Minimum Wage hike in Vietnam

INTERNATIONAL NEWS

Minimum Wage hike in Vietnam


September 06, 2017

The forthcoming spikes in the region-based minimum wages are expected to improve workers’ incomes but production costs in labour-intensive industries will certainly pick up. The Ministry of Labour, has proposed a wage increase of 6.5%, or VND 180,000-230,000 a month, which would go into force early next year. This is also what the National Wage Council, and representatives of employers and employees have agreed upon after three rounds of negotiations. The current inflation rate of 4-4.5% is taken into account to guarantee a real wage rise for workers and labor productivity growth of 2-2.5% in a bid to meet 92-96% of their minimum living needs, according to the ministry. Given the 6.5% rise, production costs might move up 0.55-0.6% but the increase could be 1.15-1.2% in labour-intensive industries like textile-garment and leather-footwear. In addition, the Government has proposed the National Assembly Standing Committee lower the rate of the unemployment insurance fund for employees by 0.5%. According to Vietnam Textile and Apparel Association the 6.5% pay raise would make life more difficult for companies in the sector. They would be compelled to cut production costs, improve productivity, and invest in new technologies to use less labour.