The proposal by the National Wage Council, submitted to the Prime Minister for approval, reflects the concerns of the business community, which is still reeling from the effects of the COVID-19 pandemic and struggling to recover amid rising commodity, logistics and transportation costs.
Workers are creating over 65 percent of the value of total social products and contribute more than 70 percent of the state budget revenue
Tran Thi Bich, representative of a foreign-invested enterprise in Vinh Phuc Province said, salaries are now higher than the regional minimum. For example, the minimum wage in Region II is currently set at VND3,920 million, but businesses already pay their employees more than VND4.3 million. She added that if the regional minimum wage increases, the insurance and overtime payments for employees will also rise, challenging many enterprises.
Nguyen Van Hoi of the Thai Nam Trading and Production Co., Ltd. agreed that increasing the minimum wage would incur other cost increases. This would be particularly hard for enterprises forced to accept orders yielding little or no profit in order to maintain production and ensure stable jobs.
Pham Hoai Nam, Head of the Department of Population and Labor Statistics, said 90 percent of enterprises implement the periodic regional wage increases. Nam noted that while raising the minimum wage is necessary in light of the rising cost of living, wages are also an input factor in production and increasing them risks the sustainability of enterprises.
Balancing worker-business needs
Reflecting these competing interests and the upcoming implementation date, eight associations recently proposed that the government increase the regional minimum wage on January 1, 2023 rather than on July 1 of this year as planned. The business community has explained that production, financial and order plans were all built at the end of last year, meaning that selling prices cannot be increased to offset wage costs. Many businesses also argue that they increased wages in early 2021 and 2022 and need more time to prepare for another hike.
Although no official decision has been made, Nguyen Van Hoi is also worried that the wage increase may lead to an increase in commodity prices, causing adverse impacts on business and the economy. He therefore proposed that authorities control price increases following the wage hikes to prevent adverse consequences.
Economic experts are warning that unless commodity prices are well managed, workers, businesses and the macroeconomy will all suffer as inflation rises. Therefore, relevant agencies need to take careful steps to ensure a balance between employee difficulties and those of their employers.
Economic expert Le Dang Doanh, former director of the Central Institute for Economic Management:
Increasing the regional minimum wage reflects the effort of the business community to share difficulties with
the employees who suffered the pandemic impacts. However, both businesses and employees can ease
difficulties themselves by reducing unnecessary costs and striving to increase productivity.
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