Vietnamese private businesses Tuesday expressed mixed feelings at a government decision to raise the minimum wage at some companies by 20%. The government announced Monday that the minimum wage for workers at state-owned companies and at private companies in the service sector would rise from 540,000 dong to 650,000 dong (US$31 to US$37) per month. The raise takes effect May 1.
“This decision conflicts with the government’s efforts to support business,” said Pham Thi Lieu, deputy director of the MSA garment company in Hanoi.
Lieu noted the government is supporting business in the negative global economic climate by offering subsidised loans at 4% interest. But at the same time it has raised electricity rates and, now, the minimum wage.
“This decision is reasonable, as the government’s plan to hike the minimum wage was already announced last year,” said Nguyen Thanh Hai, director of the Vietnam Veterinary Joint Stock Company, which makes animal feed and medicine.
Hai said the decision would help wage earners increase spending and thus boost the economy.
“This decision will help boost domestic consumption,” concurred economist Tran Duc Nguyen, a former head of the prime minister’s Research Commission. “It will not cause inflation or price increases, as buying power is low now.”
Nguyen said the previous minimum wage was out of date and no longer adequate.
The wage hike does not apply to manufacturing jobs, a move seemingly made to avoid harming the competitiveness of Vietnamese exports. Exports account for 15-20% of Vietnam’s gross domestic product when measured by value added, and have been hard hit by the global economic slowdown.
Le Bach Duong, director of the Institute for Social Development Studies, said the government’s minimum wage was too low, making workers’ lives very hard.
“This decision in a time of crisis will help to classify and purify businesses,” Duong added. “Companies that cannot pay the minimum wage should be dissolved.”