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Vietnam Gets 12.4% Wage Increase, Factory Owners Look to Revoke It

Vietnam’s garment workers may have been rejoicing in the last week at the 12.4% wage increase the country’s National Wage Council bestowed on them after months-long negotiations, but now factory owners are looking to get the raise reduced.

As part of the still pending proposal, the government would increase the minimum wage for workers starting next year to between 2.15-3.1 million Vietnamese dong ($96-$138) a month based on region, according to Thanh Nien News.

Labor unions had been looking for a 16.8% hike, though they agreed to the 12 percent, which was a win from the Vietnam Chamber of Commerce and Industry’s (VCCI) previously proposed 10 percent.

Vietnamese workers saw a 15 percent pay increase put in place early this year but unions said the rate still couldn’t be considered a living wage as workers can’t pay for life’s basic demands.

According to Thanh Nien, the country’s labor confederation conducted a survey in April and May this year at 60 businesses in rural and urban areas and found that a substantial 92 percent of workers were still struggling to afford necessities with their current wages.

But because business owners there, and the Vietnam Textile and Apparel Association (VITAS), say a wage hike would prevent them from turning a profit, likely lead to shutdowns and layoffs, and ultimately weaken the country’s competitiveness, they are seeking to cap the wage increase at 6 to 7 percent.

VITAS said even a 10 percent pay increase would lead to a more than $1.03 billion increase in total labor costs for the 2.5 million workers employed in the sector, including $387 million for insurance payments and $23.6 million for labor union fees, the Saigon Times reported.

A 6 to 7 percent increase, on the other hand, would cost $756 million in additional labor costs.

Vu Duc Giang,VITAS chairman, said regional minimum wages in Vietnam have risen by more than double since 2010 and businesses have had to cover higher insurance payments, which have increased from 18 percent in 2010 to 22 percent last year.

In order to keep business sustainable, Giang has asked the Vietnamese government to consider lowering those insurance payments and cutting labor union fees.