[15 Oct. 2013] - The National Wage Council has asked the Government to increase minimum wages for those in the private business sector from 1 January  2014.

The council, which includes representatives from the Ministry of Labour, Invalids and Social Affairs; the General Confederation of Labour; and the Viet Nam Chamber of Commerce and Industry, has suggested rises ranging from VND250,000 (US$11.90) to VND400,000 ($19) a month, equivalent to 15-17 per cent on current levels for businesses located in four zones.

Zone One, which now provides a minimum level of VND2.35 million ($111.90) a month covers urban Ha Noi and HCM City. Zone Two, which pays VND2.1 million ($100) covers rural Ha Noi and HCM City along with urban Can Tho, Da Nang and Hai Phong.

Zone Three, which pays VND1.8 million ($85.70), covers provincial cities and the districts of Bac Ninh, Bac Giang, Hai Duong, and Vinh Phuc. Zone Four workers, who are on VND1.65 million ($78.60), live in the remaining localities.

The council expects that the increase will enable their wages to cover 75 per cent of workers' basic living needs because, despite regular adjustments, the wage level can only guarantee less than 70 per cent of these needs.

The most recent survey conducted by the Institute for Workers and Trade Unions of 68 firms with 2,000 workers across the country revealed that 5.2 per cent had a total income lower than VND2 million ($95) per month.

This was especially true for those living in industrial zones in HCM City, Ha Noi and Dong Nai, who cannot save. while others simply live in poverty.

So, is the regular minimum wage increase really helpful? People doubt it! The policy seems to be far less efficient than expected. Most employers are not happy with the wage rise, especially in the context of economic recession which makes it difficult for many enterprises to survive.

The increase will surely force companies to cut spending as their budgets provide no room to manoeuvre. It will probably prevent companies from investing further to expand production and improving quality and productivity.

This means the demand for labour will fall, but the number of jobless will rise. Each year, an additional 1.7 million people nationwide seek jobs.

Companies may have to dismiss some workers. For firms on the verge of bankruptcy, the requirement to pay more to workers is like a death-blow.

According to the Ministry of Planning and Investment's Department of Business Registration Management, nearly 28,800 enterprises ceased operation in the first six months of the year, 10.5 per cent higher than the same period last year.

Some companies may be forced to reduce workers' hours so that they can afford to pay them. If companies fail to abide by the regulation, labour disputes - most of which are caused over wages and social insurance payments - will probably increase.

The above arguments are put forward when considering indirect impact of the policy. Now, let's talk about the policy's direct influence on workers. For years, commodities prices leapfrog after the Government announces a plan to raise minimum wages.

A woman working in an industrial zone once said that whenever hearing that the minimum wage would increase, her landlord rushed to raise house rental.

According to many experts, the yearly increase of a few hundred dong is actually to pay off inflation. However, the amount is never enough because prices will again escalate.

Viet Nam has one of the highest frequencies of wage rises in the region, but the real value of wages is much lower than that in other countries. This can be blamed on the inefficiency of price-control policies as well as inconsistencies among market management mechanisms.

As long as prices of electricity, clean water and petrol keep rising and prices of other essential goods are not stabilised, the periodical wage rises will achieve little.

To improve living standards, a wage-rise policy is not enough. The Government must implement better price-stabilisation policies and also have a better regime to protect workers' rights and contribute to harmonious, stable and progressive labour relations.

A good wage regime will successfully promote creativity and improve productivity of the workforce, especially high-quality workers and professionals.

A satisfactory income policy minimises conflicts of interest and strikes in enterprises; and maintains the stability and attractiveness of the investment and business environment. — VNS