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Vietnam workers indifferent to minimum wage hike; employers fret

VIETNAM ECONOMY“The wage hike would not benefit us, just put more pressure on us. It can trigger a rise in prices.” Following an earlier wage hike this year, house owners increased rents by 10 percent, Ha said, adding if prices rise after the upcoming salary hike, her monthly income of VND4 million (US$190.4) would not be enough for her to live in the city.

The National Wage Council plans to propose to the government an increase in minimum wage by 15-17 percent from January 1 next year. Many workers are not too keen about the proposed wage hike. Some firms are likely to increase salaries, but could cut allowances, one economist said. Read more

Vietnam Labor Union Calls For Minimum-Wage Hike In 2014 of 24 ~ 36%

Dang Ngoc Tung, VGCL ChairmanThe Vietnam General Federation of Labor (VGCL) wants the minimum wage hiked by a third next year in Region 1.

The minimum wage is now 2.35 million vnd/month, in Region 1.

The federation has put two alternative proposals to the National Wage Council – hike the minimum wage by either 24-36 percent or by 21-32 percent.

Read more … from the Business Times, Sep 6, 2013

Private Sector Minimum Wage Adjustment for 2013

MOLISA issued NGHỊ ĐỊNH QUY ĐỊNH MỨC LƯƠNG TỐI THIỂU VÙNG ĐỐI VỚI NGƯỜI LAO ĐỘNG LÀM VIỆC Ở DOANH NGHIỆP, HỢP TÁC XÃ, TỔ HỢP TÁC, TRANG TRẠI, HỘ GIA ĐÌNH, CÁ NHÂN VÀ CÁC CƠ QUAN, TỔ CHỨC CÓ THUÊ MƯỚN LAO ĐỘNG Decree 103/2012/ND-CP, 4 Dec 2012 Establishing the Minimum Wage for Private Sector.

In summary, the 2013 Minimum Wage levels for the private sector, effective Jan 1, 2013, are:

2.350.000 vnd/month for enterprises in Region I
2.100.000 vnd/month for enterprises in Region II
1.800.000 vnd/month for enterprises in Region III
1.650.000 vnd/month for enterprises in Region IV

Read more

Indonesia’s Misguided Labor Movement

A 2010 World Bank study shows that a 10% increase in Indonesia’s minimum wage reduces formal employment by 1%. Formal employment in Indonesia is around 44 million today, so a 30% average rise in the minimum wage could reduce formal employment by more than 1.3 million workers.

Labor activists demanding minimum-wage hikes have led protests that brought Indonesian cities to a standstill in recent months. But for all the sound and fury, this preoccupation with wages remains misguided. If politicians are serious about improving the lot of Indonesia’s poor, they should focus on reforming labor laws that protect formal sector jobs at the expense of nine out of 10 Indonesians who are employed informally.

These latter workers get lost in the din when thousands of union members flood Jakarta’s streets and threaten to halt traffic, as occurred last November in the latest round of wage demonstrations. Now an annual feature, such disturbances have spurred local governments to implement unusually high minimum-wage increases.

Labour protestors in Jakarta

Minimum wages have increased across Indonesia by an average of 10% per year over the past four years. For 2013, some 25 provinces, regencies and cities agreed to raise the minimum wage by an average of 30%, with a few as high as 50%. Greater Jakarta, which accounts for the bulk of Indonesia’s manufacturing and services, agreed to 44%, bringing the minimum wage there to 2.2 million rupiah ($225) a month. Unions are encouraged, and their demonstrations are likely to grow in size and assertiveness in the years ahead.

The problem is the 2003 Manpower Act. This places tight constraints on dismissing workers by requiring one of the world’s highest severance payments: 32 months’ worth of wages.

Each time the minimum wage rises, so do legally mandated severance payments. The increases in the minimum wage therefore make layoffs so costly that there is no incentive to hire an informal worker at the margin. Employment is virtually guaranteed for those who already have a formal job.

Such job protection does not help productivity. Nor does it improve Indonesia’s overall employment picture. A 2010 World Bank study shows that a 10% increase in Indonesia’s minimum wage reduces formal employment by 1%. Formal employment in Indonesia is around 44 million today, so a 30% average rise in the minimum wage could reduce formal employment by more than 1.3 million workers.

Vikram Nehru
SENIOR ASSOCIATE
ASIA PROGRAM
BAKRIE CHAIR IN SOUTHEAST ASIAN STUDIES

Read more …

Background Reading

Does the Minimum Wage Affect Employment? Evidence from the Manufacturing Sector in Indonesia,” March 24th, 2012, The World Bank  “Using Indonesian firm census data, the paper investigates the impacts of minimum wages on employment and wages in Indonesia in the period of 1993-2006. The paper finds that minimum wages have significant and negative employment effects in small firms, but not in large firms. The effects are especially negative among less educated workers who are hit harder by minimum wage rises; workers with high school education and above do not seem affected. Both production and non-production workers lose their manufacturing jobs when minimum wages are raised, and job losses are more severe for non-production workers, which include workers performing low-skill (non-essential) demanding activities such as cleaners and drivers. The analysis also yields clear gender differentiated effects of the minimum wage: most of the non- production job losses are experienced by female workers. Lastly, the paper also finds that minimum wages are more correlated with average wages in small firms than in large firms.”

“Labour Market Institutions: A Review of the Literature: Background Paper for the World Development Report 2013”  “Research in the 1990s, largely based on cross-country regressions, typically found that strong protective legislation and generous unemployment insurance did slow job growth and increase unemployment. These conclusions motivated the influential OECD (1994) Jobs Study which took a largely deregulation stance, recommending flexible rules for protecting employment and setting wages and hours, and unemployment and welfare systems that minimized work disincentives.”

OECD Economic Surveys INDONESIA, Sep 2012  “Formalisation of workers and firms will be a key source of productivity growth and could be encouraged by preventing excessive increases in the minimum wage, introducing a sub-minimum wage for youth and implementing reforms to make the formal labour market more attractive to workers and firms. One option to effectively protect workers against job-loss risks in the future would be to introduce limited unemployment saving coupled with individual unemployment-insurance accounts, while removing rigidities in the formal labour market. A simplification of the cumbersome licensing process would reduce the administrative burden facing companies.

“In provinces where minimum wages are already high in relation to average wages, resist increases that exceed trend productivity gains. Introduce a sub-minimum wage for youth directly linked to the general minimum wage. Reduce onerous severance payments and ease dismissal procedures in the formal labour market. In return introduce unemployment benefits possibly coupled with individual unemployment saving accounts.”

Global Wage Report, 2008/2009Minimum wages and collective bargaining: Towards policy coherence” ILO International Labour Organization

 

VCCI Chairman: Reduce corporate income taxes and have a stable wage adjustment roadmap

vu-tien-loc-sAround 100,000 businesses are forecast to close between 2011 and 2012. The figure is equal to half of the figures over the entire past two decades since Vietnam adopted the Law on Enterprises, Chairman of the Vietnam Chamber of Industry and Commerce (VCCI), Vu Tien Loc forecast.

Loc further said the enterprises that were still in business were meeting difficulties such as incomprehensive policies, lack of capital and especially a lack of transparency in the business environment.

He said there are two key points in order not to increase the difficulties that businesses face: (1) corporate income tax (CIT) and (2) workers’ wages.

Corporate Income Tax
In Vietnam, CIT is higher then neighboring countries. Thailand recently lowered the CIT from 30% to 23%. Japan, Korea, Thailand have 17% CIT for small and medium enterprises, while in Vietnam it is 25%. It should be reduced immediately to 20%. Some say it wouldn’t help to reduce CIT now, since companies aren’t making profits, but it would help those companies that are surviving, and lay the groundwork for investment in the future.

Minimum Wage Adjustment
As for workers’ wages, VCCI and a number of industry associations recently sent a letter to the Prime Minister and government agencies regarding the road map for minimum wage adjustments. We agree that it is necessary to increase wages to improve workers livelihoods. However, this has a big impact on companies, so it is necessary to plan carefully, with an agreed roadmap, rather than decide on random increases every year. Also, wage increases need to be based on labour productivity increases, which, in Vietnam, average around 4.5 – 5% per year, while the average in ASEAN is around 10%. Accordingly, VCCI and industry associations have proposed that the minimum wage adjustment be about 15% per year for the next three years, 2013 – 2015. A stable minimum wage adjustment road map like this will allow companies to plan their budgets, their production, and their overall business development.

Read more … .

State Sector Minimum Wage Adjustment
Govt says can’t afford state sector minimum wage increase in 2013, Oct 10, 2012
State sector minimum wage increase “will fuel domestic demand and consumption,” Oct 23, 2012
Cut expenses, eliminate waste to increase State sector minimum wage, Oct 24, 2012
State sector minimum wage increase, Oct 25, 2012
National Assembly may postpone state sector minimum wage increase, Oct 29, 2012
State sector minimum wage increase reduced from 24% to 9.5%, delayed two months, Nov 1, 2012
State sector minimum wage hike of 100,000 vnd (to 1.15 million vnd/month) to be effective July 1, 2013, VIR, Nov 6, 2012

Private Sector Minimum Wage Adjustment
Minimum Wage Adjustment for 2013, Aug 21, 2012
Minimum Wage adjustment (increase) spooks many enterprises, Aug 27, 2012
Private Sector Minimum Wage Adjustment Option #3, Oct 16, 2013
Cost Impact: New Labour Code, New Union Law, and Draft Employment Law
VBF Dialogue with MOLISA and MPI re Labour-related issues, Nov 2, 2012
VCCI: 15% Annual Private Sector Minimum Wage Hike 2013-2015, Nov 5, 2012

Vậy theo ông, cần phải làm thêm gì để hỗ trợ doanh nghiệp?

– Tôi cho rằng cần làm 2 việc: không tạo thêm khó khăn và đưa doanh nghiệp tiến mạnh hơn vào quá trình tái cấu trúc. Để không tạo thêm khó khăn, tôi đồng ý là phải hỗ trợ chi phí, nhất là trong các khoản thuế và chính sách lương.

Thuế thu nhập doanh nghiệp tại Việt Nam hiện cao hơn so với các nước trong khu vực. Như Thái Lan, họ vừa giảm từ 30% xuống 23%. Nhật Bản, Hàn Quốc và Đài Loan (Trung Quốc) đều đang áp thuế với khu vực vừa và nhỏ là 17%, trong khi ở Việt Nam hiện vẫn là 25%.

Tôi nghĩ cần phải giảm ngay mức thu này. Cụ thể bao nhiêu còn tuy thuộc vào ngân sách nhưng nếu có thể, nên đưa ngay xuống 20%. Vừa qua cũng có ý kiến cho rằng giảm thuế vào lúc này không có nhiều ý nghĩa, bởi thực tế đâu có nhiều doanh nghiệp có lợi nhuận để đánh thuế. Tuy nhiên tôi cho rằng đây mới chính là lúc cần hỗ trợ số ít các doanh nghiệp đang có lãi, để họ có cơ hội tích lũy, đầu tư trong tương lai.

Về lương, VCCI cùng một số hiệp hội ngành nghề lớn vừa có văn bản kiến nghị lên các cơ quan chức năng về lộ trình tăng lương tối thiểu. Chúng tôi đồng ý cần tăng lương để cải thiện đời sống người lao động. Tuy nhiên, đây là việc ảnh hưởng rất lớn đến doanh nghiệp nên cần tính toán kỹ, có lộ trình cụ thể cho trung hạn, thay vì cứ mỗi năm lại có mức tăng khác nhau.

Cũng cần lưu ý rằng, tăng lương phải gắn với tăng năng suất lao động. Tốc độ tăng năng suất bình quân ở Việt Nam hiện là 4,5% ~ 5% một năm, trong khi trung bình ASEAN là 10%. Do vậy, sau khi cân nhắc, chúng tôi đề xuất mức tăng lương 15% một năm, trong vòng 3 năm tới. Tăng ổn định như vậy thì doanh nghiệp mới tính toán, đưa vào kế hoạch sản xuất, kinh doanh được. Cuối cùng, như đã nói ở trên, tôi cho rằng cần đẩy mạnh hơn nữa quá trính tái cơ cấu, tăng cường tính minh bạch trong cả chính sách lẫn tại doanh nghiệp. Một doanh nghiệp có thể giữ kín bí mật kinh doanh, nhưng tài chính thì phải công khai, rõ ràng.

Read more …

Weekly Update Oct 29: Typhoon Drenches Hanoi, Visa Workshop, Global Antitrust, Members Night

Highlights

Th, Nov 1 U.S. Visas Procedures Workshop
Tropical Storm Son-Tinh Drenches Hanoi
Seeking volunteers to interview AmCham Scholarship Candidates
Tu, Nov 6, U.S. General Elections Day • U.S. Voter Registration Web Sites
Nov 11-17 Infrastructure Trade Mission: HCM City, Hanoi, Jakarta
Mo, Nov 12 Members Lunch: Global Antitrust Enforcement – More Authorities, Increased Coordination, Higher Stakes
Tu, Nov 13 Members Night and Meet the Candidates
We, Nov 14 U.S. – Myanmar Business Summit, Yangon
Th, Nov 22 AmCham’s Thanksgiving Golf Tournament and Dinner
Sa, Nov 24 Seeking volunteers to interview AmCham Scholarship Candidates
Sa, Dec 8 AmCham Governors’ Ball • Christmas in San Francisco
Tu Dec 11 Annual General Meeting and Members’ Night
AmCham’s International Coastal Cleanup in the News
Vietnam’s Economic Development Outlook Update, Oct 3, 2012 (ADB)
Vietnam’s Consumer Trends 2012: “We have yet to hit the bottom.”
U.S. Textile Manufacturing, Vietnam, and the TPP Negotiations
New AmCham Companies – 2012
Coca-Cola to invest $ 300 million more in Vietnam
Party Secretary Remarks at Closing of Party Central Committee 6th Plenum
Ca Mau gas, power, fertilizer complex inaugurated
National Assembly may postpone state workers’ minimum wage increase

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Garment makers fear minimum wage rise

Aug 30, 2011. Apparel firms fear a rise in the minimum wage will lead some foreign investors to move out of Vietnam

Vietnam’s textile, garment and footwear industries are likely to be hardest hit by a government decision to increase minimum wages by up to one-third from 1 October.

Wages are being raised to help workers cope with surging levels of inflation – and to reduce the likelihood of strikes.

Read more

Minimum Wage Adjustment for 2012 to be effective from Oct 5, 2011

HCMC – Starting from October 1 to the end of December 31, 2012, a new minimum wage, varying from VND1.4 to 2 million, will be applied to employees working for companies and organizations across the country.

The recently-issued Decree 70/2011/ND-CP, Aug 22, 2011 stipulates a minimum salary applicable for staff of businesses, domestic and foreign-invested alike, in four different regions in the country, the Government said on its website (chinhphu.vn).

In particular, region one, consisting of Hanoi and HCMC, has the highest minimum salary at VND2 million a month whereas laborers will earn a minimum monthly salary of VND1.78 million in region two, including important economic areas like Binh Duong, Dong Nai and Ba Ria-Vung Tau. The figures are VND1.55 million for region three and VND1.4 million for region four.

Read more

Minimum Wage Adjustment (MWA) considered for Oct 1, three months early

Repeated minimum wage increases have failed to help Vietnam’s workers make ends meet, because of Vietnam’s macroeconomic instability and high inflation. A failure to address their concerns could see a even more wildcat strikes in the near future.

Wildcat strikes by city workers have become “serious” and relevant agencies should not consider it a normal issue, Le Thanh Hai, chief of the Ho Chi Minh City Party Unit, said at a conference on Tuesday (July 12). He asked government agencies and companies to provide greater support to workers with increased salaries and allowances as well as better working conditions.

At a meeting held by the Ministry of Labor, War Invalids and Social Affairs on July 8 to discuss the issue, the MOLISA representatives said the government is considering a basic salary increase in October instead of next January as planned due to rising inflation.

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Abandoning China: In search of cheap labour, companies turn to Vietnam

More and more Chinese and international companies have been turning to southeast Asia, Vietnam in particular, in search of cheaper labor. In Vietnam, the minimum wage does not exceed $ 85 a month in the large manufacturing zones.

To witness this relocation trend, all you have to do is going to Bac Ninh, a city 40 kilometers north of Hanoi. A few years ago, there used to be large rice fields, but now they have been replaced by multinational companies and their local subcontractors.

Samsung’s Bac-Ninh-based factory is its largest worldwide, employing 9,600 workers. Canon employs 8,500 workers, whereas Foxconn, a Taiwanese electronics manufacturer, employs 5,600. The latter is the world’s largest maker of electronic components and the largest private company in China, employing 420,000 people.

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