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Minimum wage announced to increase in January

Update: December, 08/2012 - 09:22

HA NOI (VNS)– A new minimum wage band for workers, which will be up to 300,000 (US$14) more than the current rate per month, will be applied from January 2013.

The country now has different wage brackets covering four regional zones, ranked according to the level of socio-economic development in each zone.

Zone One covers urban Ha Noi and HCM City. Zone Two covers rural Ha Noi and HCM City along with urban Can Tho, Da Nang and Hai Phong. Zone Three covers provincial cities and the districts of Bac Ninh, Bac Giang, Hai Duong, and Vinh Phuc. Zone Four covers the remaining localities.

The move will set the monthly minimum wage at VND2.35 million ($111) for Zone 1, VND2.1 million ($100) for Zone 2, VND1.8 million ($86) for Zone 3 and VND1.65 million ($78.5) for Zone 4.

The wage is applicable to labourers working for enterprises, co-operatives, farms, households, individuals, and organisations.

Wage scale and other allowances set forth by enterprises should be based on the minimum wage, according to the decree.

The wage paid to a vocational trainee must exceed the minimum wage for the zone by at least 7 per cent, and enterprises are encouraged to pay wages higher than the minimum wage. According to the Ministry of Labour, Invalids and Social Affairs the current wage level provides for only around 60 per cent of workers' basic demands.

The adjusted band will apply from January 1.

Viet Nam has experienced robust wage growth, which has been seen as a major achievement when looked at in the context of an increasing slowdown in global wage rises, which was confirmed yesterday in a report from the International Labour Organisation (ILO).

The ILO Global Wage Report 2012/2013 shows that worldwide wage growth remains far below pre-crisis levels. Monthly wages grew by 1.2 per cent in 2011, down from 3 per cent in 2007 and 2.1 per cent in 2010.

Meanwhile, in Viet Nam between 2006 and 2010, the average minimal wage increased 26.8 per cent per year. Even when taking into account inflation, which remained high, the wage still increased by 12.6 per cent on a yearly basis.

This wage growth rate in Viet Nam is at least three times higher than the growth rate of labour productivity. This contrasts sharply with the global pattern, in which wage rises are growing at a slower pace than labour productivity.

It has been reasoned that these figures look like this because in Viet Nam, like in many other developing countries, paid employees represent only a small proportion of the total labour force; in Viet Nam this figure is at 33.8 per cent. However, labour productivity measures the GDP of all employed people, including the self-employed.

According to ILO Viet Nam's Senior Industrial Relations Specialist, Yoon Youngmo, the Government has used the minimum wage as a policy instrument to gradually raise the wage floor over the last few years, with more than 20 per cent increases each annum.

"The Vietnamese Government has relied on minimum wage policy, in addition to being a key instrument for reducing working poverty and providing social protection for vulnerable employees, as a leading mechanism for wage development in general," he said."They have been very successful in this."

However, he said that the growth of wages and the increasing complexity of the economy mean that the minimum wage is no longer that effective in setting the wage trends in the formal sector for paid employees, said Mr Youngmo. "It's important to have more effective wage setting mechanisms accounting for the development in the labour market and ensuring that wage growth is in line with labour productivity growth."

ILO Viet Nam Country Director Gyorgy Sziraczki also commented on the wage situation in the country, saying that there are challenges ahead to make the wage growth equal for all.

"Policy efforts should focus on the nearly 60 per cent of the labour force that remain in the informal economy with low productivity, little protection and low income," he said.

He also warned about the widening gender pay divide in Viet Nam.

While the gender pay gap has declined in the crisis years in most countries in the world, Viet Nam is among a few nations that have seen a widening gap – with a nearly 2 per cent increase in 2008-11 compared to 1999-2007 - according to the ILO report.

"Unless women are paid equally for their equally important contributions in the world of work, the country cannot tap the huge potential of about half of its labour force," said Mr Sziraczki. — VNS

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