Expert Truong Dinh Tuyen: Vietnam should consider abolishing the minimum wage.

According to research by a group of experts, Vietnam is having a minimum wage increase rate higher than labor productivity.

On the morning of September 13, the Vietnam Institute for Economic and Policy Research (VEPR) and the Japan International Cooperation Agency (JICA) announced a study on minimum wages and labor productivity in Vietnam.

According to Dr. Nguyen Duc Thanh -DirectorVEPR,The minimum wage increase in Vietnam over the past 10 years has averaged double-digit growth rates. Specifically, in the period 2007-2016, the minimum wage increased at a rate of 11-70% per year (the increase rate varied by region), averaging approximately 20%.

Also during the same period, the minimum wage increase far exceeded the growth rate of GDP per capita and the consumer price index.In addition, Vietnam's labor productivity increased significantly during this period with an average increase of 4.4%. However, the average growth rate of wages (5.8%) exceeded the growth rate of labor productivity.

In 2017, the minimum costs incurred by businesses in Vietnam, calculated by the sum of minimum wages and contributions to insurance (including social insurance, health insurance, unemployment insurance), were close to the cost in Thailand, and higher than in Indonesia.

Dr. Nguyen Duc Thanh: Increasing the minimum wage will erode the competitiveness of businesses and the economy.

"In the area,Vietnam is the only country where the minimum wage increase rate is higher than labor productivity, which will erode the competitiveness of businesses and the economy," Mr. Thanh said.

Agree, Mr.Truong Dinh Tuyen - former Minister of Trade, said that nIt is "wrong" to consider minimum wage as a social policy. In reality, if the minimum wage is increased by 50%, workers still cannot make ends meet, so the authorities should study the mechanism of negotiated wages, encouraging skilled workers to get higher wages.

"We should consider abolishing the minimum wage, while increasing social protection policies," said Mr. Tuyen.

From the perspective of the agency protecting workers' rights, Mr. Mai Duc Chinh - Vice President of the Vietnam Labor Confederation, admitted that the way the minimum wage has been calculated in the past has been "problematic". However, according to him, the current Law clearly stipulates that this salary must ensure the living standards of workers. However, because businesses are complaining about difficulties, the Government has to increase the salary every year based on the inflation index, GDP, etc. "When the minimum wage makes it enough for workers to live, it will only be adjusted by about 3-4% every year, not 6-7% like now," said Mr. Chinh.

The leader of the Labor Federation also said that this agency had surveyed a number of industrial zones, through which it found that the salary of a couple of workers of 10 million VND per month was not enough to live on. "We surveyed and found that only 16% of workers had savings, the majority of workers had to live frugally and miserably," said Mr. Chinh.

Also at the announcement ceremony, experts emphasized that Vietnam needs to improve labor productivity. Professor Kenichi Ohno, from the National Institute for Policy Studies in Japan, said that the above report provided a relatively comprehensive assessment, including the important content that the minimum wage should not be considered as a social policy.

"Vietnam needs a research agency to improve labor productivity.Singapore has emphasized labor productivity since its founding; Ethiopia has a per capita income of 700 USD and is asking JICA for support to increase labor productivity," Mr. Ohno said, emphasizing that,Labor productivity is the key to development in the current context of Vietnam.

According to VNE