The Minimum Wage Adjustment for 2016, the third since the establishment of the National Wage Council under the revised Labour Code of 2012, is about 12.4%. Decree No. 122/2015/NĐ-CP, 14/11/2015 was published on Nov 14, 2015, and will go into effect on Jan 1, 2016. The adjustment is twice the level of forecast 2016 GDP growth (6.2%), three times CPI inflation (1.8% in 2015 and 4% in 2016), and four times average annual productivity growth (3.3%). On the other hand, it is lower than increases in the past four years: 2012 (29%), 2013 (17.5%), 2014 (15%), 2015 (15.1%). The MW in Region 1 for 2016 would be 3.5 million vnd/month. If present trends continue, the minimum wage in Region 1 will be about 5.1 million vnd/month in 2020. For the second year in a row, the adjustment is within 1% of our trend line estimate.
The below chart and table shows the minimum wage from 2011 – 2016 (actual), and 2017-2020 estimates based on an extrapolation of recent trends. Click the images to zoom in.
Vietnam’s National Wage Concil (photo below) reached a consensus at its 3rd meeting on Sep 3, 2015, after two meetings in August failed to reach agreement.
In addition to far exceeding GDP growth and CPI/inflation, the minimum wage increase also far exceeds labour productivity growth in Vietnam.
According to a report by the ILO and ADB, since 2008, Vietnam’s average annual productivity growth has been only 3.3%, much lower than the 5.2 percent achieved from 2002-2007.
Vietnamese productivity was only 61.4% of the average productivity of ASEAN countries, and was equal to just 12%, 22%, and 40% of the respective productivities of Singapore, Malaysia, and Thailand. Vietnam’s productivity was only higher than those of Cambodia and Myanmar.
Less than 20% of Vietnam’s workforce is trained properly, and many Vietnamese workers do not meet the requirements of the labor market, ILO said.
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Tăng lương tối thiểu vùng từ 1/1/2016, Thủ tướng Chính phủ Nước Cộng Hòa Xã Hội Chủ Nghĩa Việt Nam
Vietnam’s minimum wage may increase by 12.4% in 2016, Tuoi Tre online, Sep 3, 2015
2015 Minimum Wage Adjustment – Decree #103/2014/NĐ-CP, Nov 11, 2014 (English), effective Jan 1, 2015
2015 Minimum Wage Adjustment – Decree #103/2014/NĐ-CP, 11/11/14 (Vietnamese), effective Jan 1, 2015
Links to previous decrees on Minimum Wage Adjustments 2007 – 2013 (Vietnamese) from www.chinphu.vn
Economic Research: The Effects of Minimum Wage Laws (in the Unites States)
While the aim is to help workers, decades of economic research show that minimum wages usually end up harming workers and the broader economy. Minimum wages particularly stifle job opportunities for low-skill workers. Governments should focus on policies that generate low-inflation economic growth and higher worker productivity, which would generate rising wages and more opportunities for all workers.
Economic Research: The Effects of Minimum Wage Laws (in Indonesia)
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.
Published: Aug 19, 2014. Updated: Oct 25, 2014; Sep 6, 2015; Nov 22, 2015