The decision to raise the minimum wage of labourers in foreign direct investment (FDI) enterprises by 40 per cent recently has mollified the large-scale strike of workers in industrial parks in the South.
However, this is considered a “palliative solution” in the process of creating a common minimum wage and gradually repairing the inadequacy of the Vietnamese labour market – its severe lack of supply caused by great inadequacy in labourers’ pay.
Common minimum wage by 2010
Right after the press conference declaring the decision to raise the minimum wage (in VND) in FDI enterprises, Mr Pham Minh Huan – Head of the Department of Wage and Salary of the Ministry of Labour affirmed that this increase of wage in FDI enterprises will widen the gap with that of national enterprises, which is fixed at VND350.000 per month. “In the coming time, the national wage must be increased more in order to shorten this gap” said Mr Huan.
In fact, with the new minimum wage, the actual income of labourers in the FDI sector is not higher than that of the domestic sector because the national wage multiples with the coefficient of wage with allowances taken into account.
According to analysis of officials from the Department of Foreign Investment – Ministry of Planning and Investment, even after this new wage scale, laborer’s income in many industrial zones, especially in Southern provinces remained lower than the average income in HCM City.
This has resulted from the fact that many FDI enterprises, especially in textiles, garments and leather, did not seriously build a wage system and bonus regime for working overtime. Mr Huan also affirmed that if all foreign investors seriously built the wage scale and chart system and abide by the labor laws of working overtime “the government won’t have to pass such palliative solutions to raise the minimum wage in the FDI sector.”
From July 2006, the common Enterprise Law which has just been ratified by the National Assembly will come into effect. This means that a policy on the common minimum wage will be made. The implementation of this policy will depend on the time it takes Vietnam to join the WTO.
Recently, over 1.5 million labourers received wages from the state budget. The total wage fund for this area last year was estimated VND20,000 billion in comparison with the total income budget of over VND180,000 billion. The Ministry of Labour estimated the starting date for implementing the common minimum wage will be in 2010. The national minimum wage will be calculated annually to catch up with that of the FDI sector. “However, in order to do this, we will have to figure out a detailed schedule for investors prepare sufficiently,” said Mr Huan.
Enterprises’ suffering
Any enterprises that pay money for labourers (considered goods in the labour market) have to count the efficiency and value that the labour brings about. Vietnam has a large labour market with a population of over 80 million, the unemployment rate is low (6 per cent) but it seriously lacks practical “labour production” in all kinds of ways.
A recent official investigation in HCM City has partly proved the above statement from a representative of an enterprise involved in Enterprise Management Training. The investigation resulted from 2,700 enterprises implemented in HCM City shows that enterprises face a variety of difficulties in capital and brand development; however they share an obstacle in “the human resource crisis”. Business reports of the consultant group of donors in Vietnam in December 2005 warned about the situation of over- exchange of skilled labours as a major problem for enterprises.
Recent research conducted on FDI by the Central Institute of Economic Research and Management showed that in the time from 2001 to 2003, the exchange rate of labours between foreign enterprises rose to the “shocking” rate of 43 per cent. The highest rates were in textiles, garments and shoe enterprises. Of those changing work, 42 per cent required skills. The lack of skilled labourers has lead to the fact that enterprises have to pay for unskilled workers at a higher wage than the actual value paid to skilled workers. Certainly, the price of unskilled labourers is lower than its real price. Mr Gian Tu Trung, Chairman of the Executive Board of PACE Co. said that this inadequacy was the far reaching cause of the extreme reaction of tens of thousands of workers recently.
According to statistics from the Ministry of Planning and Investment, FDI enterprise pay an average wage for unskilled labours of US$75-80/month, for engineers of US$220-250/month and for officers of US$500/month. According to Mr Trung, to recruit a Vietnamese Manager at US$1,000/month is much more difficult and less efficient than to recruit a foreign one at US$10,000/month. Even with unskilled workers, the problem is to meet requirements of moral discipline. “The cost of unskilled workers in Vietnam is low, but not cheap. The problem is to create high value for enterprises and society. In particular the lack of white collar workers in Vietnam is a severe and on-going crisis,” commented Mr Trung.
The decree numbered 03/2006/ND-CP which was just ratified in 6th – January 2006 laid down 3 levels of minimum wage for labours in the FDI sector, foreign companies and organisations, international organisations and foreigners working in Vietnam that: VND870,000/month (US$55) for enterprises in districts of Hanoi and HCM city, urban districts of Haiphong city, Ha Long (Quang Ninh Province), Bien Hoa (Dong Nai province), Vung Tau (Ba Ria – Vung Tau province), Thu Dau Mot town and districts of Thuan An, Di An, Ben Cat, Tan Uyen of Binh Duong province, VND710.000/month for other enterprises.
The lowest wage for trained workers must be at least 7 per cent higher than the fixed minimum wage. The new wage will be applied from 1st February 2006.
Trung Dung
Vietnamese
