Decision to raise minimum salaries ahead of time applauded by businesses

Contrary to all predictions, the proposal to raise minimum salaries ahead of time has been applauded by businesses, which believes that the wise move can help stabilize the labor market and ease the labor shortage.

Just one month after the proposal to raise the minimum salaries ahead of time was made, the Ministry of Labor, War Invalids and Social Affairs (MOLISA) has officially submitted to the government the plan to adjust salaries. Under the plan, the minimum wage increases would be applied from October 1, 2011, instead of January 1, 2012, as previously planned.

The minimum wage to be applied to zone 1 would be two million dong a month; or 100,000 dong higher than the previously proposed level, and 450-600,000 dong higher than the current wage applied to domestic and foreign invested enterprises.

The ministry plans the 1.78 million dong a month level for zone 2 (50,000 dong higher than the previously planned level). Meanwhile, the initially proposed levels of 1.55 million dong and 1.4 million dong for zone 3 and 4, respectively, have been kept unchanged.

MOLISA said the above adjustment levels have been suggested after the ministry thoroughly considered the economic growth index, inflation rate and the average pay for simple jobs in the market.

Besides, the calculation of the minimum wages has also been based on the statistics about the living standards released by the General Statistics Office (GSO), so that the minimum wages can ensure enough money for laborers to cover basic expenses in their lives.

The new proposal by MOLISA has been applauded by enterprises and the organizations representing laborers.

Deputy Minister of MOLISA, Pham Minh Huan, said that this is a necessary measure to protect laborers amid the rising inflation. “With the proposed increases, if compared with the price slippage of 15-17 percent in 2011, the actual wage increase for laborers in zone 1 would be just 15 percent,” Huan said.

However, analysts keep contradictory viewpoints about the sooner-than-expected minimum wage increases. Some have pointed out that the wage increases at this moment, when businesses are facing so many difficulties, would more burden enterprises, which would force employers to lay off workers to cut down expenses.

However, in fact, businesses do not take much care about the minimum wage increases. Nguyen Xuan Duong, General Director of Hung Yen Garment Company, said that the company is now paying 3-4 million dong a month on average already; therefore, the information about the new minimum wage levels would in no way affect his enterprise.

Duong also said that raising the minimum wage is a necessity to maintain the social insurance fund. In general, laborers and enterprises pay social insurance in accordance with their minimum wages. If the minimum wages are too low, the insurance premiums are also low, while the number of beneficiaries from the social insurance fund has been increasing, which may lead to the collapse of the fund.

Dang Quang Dieu from the Vietnam Labor Federation also said that the wage of Vietnamese workers is at the latest level in the region. He believes that raising the minimum wage is a wise move for now which can help retain laborers and minimize the strike actions for higher rates of pay.

Nguyen Thi Lan Huong, Head of the Labor and Social Sciences, has stressed that it is now the right time for Vietnam to change the viewpoint that it needs to attract foreign investments by the low labor cost.

“A lot of strikes happened recently, which shows problems in the labor relations. Vietnam should not consider the cheap labor cost as its competitiveness,” Huong said.

Ngo Chi Hung, Deputy Head of the Hanoi Management Board of Industrial Zones and Export Processing Zones, said only a few enterprises say they would face bigger difficulties if the minimum wage increases, but they will not protest the increases. Meanwhile, the board has not got any protests from FIEs on the wage increase proposal.

Tags: Vietnam minimum salary