Minimum wage is calculated by the hour, why not?

Strictly applying a monthly minimum wage inadvertently creates difficulties for certain labor relations in a market economy.

Determining whether to increase or decrease the minimum wage appropriately, and how to calculate it, is a problem that has plagued many managers, employee representatives, and employers. For a long time, we have calculated the minimum wage monthly, but according to many experts, this method has revealed several inconsistencies. Strictly applying a monthly minimum wage inadvertently creates difficulties for certain labor relations in today's market economy. For example, recruiting sanitation workers, outdoor workers, and those in supporting roles within the construction industry.

Supporting the option of calculating the minimum wage based on the hour, Dr. Nguyen Thi Lan Huong - former Director of the Institute of Labor Science, believes that attention should be paid to calculating the minimum wage based on the hour due to its flexibility and convenience for both businesses and workers.

Illustrative image.

Ms. Lan Huong stated that, having studied the market economy experiences of many countries, the practice of paying a minimum hourly wage has been in place for a long time.

The minimum hourly wage is only applicable to workers performing simple, incomplete, short-term, and flexible jobs. These jobs are typically short-term and performed by part-time workers.

From the perspective of labor contracts, those receiving the minimum hourly wage are usually on short-term or fixed-term contracts. From the business perspective, using a monthly minimum wage inadvertently puts businesses that only need to hire hourly workers at a disadvantage.

Not to mention, if a monthly minimum wage is implemented, employers will have to consider policies such as social insurance for those who only need short-term or hourly work. Of course, the hourly minimum wage has the disadvantage of depending on the total number of working hours. If workers are not given enough working time or are exploited to pay for full-time or monthly work, their monthly salary will not guarantee a minimum standard of living.

According to Mr. Bui Sy Loi, Deputy Chairman of the National Assembly's Committee on Social Affairs, determining the minimum hourly wage allows workers to have the right to work under multiple labor contracts. The minimum hourly wage will increase labor productivity and accurately reflect the nature of wages in a market economy.

According to Dr. Dang Duc Dam, Vice President of the Institute for Business Development Research, the key issue in the current debate on regional minimum wages is not the percentage increase, but whether the minimum living requirement used as a "benchmark" for adjusting the regional minimum wage has been accurately determined. If the minimum living requirement is set too high, then even if the minimum wage increases, it will still fall short of meeting the minimum living requirement, creating inaccurate public opinion and the illusion that wages can and should increase even faster.

The average wage is a crucial factor affecting workers' lives. However, according to Mr. Dac Duc Dam, if the minimum wage is forced to increase excessively, businesses will be compelled to react by reducing the wage coefficient, thus negating the incentive for increased labor productivity. The number of unemployed will also increase. Notably, in rural areas, there is a surplus of labor, and workers are willing to accept low wages (but still much higher than agricultural wages) to find work in agricultural processing businesses, but they are unable to do so.

Raising the regional minimum wage is intended to protect vulnerable workers; however, the minimum wage will only be most effective if it harmonizes three factors: meeting the minimum living needs of workers, increasing labor productivity, and enhancing the competitiveness of businesses. If the regional minimum wage is increased too much, other costs such as health insurance, unemployment insurance, union fees, etc., that businesses have to pay will also increase. These costs will be factored into the production costs of products, leading to reduced competitiveness against domestic and imported goods. These pressures will cause business owners to consider cutting jobs to ensure profits for reinvestment, resulting in increased unemployment. Increasing the minimum wage without corresponding labor productivity and business competitiveness will not help increase the net wages of workers; on the contrary, it leads to the risk of business weakness and collapse, and increased unemployment.

Vietnam's labor productivity is currently among the lowest in the Asia-Pacific region. Yet, the rate of increase in the minimum wage is not low at all. Under these conditions, no economy can maintain sustainability, let alone enhance its competitiveness.

So how can we improve labor productivity? This depends on many factors, including education, investment in science and technology, and so on.

According to VOV