Vietnam puts wage hike in cold storage

03 Nov '15

3 min read

A budget deficit has forced the Vietnamese government to postpone submitting a plan to raise the regional minimum wage to the National Assembly for approval until March 2016, according to media reports.

The decision was made at the monthly meeting of the cabinet under the chairmanship of Prime Minister Nguyen Tan Dung.

On September 3, the National Wages Council had approved the plan with the 12.4 per cent increase in minimum wage in 2016, although a lot of agencies, organisations and associations submitted their different proposals to the Government.

According to statistics of the Ministry of Finance, the country's budget deficit, as well as public debts, has increased rapidly in recent years.

The ministry's recent estimates show that central budget revenue in 2015 will likely be 31 trillion dong (nearly $1.4 billion) lower than targeted.

However, thanks to a budget surplus at the local level, expected to be close to 47 trillion dong ($2.12 billion), the country will have an overall budget excess of 16.4 trillion dong (roughly $740 million), the ministry said.

The central budget deficit has mainly been caused by the decrease in world crude oil prices, while overspending and tax reduction have contributed to the deficit, according to the ministry.

Taking into account these factors, the cabinet decided to delay submitting its minimum wage rise plan to the National Assembly until March 2016, pending an improvement in the central budget balance.

On the same day that the National Wages Council approved the wage hike plan, the Vietnam General Confederation of Labor (VGCL) proposed that the government increase regional minimum wages in 2016 by at least 14.3 per cent to improve the life of laborers.

According to the VGCL, the 2015 minimum wage rates, which are 14.3 percent higher than those in 2014, only cover 78-85 percent of the minimal living costs of employees.

To set the minimum wage increase of 12.4 per cent in 2016, the National Wages Council had to call three meetings and recorded 90 per cent of ayes. But, on October 5, the VGCL asked for the revision of the rate to at least 14.4 per cent in 2016, the same amount as in 2015.

Earlier, business associations asked the Prime Minister to adjust the minimum wage rise in 2016 to 6-7 per cent. The Vietnam Textile and Apparel Association (Vitas) disagreed with the 12.4 per cent hike because they claimed such increase was too high and this would engender enormous challenges for garment and textile businesses, particularly when they have to pay for employee insurances based on total incomes rather than the minimum wage as now. Vitas did not reveal its suggested hike.

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