Dr Nguyen Minh Phong, head of the Economic Research Unit of Ha Noi Institute for Social and Economic Development Study, spoke with Khoa hoc&Doi song (Science&Life) newspaper about the increase in minimum wages.
Do you think the increase of the minimum wage from VND830,000 (US$40) to VND1,050,000 ($50) per month is reasonable?
The increase of the minimum wage depends on two elements: productivity and the ability to balance the nation's budget. In my opinion, this increase in the minimum wage is acceptable.
I'm also on the list for getting a pay rise from this list, and I am satisfied with it.
In some respects, I think the current wage is rather high compared with the productivity.
For example, my wife works two hours per day in a library, sometimes only two days a week. Still, she receives VND4 million ($192) a month. In general, the pay should be based on productivity of employees instead of their qualifications.
The Report from the Home Affairs Ministry showed that only one-third of State employees performed at an acceptable level.
What do you think the general impacts on businesses who have to deal with the effects of pay increases, and specifically will it attract more talented people to State-owned enterprises?
Businesses will definitely have to pay more for their employees, for both monthly wages and labour and unemployment insurance. This might cause increased unemployment as employers get rid of under performing staff. Every policy has good and bad effects. A good policy will bring more positive effects to the society. However I do believe that we should wait for some time to increase the minimum wage after this.
In recent years, the has been a trend of State employees quitting jobs to work for private enterprises due to low salary. The wage increase will give incentive to talented people to keep working for State-owned enterprises. Still I think that the wage will never be enough to attract people with the ambition of becoming rich.
What effects will this increase have on the national economy?
As usual, the wage increase will help people to meet their living expenses and improve their lives, especially in the context of spiralling inflation. However, it will also increase State spending, and have an overall effect on the Vietnamese economy. Another unintended effect could be a rise in production prices.
These should not be to much of a problem this time, though. The country witnessed extreme price increases last year, so a 10 per cent wage increase is not much in comparison to a 20 per cent inflation rate. People everywhere are tightening their purse strings.
In the past, retailers could increase prices if they wanted, but now the tight budgets of their customers stops them from doing so. — VNS