Minimum wage increases make businesses worried stiff

The minimum wage of enterprises is expected to increase to 1.9 million dong a month, commencing from October 1, 2011. While the information makes laborers happy, it has grieved businesses because their expenses would increase by 20 percent at least.

The Ministry of Labor, War Invalids and Social Affairs (MOLISA) is consulting with relevant ministries and branches on the plan to increase the minimum wage of laborers. It is expected that a report will be submitted to the Government in July for approval before the new minimum wage policy takes effect as of October 1, 2011.

MOLISA said that the ministry is collecting opinions from relevant ministries on the issues relating to the minimum wage levels, the moments to apply the new wage policies and the wage levels to be applied to different zones.

MOLISA said that it has drawn up the new wage policy based on the GDP growth rate, the consumer price index (CPI) and the demand for laborers in different periods.

Under the drafted minimum wage adjustment plan suggested by MOLISA, the minimum wage to be applied to zone 1, including big cities like Hanoi and HCM City, would be 1.9 million dong a month. Meanwhile, the minimum wage of 1.73 million dong would be applied to zone 2, and the level of 1.55 million dong would be applied to zone 3. Meanwhile, zone 4 would have the minimum wage level of 1.4 million dong.

The new minimum wage adjustment, if made in October as expected would be three months earlier than initially planned, which, according to MOLISA, aims to support laborers in the context of the sharp CPI increases.

The tentative minimum wage of 1.4-1.9 million dong a month, to be applied to zone 4, according to MOLISA, is equal to that in some regional countries, including Laos, Indonesia and the Philippines.

However, according to the Vietnam General Confederation of Labor, the suggested minimum wages are “out of date” if compared with the goods price levels in the market and the living standards of the majority of laborers.

“In big cities like Hanoi and HCM City, the 1.9 million dong wage is not high enough to cover basic needs. Such a low income cannot encourage people to work in enterprises,” Deputy Head of the Vietnam General Confederation of Labor, Mai Duc Chinh said.

Chinh said that the confederation has asked to raise the minimum wage to 2.2 million dong for zone 1, to 2 million dong for zone 2, to 1.8 million dong for zone 3, and to 1.6 million dong for zone 4.

However, MOLISA has decided to set up lower levels because it thinks that if the minimum wages increase too sharply, this would put a too heavy burden on businesses, because businesses would have to pay too much on insurance fee for laborers, which would make their expenses higher.

“I personally think that the 1.9 million dong level proves to be “behind the times”. The minimum wage should be 3.4 million dong to be high enough to feed one laborer and one of his dependent family members,” he said.

However, everyone understands well that it is unfeasible to raise the minimum wage to 3.4 million dong. “It is impossible to raise wages sharply at once. The wage adjustment needs to be carried out following a reasonable roadmap,” Chinh said

Businesses have also said that if the minimum wages increase too sharply, this would cause big difficulties to them.

In fact, the wages enterprises now pay to laborers in big cities have far exceeded 1.9 million dong. The incomes of laborers include monthly salaries, allowances and other kinds of incomes.

Meanwhile, enterprises only consider the minimum wages when calculating allowances for laborers or pay insurance fees.

The owner of a jewelry company said that the minimum wage increase would mostly affect unskilled workers and the labor-intensive enterprises, such as garment or footwear companies. Meanwhile, laborers in other industries, who have been earning much more than 1.9 million dong a month, so they would not get benefits from the wage adjustment.

However, enterprises would have to pay 20 percent more at least to pay insurance fees for laborers.

Quoc Anh, the owner of a gas distribution company said that with 300 workers, the company’s expenses would increase by 400 million dong a year. – VNE

Tags: Vietnam minimum wage