Want to be in the loop?
subscribe to
our notification
Business News
MINIMUM WAGE HIKES SEEN SENDING PRODUCTION COSTS SOARING
The forthcoming spikes in the region-based minimum wages are expected to improve workers' incomes but production costs in labor-intensive industries will certainly pick up.
The Ministry of Labor, Invalids and Social Affairs, which is drafting a decree on the region-based minimum wages, proposes a wage increase of 6.5%, or VND180,000-230,000 a month, which would go into force early next year.
This is also what the National Wage Council, and representatives of employers and employees have agreed upon after three rounds of negotiations.
The current inflation rate of 4-4.5% is taken into account to guarantee a real wage rise for workers and labor productivity growth of 2-2.5% in a bid to meet 92-96% of their minimum living needs, according to the ministry.
The ministry said job creation, unemployment, production and business conditions, manufacturing costs and others have been factored into the proposed wage hike.
Given the 6.5% rise, production costs might move up 0.55-0.6% but the increase could be 1.15-1.2% in labor-intensive industries like textile-garment and leather-footwear.
According to the ministry, a new regulation on an expansion of social insurance coverage is also taken into consideration. The regulation specifies those entering into labor contracts of one month or longer must contribute social insurance.
The basis for social insurance contribution will be broadened to include salaries, allowances and others from early next year onwards, making the labor cost burden heavier.
Therefore, the Government has reduced the rate of compulsory social insurance contribution by the employer to the fund for occupational accidents and diseases by half a percentage point since June.
In addition, the Government has proposed the National Assembly Standing Committee lower the rate of the unemployment insurance fund for employees by 0.5%.
Impacts on employees and employers
Truong Van Cam, general secretary of the Vietnam Textile and Apparel Association, said the 6.5% pay raise would make life more difficult for companies in the sector. They would be compelled to cut production costs, improve productivity, and invest in new technologies to use less labor.
He also said the National Assembly should weigh lowering the ratio of contribution to the unemployment insurance fund for both employers and employees by half a percentage point given its current surplus.
Chang-Hee Lee, director of the International Labour Organization in Vietnam, said effects of the higher minimum wages could be felt differently by different groups of employers and workers. In particular, businesses at the lower end of the global supply chain may feel their price competitiveness squeezed, as the high wage increases have not abated in recent years.
Lee said the prices the Vietnamese firms relying on garment outsourcing contracts with multinationals have remained largely unchanged for almost a decade, and in some cases, have even been lowered.
This is why employers in export-reliant industries have come under constant pressure to improve business efficiency and reduce production costs to stay competitive.
He underlined the need for multinationals to engage dialogues with Vietnamese suppliers and trade unions to ensure a fair share of economic gains and social responsibilities.
On the other hand, according to Lee, the new minimum wages can boost domestic demands.
It means higher minimum wages would improve incomes of the majority of workers that can boost domestic consumption and contribute to higher gross domestic product growth.
Source: The Saigon Times
Related News
DIGITAL TRANSFORMATION IN LOGISTICS – A KEY TO UNLOCKING SUSTAINABLE E-COMMERCE AND ECONOMIC DEVELOPMENT
Accelerating digital transformation in logistics is critical in order to promote the sustainable development of e-commerce, a conference on applying technology held by the Ministry of Industry and Trade heard on Thursday, as well as accelerating overall economic growth.
SOILBUILD EXTENDS ITS HORIZONS INTO VIETNAM INDUSTRIAL REAL ESTATE
Soilbuild Group, an integrated real estate group, has broadened its investment in industrial real estate to Vietnam through its Soilbuild International division. The official launch of Soilbuild International (Vietnam) took place in Hanoi on May 9th, 2024, and was attended by esteemed guests, including domestic and international partners.
SEMINAR: BUSINESS SPOTLIGHT - THE HONG KONG-INSPIRED PRESENCE NESTLED IN THE HEART OF HANOI'S EAST
16h00 - 18h00, Wednesday (May 22nd, 2024)Almaz Convention Center - Hanoi (GG map: https://maps.app.goo.gl/YtWyGgkiTwWvFnfX6)
VIETNAM SECURES REMARKABLE ECONOMIC SUCCESSES SINCE NATIONAL REUNIFICATION
Since the national reunification on April 30, 1975, Vietnam has obtained admirable economic achievements and is now on its way to become the 20th largest economy in the world. Back to 1975, Vietnam, torn by two major wars, was a backward economy dependent on agriculture and foreign assistance. Foreign loans and aid accounted for over 63 percent of its budget.
350 EXHIBITORS TO TAKE PART IN HCM CITY PAPER, COATINGS, RUBBER, PLASTIC EXPOS
They will have a total display area of 10,000sq.m, 30 per cent more than last year, and the participation of over 350 local and international exhibitors who will showcase thousands of products and technologies.
INT’L INVESTORS EYE VIETNAM’S DATA CENTER MARKET – REPORT
Vietnam’s data center market is increasingly attractive to foreign investors, driven by the country’s expanding digital economy, rising data consumption, and supportive government policies, said a new report by JLL. While Vietnam’s data center sector has traditionally been dominated by local telecommunications companies, global players are now entering the market.