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More than 10 percent minimum wage increase could lead to massive bankruptcies: VCCI

The Vietnam Chamber of Commerce and Industry (VCCI) has said that if the minimum regional wage increases by more than 10 percent, an increasing number of businesses will dissolve. 
VietNamNet Bridge - The Vietnam Chamber of Commerce and Industry (VCCI) has said that if the minimum regional wage increases by more than 10 percent, an increasing number of businesses will dissolve. 


VCCI proposed a maximum 10 percent wage increase after reconsidering working conditions, workers’ lives and speaking with employers.

VCCI emphasized that most businesses are still facing big difficulties due to the economic downturn. Large enterprises account for less than 2 percent of all enterprises, while the others are small. Meanwhile, 70 percent are unprofitable.

The organization cited a report showing that 37,829 businesses stopped production or were dissolved in the first seven months of the year, an increase of 1.2 percent over the same period last year. At least 97 percent of the enterprises were small and medium sized. 

VCCI believes that in order to increase workers’ minimum wage, it is necessary to increase productivity and upgrade work quality.

The productivity of Vietnamese enterprises is still lower than regional countries. Therefore, if 70 percent of businesses do not make profits, it would be difficult for businesses to increase investments to upgrade technologies to improve productivity. It will also take them time to grab opportunities brought by economic integration. 

VCCI said that workers not only can enjoy higher salaries with the 10% increase, but also enjoy better annual leave, maternity leave, healthcare and overtime pay.  

The minimum wage increase will put a heavier burden on employers. From January 1, 2016, employers will have to pay 35-40 percent more in different kinds of fees for workers because insurance premiums will be higher. 

Also from 2016, enterprises will have to pay other kinds of fees related to female workers and labor safety.

“With the 10 percent minimum wage increase, employers’ expenses will be 17-18 percent higher,” VCCI said.

“This will be a big shock to businesses. And if the minimum wage increase is too high, this will lead to massive bankruptcy of enterprises,” it said.

The National Wage Council had its first working session on August 5 to discuss the minimum wage policy for 2016. However, the agencies and organizations could not reach agreement. 

At the first working session, VCCI proposed a 6-7 percent wage increase. Meanwhile, the Vietnam Labor Union, representing workers, proposed a 17 percent increase.

Every year, the Ministry of Labor, War Invalids and Social Affairs (MOLISA) and relevant agencies discuss the minimum wage increase, but both businesses and workers have not seen benefits.



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