Independent agency should assess, quantify minimum living standards: experts

The concept of “minimum living standard”, which was legislated in 2012, is an important basis for calculating the minimum wage. However, this is also the most controversial topic at every meeting of the National Wage Council. As one of the three parties involved in wage calculation, the Vietnam General Confederation of Labor has repeatedly suggested that there should be an independent agency outside the council that is given the responsibility of working out Vietnam’s minimum living standards.

Le Dinh Quang, Deputy Head of Labor Relations under the confederation and member of the National Wage Council, said that the trade union’s recommendation was consistent with the resolution of the Party Central Committee on wage reform. This resolution clearly states that “the statistics agency of the state publishes the annual minimum living as a basis for determining the minimum wage and recommending wage policy orientations.”

“We understand that the state’s statistical agency is the General Statistics Office (GSO). Only this unit has the expertise, personnel and tools to perform this task,” Quang said.

For the past 10 years, the minimum living standard has been calculated by the technical department of the council.

Currently, the minimum living standard for a month covers expenses for food (a basket of goods with 53 items); non-food items (clothing, travel, entertainment…); expenses to raise a small child; housing and consumer price index. The ratio between food and non-food groups is 48-52. The cost of raising a child is 70 percent of that of an adult.

As a member of the technical department of the National Wage Council, Pham Thi Thu Lan, deputy director of the Institute for Workers and Trade Unions, pointed out the current shortcomings when calculating the minimum living standard. Because it is not possible to survey the consumption habits of employees themselves, the calculation of food costs is solely based on a survey of living standards of 10 population groups published by the GSO.

For example, to calculate this year’s minimum living standard, the technical department used a basket of goods that was worth VND807,000 ($35.30) in 2020, just VND42,500 ($1.86) higher than the basket of 2018. Lan said that the increase was insignificant, not true to the nature of market prices and could not cover the costs incurred after two years of the Covid-19 pandemic.

According to Lan, due to the negative effects of the pandemic, the consumption habits of population groups will change in the direction of reducing spending, especially among the poor and near-poor groups. Therefore, the amount of money spent on food according to the living standards survey published by the GSO will naturally give low results.

“If we continue to use this result as a basis for calculating the minimum living standard, it can lower the quality of life of workers. The minimum living standard will be closer to reality if there is a specialized agency in charge of annual calculation and publication,” Lan said.

Hoang Quang Phong, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI), Vice Chairman of the National Wage Council, also agreed that there should be an independent agency tasked with studying and publishing the minimum salary level to avoid controversy.

“It’s not just the trade unions, the VCCI is also sceptical about the numbers included in calculating the minimum living standard,” Phong said, suggesting that the autonomous agency can be a social research institute, an experienced agency similar to the GSO.

The agency should not only be responsible for publishing the minimum standard of living, but also assessing the impact of each salary adjustment period on workers’ lives, inflation, and the competitiveness of businesses, to make appropriate recommendations and solutions, she added

Pham Minh Huan, former Deputy Minister of Labor, Invalids and Social Affairs and former Chairman of the National Wage Council from 2013-2016, said that even if there was an autonomous agency tasked with publishing the minimum living standard, members of the council would have to review it.

Huan said minimum living standard is only one of the seven factors that determine the minimum wage, the other factors including consumer price index, economic growth rate, labor supply and demand, employment and unemployment ratios, labor productivity and financial capabilities of businesses.

Previously, to set the bar for minimum living standards, the council invited experts from the GSO and the National Institute of Nutrition for comments and calculations. It is important that the technical department of the council function frequently, from the beginning to the end of the year, not just 3-4 times a year.

“Only then can there be proper surveys and close assessments of workers’ lives, from which appropriate adjustments can be made,” Huan said.

After two years of postponement, the council met recently to discuss an increase in the regional minimum wage. The specific number has not been announced, but the parties have confirmed that the adjustment will take place this July and remain in place until the beginning of 2023.