Enterprises may be generally sympathetic to a proposal to increase minimum wages but it will come at a cost.
Mr Nguyen Van Thanh, who works at Yamaha Motor Vietnam, has been anxious about the high inflation seen in recent months. “It’s hard to live in the city on what I earn,” he said. His salary and allowances of VND2.5 million ($125) is barely enough to cover his cost of living. “We have just had a baby so I don’t really know how I’ll make ends meet in the future,” he lamented. Most workers at the industrial park where he works must do overtime and save as much as they can because prices are so high. “If prices continue to rise like they have been, I might return to my hometown and work on the farm,” he said.
Mr Thanh’s tale reveals the difficult lives faced by thousands of workers at the Thang Long Industrial Park (TLIP), which has 61 projects, of which 90 per cent are foreign-invested enterprises (FIEs). At TLIP the base salary offered by many enterprises in recruitment notices are still lower than the minimum wage set for Region 1 - Hanoi and Ho Chi Minh City.
For example, the base salary at Vietnam Alpha Plastics is VND1,733,500 ($86.5), at Kai Vietnam VND1,654,000 ($82.7), at Ogino Vietnam VND1,600,000 ($80), and at Yasufuku Vietnam VND1,650,000 ($82.5). “The salaries being paid are only enough for a single person,” said the owner of a house for rent living near the industrial park.
In June this year the Ministry of Labour, War Invalids and Social Affairs (MoLISA) submitted a proposal to the government to raise minimum regional wages in all businesses. The minimum wage will be set in four different regions, regardless of whether they are domestic enterprises or FIEs. Specifically, the minimum wage for workers in Region 1 - Hanoi and Ho Chi Minh City - is VND1.9 million ($95), in Region 2, which includes some districts in central cities having developed socio-economic conditions, VND1.73 million ($86.5), in Region 3, which includes provincial cities and areas with developed socio-economic condition and labour markets, VND1.55 million ($77.5), and in Region 4, which includes rural, mountainous and remote areas, VND1.4 million ($70).
But the proposal will create a number of challenges for enterprises. “Doing business in Vietnam involves some difficulties due to high inflation and tightened credit policies,” said Mr Akito Tachibana, General Director of Toyota Motor Vietnam (TMV). “Support industries in Vietnam have not been developed so many businesses are forced to import their inputs at high cost.” He also said that the proposal could put many small-scale enterprises in danger of bankruptcy.
Major FIEs like TMV, Canon Vietnam, and Honda Vietnam (HVN) generally agree with the MoLISA proposal and actively support their workers. “We hope that MoLISA’s recommendations will help to reduce the problems caused by inflation,” said Mr Tachibana. TMV’s current minimum basic salary of 2.5 times higher than the MoLISA proposal for enterprises in Region 2.” “TMV’s salary policy aims to provide a stable income to ensure the lives of workers and reflect the capacity and efficiency of employees at work,” he said.
Mr Koji Onishi, General Director of HVN, said that it advocated the merging of minimum salaries at State-owned enterprises (SOEs) and FIEs into one level within the four regions.
“The policy is about creating a fair labour market among different types of enterprises and different regions,” Mr Onishi said. HVN has also introduced some support measures to assist their workers, such as building a new dormitory to cut their accommodation outlays, distributing rice to workers, and helping those with small children. “We believe that such activities will help to maintain stable production,” he added. “Honda Vietnam tries its best to guarantee social welfare for our workers and will not cut our workforce.”
To offset costs and maintain production, enterprises are attempting to improve their technology and cut costs in other areas. HVN, according to Mr Onishi, have a range of technical improvement programmes to reduced expenses and raise production efficiency. Representatives from Canon Vietnam said that it is trying to apply more scientific and technical advances to increase production efficiency.
Businesses are keen for the government to adopt urgent action to stabilise markets, inflation and economic recession, so that raising the minimum salary will indeed help their workers. In this regard, HVN said that it will continue to hold discussions with MoLISA about the draft, while Canon Vietnam said that when wages go up so will the cost of most goods and services.
“The government should adopt strict measures for controlling the inflation rate and investing in building infrastructure around the industrial park such as hospitals, supermarkets, and entertainment services, so that employees can truly enjoy a higher quality of life,” said a representative from Canon Vietnam.