VietNamNet Bridge – Vietnam’s National Wage Council was launched on Tuesday, marking a shift from a solely Government-led minimum wage fixing mechanism into a new tripartite body which recognizes the participation of workers and employers. The Saigon Times Daily had an interview with Gyorgy Sziraczki, country director of the International Labor Organization (ILO) in Vietnam, on the operation as well as the challenges ahead for this Council. Excerpts follow.

What is your comment about the birth of the National Wage Council in Viet Nam?

- Gyorgy Sziraczki: The 2012 Labor Code stipulates that based on the minimum living needs of the employee and his or her family, social and economic conditions, and wage levels in the labor market, the Government shall announce regional minimum wages on the basis of the recommendation of the National Wage Council. The introduction of this tripartite body in Vietnam recognizes the importance of participation of workers and employers into the minimum wage fixing process.

Gyorgy Sziraczki

Over the past 15 years, the Government has played a leading and decisive role in fixing the minimum wage while workers and employers organizations were consulted separately. The National Wage Council now works based on joint decision making of the three parties: workers, employers and the Government, and minimum regional wages will be agreed as the outcome of their negotiation and deliberation. This is a process of building consensus and reaching agreements, which helps promote industrial peace and the climate conducive to investment, growth and development.

The National Wage Council will also enable workers’ and employers’ organizations to work more proactively in developing minimum wage proposals which would reflect the needs and concerns of their members and those who are directly affected by minimum wages. And through negotiations, the minimum wage is expected to be adjusted at a relevant level which helps balance interests of workers and employers.

Besides, the role of the Government in the operation of the National Wage Council will be particularly critical. The Government is not only the “institutional architect” of the over-arching framework under which wage deliberations are undertaken. It is also an “agenda-setter”, an “information and statistics provider” and a “facilitator” in promoting dialogue and deliberation.

But making the National Wage Council operate well will be a bigger challenge than establishing it.

So what are the key challenges ahead for the National Wage Council?

- The operation of the National Wage Council will allow more systematic wage related data collection and analysis which plays a very important role in minimum wage determination. Statistical and analytical capacity of Vietnam needs to be put in place to support evidence-based dialogues.

Other major challenges ahead for the Council lie in the capacity of workers’ and employers’ organizations to effectively participate in the work of the Council, and the enforcement of the regional minimum wages, which requires better labor inspection.

More importantly, the Council’s operations should find a way to reconcile with the still existing regulation that requires the Ministry of Labor, Invalids and Social Affairs to prepare and circulate minimum wage proposals to other ministries for comments before finalization.

However, lessons learnt from other countries in the region show that it is not easy to reach consensus and agreement in the Council as its members represent different parties with different interests.

Do you have any recommendations for the effective performance of the National Wage Council?

- Minimum wages in Vietnam have tended to be used as “base wages” (or “reference wages”) to calculate the different wage levels of different groups of workers.  Their use as a calculation basis is extended to social security system as well as the public sector. Minimum wage is commonly regarded as the “wage floor” under which wages should not fall. In this approach, minimum wages are largely concerned with the most vulnerable workers and intended to provide a minimum living standard for them, while average workers are expected to negotiate wages with their employers through either collective or individual bargaining.

The availability of minimum wage fixing criteria is crucial. It is important for the Council to specify and agree on the list of criteria for minimum-wage fixing in order to ensure consistency and coherence in minimum wage adjustments.

In practice, three variables are particularly important: Minimum living costs, or poverty thresholds, which reflect changes in consumer prices; the average wages; and labor productivity.

Nevertheless, workers’ and employers’ representatives need to be trained so that they will be able to develop convincing arguments on minimum wage proposals and participate more effectively in real negotiations.

Source: SGT