In 2018, Vietnam along with several ASEAN countries will see a rise in their minimum wages to support the rising costs of living. The region’s growth in the past few years has been largely attributed to the manufacturing industry, driven by low labor costs. As more investors adopt the “China Plus One” strategy, understanding the rise in wages will be crucial for maintaining the delicate balance between labor costs and productivity in Vietnam and its neighboring countries.
Vietnam’s rising minimum wages
Vietnam has revised the minimum wage caps in effect from January 2018. Currently, there are two kinds of minimum wages.
Common Minimum Wage
The first type is the common minimum wage, which is used to calculate salaries for employees in state-owned organizations and enterprises. The common minimum wage has been increased by 90,000 VND/month from 1,300,000 VND /month (US$ 57) to 1,390,000 VND /month (US$ 61), in effect from 1 July 2018.
Regional minimum salary
The second type of minimum wage is used for employees in all non-state enterprises and is based on regions as defined by the government. From 1 Jan 2018, the National Wages Council has finalized the regional minimum salary rates for 2018, as follows:
- Region I: VND 3,980,000/month;
- Region II: VND 3,530,000/ month;
- Region III: VND 3,090,000/ month;
- Region IV: VND 2,760,000/ month.
Region I covers the rural and urban districts of Hanoi, Ho Chi Minh City, Hai Phong, Bien Hoa City, Thu Dau Mot City, Vung Tau City of Ba Ria-Vung Tau Province, and some rural districts of Dong Nai and Binh Duong Province. Region II covers the remaining rural districts of Hanoi, Hai Phong, Hai Duong City, Hung Yen City, and some rural districts of Hung Yen Province. Region III covers the remaining provincial cities, Chi Linh town, and some rural districts of Hai Duong and Vinh Phuc Province. Region IV covers the remaining localities.
ASEAN minimum wages
In 2018, almost all the ASEAN nations will see a rise in minimum wages. Laos and Myanmar have already proposed new wages, while Malaysia is currently deciding on the new minimum wage structure.
|ASEAN Minimum Wages|
|2017 Minimum Wages (Local currency/month)||2017 Minimum Wages (USD/month)||2018 Revised Minimum Wages (Local currency/month)||2018 Revised Minimum Wages (USD/month)||Status|
|Vietnam||2,580,000 to 3,750,000||114.29 to 166.13||2,760,000 to 3,980,000||122.27 to 176.31||In effect 1st January 2018|
|Philippines||7290 to 15,360||140.26 to 295.53||7680 to 9300 (only for Region I – Ilocos)t||147.76 to 178.94 (only for Region I – Ilocos)||In effect 25th January 2018|
|Thailand||9000 to 9300||285.39 to 294.90||9240 to 9900||293 to 313.39||In effect 1st April 2018|
|Malaysia||920 to 1000||233.83 to 254.16||Same as 2017||Same as 2017||Government working on revised rates for 2018|
|Cambodia||612000||153||680000||170||In effect 1st January 2018|
|Indonesia||1,337,745 to 3,355,750||99.80 to 250.35||1,560,000 to 3,920,000||109.20 to 274.40||In effect 1st January 2018|
|Exchange rate as of 13th Feb, 2018|
Impact of rising wages
Wage increases often lead to an increase in consumer spending. With the domestic market growing in Vietnam and other ASEAN member states, the rising minimum wages will lead to an increase in consumption and offset any reduced investment and net exports to a certain extent. However, countries have to maintain the delicate balance between inflation, wage levels, and productivity so as to not to disrupt the overall labor market.
Low labor costs as a competitive factor, is not sustainable in the long-term and one should focus on the development of the service industry, high-tech industries, and domestic consumption for a sustainable growth like China.
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