Vietnam unable to match minimum wages with living standards

Vietnam first introduced the “minimum living standard” term in its 2012 Labor Law, which requires that the minimum wage must meet the minimum living standard.

A decade later, the gap between the two has kept widening and the current minimum wage far is from matching the level needed for an average laborer to make ends meet.

The minimum wage in Region 1, referring to the most developed areas of a province or city, has stayed unchanged at VND4.42 million ($194) since 2020, which is 5 percent shy of the official minimum living standard, according to a study by the Research Center for Employment Relations.

When compared with the acceptable living standard, the figure is 41 percent lower, it said.

One of the reasons for such a wide gap is that the starting point of the minimum wage was too low, said Mai Duc Chinh, former deputy chairman of the Vietnam General Confederation of Labor.

In 2013, representatives of businesses and workers negotiated and agreed that the first minimum wage level would be VND2.35 million, 30 percent lower than the minimum living standard at the time.

In 2014, the labor confederation proposed that the gap be eliminatedi, but the Vietnam Chamber of Commerce and Industry (VCCI) and the Ministry of Labor, Invalids and Social Affairs opposed it, saying a sudden surge would hurt businesses.

They finally agreed to increase the wage by 15 percent to VND2.7 million.

In the following years, the minimum wage level was increased mostly to make up for inflation, which means technically the “15 percent gap” is still there, Chinh said.

Another reason that the gap still exists is the lack of an independent organization to determine the minimum living standard, said Vu Quang Tho, former head of the Institute of Workers and Trade Union.

Labor representatives think that raising a child costs 70 percent of an adults’ living costs, but businesses think the ratio should be around 50 percent. The labor reps also say that the average daily amount of food a worker needs is 2,300 calories, but businesses think the figure should be 2,000 calories.

Chinh said that current labor laws allow business owners to increase workers’ salaries “according to the ability of the business,” which is something that authorities cannot evaluate and manage.

Therefore, if a company claims to continuous losses or plunging revenues, it can keep workers’ salaries unchanged for years, which is what happened over the last two years of Covid-19.

Do Quynh Chi, director of the Research center For Employment Relations, said many countries have shown that a well-designed minimum wage set of policy will protect workers at the “bottom” of the labor market.

He said: “Other countries have strong union organizations, and the wage there meets minimum living standards.”