating minimum wage and minimum living standard will increase inequality and poverty, while it is also important is to think about living wages and a basic income, rather than just a minimum. This point is exemplified by a recent report on how 74% of Vietnamese garment workers earn below the global living wage, and 99% of them earn below Asia's Floor Wage.

The labor confederation ended up suggesting a third option at the second meeting, which is a 6.51% increase. VCCI and other business representatives suggested an approximate increase of 4%. The final number, 5.5%, seems to be a happy middle for these groups with different interests.

After the decision was made, the representative from the VCGL said that although the number isn't as high as they had hoped for, a 5.5% increase is a good compromise and will cover basic needs for 100% of workers, according to the news source.

Phong, representative of VCCI was less cheerful about the result, saying that "the business community isn't happy with the result, but taking into consideration that workers are still struggling, we have to share the burden."

[Photo via IGC]

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