Tens of millions of salaried workers and employers in factories and industrial zones across the country are awaiting the wage recommendation from the National Wage Council.

At the meeting held by the council to discuss the minimum wage hike for 2019, the Vietnam General Confederation of Labor (VGCL) proposed a hike of at least 8% for the minimum wage while the Vietnam Chamber of Commerce and Industry (VCCI) suggested keeping the status quo. Each side has its own reasons.

According to a new report released by the VGCL, the current minimum wage can meet only 93% of the minimum living standard. Meanwhile, as per Resolution 27-NQ-TW issued recently, only two years remain for the wage hike so that by 2020 the region-based minimum wage must meet the minimum living standard. However, the resolution also states the principle of wage reform that the State will not interfere in the wage policy of enterprises and will encourage wage negotiation between employers and employees. It should be noted that the minimum wage is one of the strongest interventions in the manpower management of enterprises.

Obviously, all workers want to see their salaries increase. However, a hike in the minimum wage does not mean beneficial for all workers. According to the author’s calculation based on statistics of the survey on household living standards in 2016, the zero weighted rate of workers with salaries lower than or equal to the lowest minimum wage, at VND2.76 million per month for workers in Region IV, is about 20%. With more detailed calculation, the rate would be higher, as the minimum wage is based on individual regions with different living standards. However, it can somewhat tell the division in the interests of workers when the minimum wage is adjusted. The actual income of workers with salaries higher than the minimum wages may even be reduced, as they have to pay more for social insurance, which is mainly based on the minimum wage.

It’s not easy for the 20% of workers with salaries lower than the lowest minimum wage to earn more income, as even for enterprises, violations of minimum wage regulations still occur and are not yet handled properly. To cut costs when the salary fund swells, many enterprises will lay off workers, and those with salaries near the minimum wage level will be the most vulnerable. Then they will have to join the informal labor sector, with no labor contracts or social insurance. According to figures released by the General Statistics Office last year, the number of workers in this sector was nearly 18 million. Who are the people to protect their interests?

To enterprises, the impact of the minimum wage hike depends on many factors. A study by the Institute for Economic and Policy Research in 2017 shows that the minimum wage hike has a negative impact on profit, especially for private enterprises. Therefore, continuous minimum wage hikes may reduce the capital accumulation and growth of the private sector. The minimum wage hike also has an adverse impact on enterprises complying with labor regulations rather than on non-complying enterprises, and their growth as well.

It’s understandable that the minimum wage regulation causes heavy division among many stakeholders, including lawmakers, the trade union, enterprises, academics and policy lobbyists. In the world, 169 out of 187 countries, or up to 90% of the members of the International Labor Organization (ILO), have the regulation for minimum wages, but they are still engaged in endless debates about its effectiveness. In Vietnam, the minimum wage still cannot meet the minimum living standard of workers despite its fast hikes. In the 2010-2011 period, when inflation was high, the region-based minimum wage could meet only 47% of the minimum living standard of workers. In 2015, the level rose to 80% thanks to the fast pace of minimum wage hikes. According to the report of the VGCL, the current level is at 93%.  

The minimum wage reflects the humanity of the State and is an instrument for rectifying defects of the labor market and ensure the minimum living standard for workers. However, incorrect determination of the minimum wage may lead to unemployment, especially for low skilled workers, and erode the competitiveness of enterprises. Therefore, the story of the minimum wage may probably has no ending. However, it should be noted that the ultimate goal of the minimum wage is to provide an appropriate and more complete social welfare system for workers.

In line with this spirit, apart from the minimum wage, the State can provide other forms of support, such as social housing, schools or hospitals near industrial zones. These efforts can not only help reduce the living cost for workers but also minimize their anxieties, so they can focus on their work and thus indirectly increase their productivity. In addition, they can help maintain security at industrial zones. According to the report of the VGCL, there were 131 strikes across the country in the first six months of this year, most of which (103) at foreign-invested enterprises and low-income industries like textile, garments and footwear.

Intensive minimum wage debates may make people forget that the life of workers is also affected by many other things, those which can be done right away without debate.

SGT