Vice President of the Viet Nam Chamber of Commerce and Industry (VCCI), Hoang Quang Phong, talks with Thoi Bao Kinh Te Viet Nam (Vietnam Economic Times) about the effect of the minimum wage rise.
Can you explain why the Viet Nam General Confederation of Labour, at the National Wage Council's first working session earlier this month, said that a regional minimum wage rise of 10 per cent proposed by VCCI could not meet the needs of labourers?
The VCCI's first proposed wage increase was six to seven per cent. This is a reasonable rise, which properly demonstrates enterprises' competitiveness. However, after further discussions and after taking into account other factors affecting employ-ee's living standards, the VCCI decided to put forward a minimum wage increase of 10 per cent.
A 10 per cent rise in the minimum wage will help enterprises ensure their survival and make sustainable development, thus creating more jobs. A recent survey by the VCCI shows that enterprises are facing many difficulties. Large companies account for less than two per cent of the total, while the remaining 98 per cent are and small and super small-sized businesses. About 70 per cent of them are said to be not making a profit.
More than 32,300 enterprises have had to suspend their operations in the last seven months, a rise of 1.2 per cent compared to the same period last year. Of this figure, medium and small-sized enterprises accounted for 97 per cent.
Meanwhile, the unemployment rate is reported to be on the rise. Therefore, if enterprises are unprofitable, employees are more likely to be laid off, leading to an increased number of labourers taking jobs without binding labour contracts. This might cause adverse consequences as the number of labourers who will not benefit from social welfare policies will surge.
The VCCI's wage-rise proposal is lower than in 2014, which was 14 per cent, and also, much lower than the proposal put forward by the Viet Nam General Confederation of Labour, isn't it?
Next year, in addition to the assumed wage rise of 10 per cent, labourers can enjoy better social-welfare benefits regarding annual leave, sick leave, maternity leave and overtime pay. When the Social Insurance Law (passed in 2014) takes effect in 2016, employers' payments to workers (including wages, allowances and social insurance) will increase by 35 to 40 per cent compared with this year.
As a result, monthly wages, which are used to determine employees' insurance and trade-union fees, will comprise wages and other allowances, while at present they only consist of wages. Moreover, when other laws on social insurance, labour safety and hygiene come into effect in 2016, employers will have to spend more on supporting female employees and ensuring labour safety and hygiene. Thus, if the regional minimum wage picks up by 10 per cent, employers' cost for trade-union fees will increase by 17 to 18 per cent.
This is a big shock to businesses; therefore, if the wage adjustment is not proper and appropriate, the number of enterprises suspending operations or going bankrupt will keep rising.
The VCCI will continue to discuss the issue with relevant authorised agencies to make sure that the wage hike will ensure both labourers' needs and enterprises' development. Our duties are to support enterprises to meet the wage rise demand.
So, what is the solution to the minimum wage rise question to ensure workers make a decent living?
I believe that the most important factors allowing the wage hike, as mentioned in Article 90 of the labour code, are productivity and work quality.
Increased productivity can be achieved by improving employees' working skills, industrial working style and discipline; upgrading equipment and technologies and grasping opportunities as the country are participating in international trade pacts.
However, current labour productivity of Viet Nam is lower than other regional countries. As about 70 per cent of enterprises are not generating profits, enterprises' capacity to invest in new technologies is limited. In addition, it takes time to make use of integration opportunities. — VNS