Vietnam’s Minimum Wages to Increase in 2016
Vietnam’s National Wage Council has voted for a 12.4 percent minimum wage increase in 2016. According to the Ministry of Labour, Invalids and Social Affairs (MOLISA)’s Vice Minister, increases will also take place in 2017.
In 2015, the minimum wage across Vietnam was increased by 13-15 percent to VND 2.15 million-VND 3.1 million (US$96-138).
MOLISA’s “Minimum Wage Adjustment Road Map” to 2020 suggests that the minimum wage in 2020 will be around VND 4.8 million (US$213) in Region One and VND 3.4 million (US$151) in Region Four.
Vietnam has a four-tiered minimum wage scheme based on location. Region One, which includes Hanoi, Hai Phong and Ho Chi Minh City, has the highest minimum wage. Region Four, including the least developed parts of Vietnam, has the lowest.
MOLISA has suggested that the act of increasing minimum wage will “lift up the wages of Vietnamese workers and bring them on par with regional levels”.
Vietnam’s current monthly minimum wage of US$96-138 compares to minimums of US$121.90 in Cambodia, US$135.43- 296.96 in China and US$265.68 in Thailand. Considering these figures, it is apparent that Vietnam will remain wage-competitive.
However, costs in Vietnam are not all wage-related; according to the American Chamber of Commerce Vietnam, if minimum wages were to increase by 15 percent, actual labor costs would be expected to increase by 20-25 percent.
These changes will heavily effect retail companies, where labor cost accounts for 25% or more of total costs. The increases will have minimal effect on electronics manufacturers, whose workers are usually paid above minimum wage.
These expected increases are lower than in previous years, considering that the minimum wage increased by 17.5 percent in 2013 and 15 percent in 2014. However, a projected low inflation rate of three percent in 2015 will make the real increases as pronounced as previously.
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