Minimum wage up, laborers’ income down

VietNamNet Bridge – While the Ministry of Labor, War Invalids and Social Affairs (MOLISA) believes that raising the minimum wage is a must, businesses fear that the production costs would be higher, while laborers worry that their actual income would go down.

94 percent of businesses pay higher than stipulated minimum wages

A survey conducted by MOLISA on 1700 businesses showed that 94 percent of businesses now pay workers higher than the minimum wages stipulated by the laws.

However, the minimum wage increase would still be a big threat to business owners, because they would have to pay higher for workers’ social insurance premiums and other expenses.

The problem is that the social and healthcare insurance premiums are now defined based on the minimum wages set up by the State. Therefore, when the minimum wages increase, the costs businesses have to bear would also increase.

Under the current laws, businesses have to pay 20 percent of the social insurance premiums for workers, while workers have to pay 8.5 percent.

The labor intensive industries prove to be the biggest sufferers from the minimum wage adjustments. As for garment, footwear and wooden furniture enterprises, for example, the pay for social insurance premiums account for 3-4 percent of the total expenses.

An executive of Kungviet garment company Nguyen Quoc Lap said the 500 workers in his company have the average pay of 3.8-4 million dong a month, which is higher than the stipulated minimum wage.

Therefore, if the minimum wage is raised, the actual income of workers would be unchanged. Meanwhile, both businesses and workers would have to pay higher for social insurance premiums, which means their income would decrease.

Minimum wage up, income down

According to Pham Minh Huan, Deputy Minister of MOLISA, the minimum wage levels need to be high enough to ensure the minimum living standards for every worker and one child.

However, in fact, the current minimum wage just satisfies 57-63 percent of the basic requirements of workers and their families.

In the first six months of 2012, GDP grew by 4.38 percent and it is expected to growth by 6-6.5 percent by the end of the year, while the consumer price index (CPI) is expected to increase by 7-8 percent. The average wage in the labor market is expected to increase by 8-10 percent this year (it was 19.8 percent in 2011). Therefore, it is really necessary to adjust the minimum wages applied for businesses.

Pham Gia Tuc from the Vietnam Chamber of Commerce and Industry (VCCI) has warned that unreasonable adjustments, if they are made, would badly affect businesses’ health and weaken the national economy.

Tuc said that businesses are facing too many difficulties, including the high capital costs, decreasing purchasing power and market narrowing. Therefore, the production cost increases would make the businesses’ problems more serious, which may lead to the bankruptcy of businesses in masses.

Nguyen Tung Van, Chair of the Textile and Apparel Trade Union, said that since garment companies are now mostly doing the outsourcing for others, the pay for workers always accounts for a big proportion, up to 52 percent, of the production costs.

At present, the 120,000 workers in the garment industry have the average monthly income of four million dong per capita. The minimum wage increases would mean the higher duties for healthcare, unemployment and social insurance premiums.

In related news, 27,000 businesses reportedly dissolved or stopped operation in the first six months of 2012, an increase of 5.4 percent over the same period of the last year, while 225,000 people applied for unemployment allowances.

Compiled by Thanh Mai