Nation skates around edge of salary trap

“Workers are in dire need of support. Let’s come and see the daily meals of almost all workers at industrial parks, you will see how meager they are,” said Hanoi deputy Bui Thi An. An’s view was echoed by Hung Yen province deputy Cu Thi Hau who cited a Ho Chi Minh City Department of Labour, Invalids and Social Affairs recent survey as saying over 30 per cent of the city’s industrial park workers suffered from malnutrition.

“The low salary has forced workers to work overtime to earn more cash which damages their health further. In the long term, this will burden society,” said Ninh Binh province delegate Bui Van Phuong.

Under the government’s Decree 70/2011/ND-CP on regional minimum salary applied to all types of enterprises, effective from October 1, 2011, the minimum salary for region 1, including big cities like Hanoi and Ho Chi Minh City, is VND2 million ($100) a month. The thresholds for regions 2, 3 and 4 are VND1.78 million ($89), VND1.55 million ($77.5) and VND1.4 million ($70), respectively.
But the Ministry of Labour, War Invalids and Social Affairs reported that over 90 per cent of workers’ strikes and work stoppages were associated with low salary and allowance issues. The Vietnam General Confederation of Labour (VGCL) said this salary regime was sufficient for 60 per cent of workers’ minimum daily expenses.

Hau saw the low minimum salary regime was a “mistake” in the government’s salary policy, because employers were using it as a main legal basis to make their own salary sheets.
“Meanwhile, the regime is not linked with the socio-economic realities, market prices and inflation. The government should replace the regime with another new flexible one, which should be raised together with inflation increases,” said VGCL chairman Dang Ngoc Tung.

“That is the best way to benefit workers,” said Tung, who is a Dong Nai province delegate.
However Jo In Sang, vice general director of South Korea’s garment maker Yakjin Vietnam Company, said foreign firms wanted the government to “do its best to control the consumer price index instead of basic salary increases, because price increases are closely related to the rise in workers’ salaries.”

According to the government, the low minimum salary regime gives Vietnam a big advantage in luring foreign investment via cheap labour costs. But Tung warned if Vietnam continued considering cheap labour an advantage to lure more investment, the country would continue seeing troubles arising from its labour market.

Yutaka Morimoto, chairman of Japanese-backed Accord Biz, said though Vietnam’s labour costs were cheap in comparison with other countries, they had risen almost three times in the past five years. “As a general understanding, labour costs should increase accordingly with workers’ quality. However, in Vietnam the increase in labour costs is due to the differences between the labour supply-demand and not due to the improvements in workers’ quality,” Morimoto told VIR. 

He said to continue attracting more foreign investors, Vietnam needed to improve workers’ quality.
 “Unless Vietnam fails to mitigate such difference in cost and quality of workers, the labour cost will be subsequently high for investors. That is, employers themselves have to invest in educating their employees, building their knowledge and training skills,” he said.