Minimum wage in Vietnam's textile industry is the lowest in Asia.

According to the report “Asia-Pacific Textile and Footwear Study” recently published by the International Labor Organization (ILO), a large proportion of workers in the textile and footwear industry in seven Asian textile-exporting countries are receiving wages lower than the minimum wage.

Vietnam ranks first in minimum wage compliance

According to the ILO, Vietnam has the lowest rate of non-compliance with minimum wage regulations in the textile, garment and footwear industry among seven garment-exporting countries in Asia, at 6.6%.

That means that for every 100 wage workers in the industry, 6.6 are paid less than the minimum wage, which is designed to protect wage earners from being paid too low.

Vietnam is the leading country in Asia in compliance with minimum wage regulations in the textile industry.

This rate is much lower than the second lowest country on the list, Cambodia (25.6%), and nearly nine times lower than the top country, the Philippines (53.3%).

While compliance with minimum wage regulations is weak across Asia’s garment industries, the extent of non-compliance varies from country to country. Vietnam also stands out in this regard.

The rate of serious violations (paying less than 80% of the minimum wage) in Vietnam is 3.8% and the rate of moderate violations (paying between 80% and less than 100% of the minimum wage) is 2.8%.

In contrast, the Philippines, India, Thailand, Pakistan, and Indonesia all have large proportions of garment workers paid well below the minimum wage. The serious violations in the Philippines and India are 38.8% and 34.9%, respectively. About a quarter of Indonesian garment workers are also paid well below the minimum wage.

“The level of non-compliance is an important aspect because there is a big difference between a worker earning 99% of the minimum wage and one earning half the minimum wage,” said Matthew Cowgill, ILO chief adviser on labour standards in global supply chains and lead author of the report.

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In all the countries studied, female workers are more likely to be paid below the minimum wage than male workers. Again, Vietnam has one of the smallest gender gaps (5.7 percentage points), behind Cambodia and Indonesia. Meanwhile, Pakistan has the largest gender gap in non-compliance (60.4 percentage points).

The report also found that workers with lower levels of education were also more likely to be paid below the minimum wage. “Minimum wages are important in the garment industry, where collective bargaining over wages is rare,” said Cowgill.

Minimum wage non-compliance is a concern

According to the report, the design of the minimum wage system, including the minimum wage level and the complexity of the wage mechanism, are important considerations to promote compliance.

The role of representative organizations of workers and employers in the wage adjustment process, as well as the institutional framework for labor market governance and the strength of the labor inspection system, also influence compliance.

“Although Vietnam is ahead of its neighbors, non-compliance with minimum wage regulations, at any level, is a matter of concern and needs to be closely monitored.

Of course, compliance with minimum wage regulations is not the only issue to be concerned about. The level of the minimum wage is also an important aspect. In Vietnam, the ratio of minimum wage to prevailing wages in the textile industry is relatively low compared to other countries in the region,” Mr. Cowgill added.

Vietnam has four regional minimum wages, currently ranging from VND2.4 million to VND3.5 million. Each year, the National Wage Council, which is composed of representatives from the Government, employers’ and workers’ organizations, is tasked with proposing the wages for the coming year.

Vietnam's regional minimum wages increased by 12-15% annually during 2014-2016 and will continue to increase by 7.3% in 2017.

ILO assessment: Minimum wages play an important role in the textile and footwear industries, where wages are rarely subject to collective bargaining. Minimum wages can only achieve their basic purpose of ensuring social security for wage workers, preventing them from being paid less than the legal minimum wage.

The findings of this research paper show that a large proportion of workers in the garment industry in several Asian countries are paid below the minimum wage. This is an issue that policymakers and social partners need to consider, both in terms of the design and implementation of minimum wage setting systems, and in terms of appropriately targeted compliance measures.

According to VOV