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By Lien Hoang
Aug. 8—Vietnam is preparing to raise the minimum wage by the lowest rate in years, a move that should attract companies leaving China to cut costs but raises questions about whether the communist country has adequate labor standards to join the Trans-Pacific Partnership.
The National Wage Council proposed increasing wages 7.3 percent on average in 2017, according to an Aug. 2 post on the Ministry of Labor, Invalids, and Social Affairs website. That compares with hikes closer to 12 percent in 2016 and 14 percent in 2015, data from Baker & McKenzie show.
This is despite the fact that the 2016 wage represents just 85 percent of the amount needed to meet minimum living standards, said the Vietnam General Confederation of Labor, which wanted a 2017 bump of 11 percent. A survey by Vietnam's sole labor union found more than half of workers barely make enough to survive, state news agency Vietnam News reported.
Angie Ngoc Tran, a professor at California State University, Monterey Bay, expects the wage issue “will become even more relevant” under the Pacific trade deal, which includes Vietnam and the US. Critics see the deal as a conduit for low-wage countries to siphon jobs away from richer nations.
“From a global perspective, consumers in industrialized countries the world over should be angry about this,” Tran, who has studied a century of labor movements in Vietnam, said of the pay increase. She told Bloomberg BNA people buy products “made by Vietnamese workers who could not even afford what they manufacture for us.”
Tran blamed the “downward spiral” of wage growth on an “increasingly stronger alliance” between the wage council, a government advisory board, and the Vietnam Chamber of Commerce and Industry.
The chamber supports the 7.3 percent raise, which would result in monthly earnings of 2.58 to 3.75 million dong ($116 to $168), depending on the region.
Chamber vice chair Hoang Quang Phong said businesses are recovering but still face difficulties, according to the labor ministry post.
“The minimum salary should not be misunderstood for a good salary or a reasonable salary,” said Nguyen Thi Quynh Nhu, a senior associate lawyer at Grünkorn & Partner in Ho Chi Minh City. “Obviously many employers will have to pay considerably more than what are the minimum wages.”
Quynh Nhu recommended that workers “reduce the importance of the minimum wage as such by increasing productivity, especially by improving vocational training.”
According to Tran, however, the onus should be on employers to meet corporate social responsibility by paying a livable income, as outlined in the Labor Code.
She believes a low wage “hurts workers in the long run because social insurance benefits are tied to the minimum wage, not the actual, higher gross salary, which includes overtime.”
The wage council will submit its proposal to the prime minister for approval. The ministry said all parties have agreed to the 2017 rate.
To contact the reporter on this story: Lien Hoang in Ho Chi Minh City at firstname.lastname@example.org
To contact the editor responsible for this story: Rick Vollmar at email@example.com
The 2012 Labor Code is available in English here.
For more information on Vietnamese HR law and regulation, see the Vietnam primer.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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