Amended labor code draft could weaken Vietnam's competitiveness: economists
Economists have voiced their disappointment about the draft of the amended labor code, saying that the competitiveness of the national economy will weaken because of rigid regulations on extra working hours and wages.
Nguyen Dinh Cung, head of the Central Institute of Economic Management (CIEM) commented that the draft only focuses on workers in enterprises who just account for 40 percent of the total labor force.
He said the amended law needs to cover all 50 million laborers, not only workers in enterprises.
The 4.0 industry era has changed labor relations. The number of people generating jobs themselves has increased rapidly and a high number of jobs are generated on the basis of technology.
|iIf the regulations on extra working hours and wages become too strict, employers and employees will try to dodge the law, thus causing unnecessary costs to the economy.|
“The compilers have written the law based on a subsidized economy, not meeting practical requirements. With this way of thinking, the biggest beneficiary will be labor inspectors, because nearly all enterprises commit violations,” Cung commented.
Nguyen Thi Lan Huong, former Director of the Institute of Labor Science, also said that labor is defined as activities which are not prohibited by law. But the draft law mostly attaches the relationship between employers and employees. This narrows coverage of the law.
Vu Thanh Tu Anh from the Fulbright Economics Teaching Program (FETP) commented that the draft law retains conservative thinking and shows a backward mindset compared to the 2012 Labor Code.
Vietnam is developing a market economy, in which the labor market is the basic input of the economy. With the draft Law, the state is intervening too deeply in the relationship between employees and the employers.
“The law should be designed in a way so that the labor contract between employers and employees can be implemented, but it is not the job of the state to think for employers and employees about extra working hours and wages,” Anh said.
The expert believes that if the regulations on extra working hours and wages become too strict, employers and employees will try to dodge the law, thus causing unnecessary costs to the economy.
He said the draft law may undermine Vietnam's comparative advantage, or even harm the competitiveness of the national economy.
A representative of the Food and Foodstuff Association also warned that if the draft law is approved, enterprises will ‘have to dodge the laws’ and ‘become illegal’. The association strongly recommended amending the draft law.
Vietnam is considered an attractive destination for investors thanks to the cheap labor force. In 2019, the minimum zonal wages of Vietnamese workers ranged between VND2.92 million and 4.18 million.
Labor productivity is a decisive factor for competitiveness of every economy and enterprise especially a developing country like Viet Nam.