Eight business associations in Vietnam have proposed a delay of the increase of the regional minimum wage until early next year, to give them more time to prepare after the COVID-19 pandemic, while some labor experts have warned that such delay is unadvisable. 

In a recent joint dispatch to the Prime Minister, these associations proposed the regional minimum wage increase be delayed until January 1, 2023, instead of applying them on July 1, 2022, at an increase rate of six percent as announced by the National Wage Council.

These associations include the Japan Business Association in Vietnam, the Vietnam Association of Seafood Exporters and Producers (VASEP), the Vietnam Textile and Apparel Association (VITAS), the Vietnam Electronic Business Association, the Ho Chi Minh City Food and Foodstuff Association, the Vietnam Wood and Forest Products Association, the Vietnam Plastics Association, and the Vietnam Motorcycle Manufacturers Association, according to the Vietnam News Agency.

The application of the wage rise in early July will pose a lot of difficulties to businesses, the associations said. 

During 2020 and 2021, the COVID-19 epidemic had serious impacts on every aspect of the economy, exhausting numerous enterprises, which now need more time to make a recovery and proceed with the planned wage rise.

Many enterprises have already increased wages for employees in early 2021 and 2022, while many employees were still being infected with COVID-19, seriously affecting productivity. 

The scheduled wage increase will cause many businesses to cancel contracts signed with partners as they cannot cover the additional cost, the associations said. 

Unit prices of goods and other expenses have been considered and agreed upon from the beginning of this year with partners and cannot be changed now, they explained.      

Cancellations of contracts will seriously affect the jobs and income of employees, shrink earnings and threaten their existence.

In such cases, enterprises will have to cut down on their workforce, suspend or narrow production, or even declare bankruptcy due to excessive costs.

There may be tens of thousands of workers losing their jobs in that case, the associations warned. 

Therefore, they proposed the Prime Minister consider solutions to support businesses and delay applying the regional minimum wage increase until early next year so that enterprises may have their best preparations for wage rise. 

Dr. Nguyen Thi Lan Huong, former director of the Institute of Labor and Social Sciences, under the Ministry of Labor, Invalids and Social Affairs, and former member of the National Wage Council, commented that the wage increase would be more appropriate to apply on January 1, 2023 than on July 1, 2022.

The government needs to continue to take measures to stimulate the economy, support businesses and pay attention to the group of freelance workers who work without labor contracts, Dr. Huong advised. 

The expert warned that if the regional minimum wage is increased, businesses may find it difficult to expand production, and many workers may be out of work as their employers fail to cover increased employee expenses.

Le Dinh Quang, deputy head of the Labor Relations Department of the Vietnam General Confederation of Labor, a member of the National Wage Council, acknowledged that the salary increase would partly affect the production and business plans of enterprises.

Quang, however, warned that in the market economy mechanism and current labor supply and demand conditions, enterprises wanting to maintain a low wage policy may find it ‘difficult to survive’ and face the risk of ‘self-elimination.”

“Increasing wages helps businesses attract workers, restore production capacity, and motivate employees to stay with their employers,” Quang emphasized.

The regional minimum wage increase should have been done from January 1, 2021, but due to the COVID-19 epidemic, it has been delayed as a way to ease cost burdens for businesses, Quang added.

Dr. Vu Minh Tien, director of the Institute of Workers and Trade Unions, member of the National Wage Council, cited a survey by the Vietnam General Confederation of Labor, which showed that 84 percent of businesses are willing to overcome difficulties when increasing wages for employees on July 1, 2022.

Dr. Tien warned that the delay in wage increase might lead to a risk of instability in labor relations such as strikes.

At the third quarter of 2021, the average monthly income of employees was VND5.2 million (US$225.28), down by VND877,000 ($38.08) from the previous quarter and by VND603,000 ($26.18) year-on-year, according to a survey by the Institute of Workers and Trade Unions in 2021 in eight provinces and cities.

Many workers have had to resort to their personal savings or family support, borrowing money at high interest rates, or choosing to exit the social insurance scheme by making lump sum withdrawals of their social insurance premiums, the survey said.

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