Minimum wage increase: Corresponding to labor productivity or living standards?

This is the second year that the National Wage Council, with the participation of three parties representing workers, employers and the Government, is discussing and agreeing on a plan to increase the annual minimum wage. Each party has its own arguments for its wage increase plan, but the proposed levels are quite different, so there is no agreement, so the minimum wage increase for 2015 is still open.

The wage increase proposals of workers' representatives and employers' representatives are quite different. Illustrative photo: VNA

The proposed increase is too different.

The National Wage Council is urgently discussing the plan to increase the minimum wage in 2015. The huge difference in the proposed increase levels of the parties is the reason why it is difficult to agree on a plan to increase the wage.

According to the proposal of the Vietnam General Confederation of Labor, the current regional minimum wage in 2014 is 2.7 million VND for region 1 and 1.9 million VND for region 2. This wage is still not enough to meet the minimum living needs of workers.

Faced with this situation, Vice President of the General Confederation of Labor Mai Duc Chinh said that the General Confederation of Labor proposed to increase the minimum wage in region 1 in 2015 to 3.4 million VND/person/month, an increase of nearly 26% compared to the old minimum wage.

Compared to the rather high proposal of the Vietnam General Confederation of Labor, the minimum wage increase in 2015 proposed by business representatives is only 11%. The Vietnam Chamber of Commerce and Industry (VCCI), representing employers, proposed a minimum wage in 2015 for region 1 of 3 million VND.

Through the process of consulting businesses on the proposal to increase the minimum wage in 2015 of the Vietnam Chamber of Commerce and Industry (VCCI), some businesses said that the minimum wage increase in 2015 should be lower than that of 2014, just under 12% to create conditions to further strengthen sustainable employment for workers. Some businesses that are facing many difficulties even proposed to temporarily suspend the wage increase.

Mr. Phung Quang Huy, Director of the Office of Employers (VCCI), said that the adjustment of the minimum wage for 2015 should be considered at an appropriate level, ensuring both actual wages for workers and production and business activities of enterprises. Next year will continue to be a difficult year, if the minimum wage increase is high, enterprises will tighten their business expansion and recruitment.

Reconciling the two proposals above, the permanent representative of the Wage Council, the Ministry of Labor, War Invalids and Social Affairs, proposed the minimum wage for region 1 in 2015 at 3.05 million VND/month.

However, due to the large differences between the three proposals, the 2015 regional minimum wage plan remains open.

Annual minimum wage increases do not take into account labor productivity. Illustration photo: VNA

Salary increase must correspond to labor productivity.

Analyzing the difficulties in the process of agreeing on the minimum wage increase among the three parties, Dr. Bui Sy Loi, Vice Chairman of the National Assembly's Committee on Social Affairs, said that each member of the National Wage Council has a different way of calculating and thinking.

According to the representative of the Vietnam General Confederation of Labor, the organization representing workers, wages must ensure the minimum living standard of workers, but up to now, wages themselves only ensure 70% of the minimum living standard, so how can wages reach 100% of the minimum living needs by 2018?

“Therefore, the trade union proposed an increase of 3.4 million VND/month to speed up the salary progress to ensure minimum living needs,” said Mr. Bui Sy Loi.

Mr. Bui Sy Loi also added: "The Ministry of Labor, War Invalids and Social Affairs calculates average wages based on labor productivity. This is a very important factor that we have previously neglected or focused too much on the living needs of workers."

Wages are the total social product distributed to ensure the reproduction of labor power for workers, so wages must be linked to labor productivity.

“Low labor productivity but wages increasing faster than labor productivity growth is against the law. Thus, although workers’ living standards are still low, if wages are increased, wages will increase faster than labor productivity growth,” Mr. Bui Sy Loi emphasized.

In addition to the above two opinions, the employer representative is interested in considering the salary level so that the employer can still survive and develop the business. If the business can survive and have jobs, then the employees will have a salary.

Currently, all three parties have their own arguments and have not reached a consensus. However, having representatives from all three parties discuss the annual minimum wage increase is an important step in the process of determining an increase that is both commensurate with labor productivity and ensures a minimum standard of living for workers.

Deputy Minister Pham Minh Huan said that next week the National Wage Council will meet to agree on the minimum wage increase for 2015 to submit to the Government. In addition to the three wage increase options from the three representatives, there may be a plan to reconcile the opinions of the parties.

According to Vietnam+