Vietnam Labor Disorder Over Pension Change is Already Rampant

In an aim to support the constantly rising cost of living, Vietnam together with some ASEAN countries is expecting an increase in their minimum wage this 2018.

Thanks to the manufacturing industry, the region have seen a significant growth over the past few years, as motivated by low labor costs. Since more investors are already adopting the “China Plus One” scheme, understanding the increase in wages will be essential for maintaining the subtle balance between labor cost and productivity in Vietnam and its neighboring countries.

Increasing Minimum Wages

Vietnam recently revised it minimum wage ceilings which has already took effect in January, 2018. So far, the country has two types of minimum wages.

1. The Common Minimum Wage

The common minimum wage is used to calculate salaries for state-owned enterprises and organizations. On July 1,2018, the same will see an increase from 1,300,000 VND (US $57) per month to 1,390,000 VND (US $61).

2. The Regional Minimum Wage

The regional minimum wage is used for all non-state organizations and enterprises. It is generally based on regions as defined by Vietnam’s government. On January 1, 2018, the country’s National Wages Council had already confirmed the regional minimum salary rates for 2018.

• Region I: VND 3,980,000/month;
• Region II: VND 3,530,000/ month;
• Region III: VND 3,090,000/ month;
• Region IV: VND 2,760,000/ month.

Other ASEAN Countries Minimum Wages

By the end of 2018, all the ASEAN countries are expected to see in increase in minimum wages. In fact, Laos and Myanmar is already anticipating new wage caps while Malaysia is currently determining its new wage scheme.

The Significant Effects of Increasing Wages

Generally, rise in salary leads to an increase in consumer spending. Due to the domestic market rapidly growing and other ASEAN member states, the rising minimum wages will lead to an increase in consumption and counterbalance and reduced investment and net exports to a certain level. Nevertheless, each country has to maintain the elusive balance between inflation, wage levels and productivity so as to avoid disrupting the overall labor market.

A low labor cost, being a competitive factor, is actually not sustainable in the long run and one should pay more attention on the development of the service industry, high-tech industries as well as domestic consumption for a sustainable growth.

Lei Hoang

Vietnam

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