Vietnam plans to raise its minimum wage by 6 percent in July, its first such hike in two years, the government revealed this week.
Pending approval from the prime minister, the plan would bump the Southeast Asian nation’s monthly floor to between 3.25 million-4.68 million dong ($141.92-$204.36).
“A proportion of laborers are facing difficulties due to the pandemic, and therefore an increase in the minimum salary at this time is needed to help them stabilize their life and stay with their employers,” Ngo Duy Hieu, head of the Vietnam General Confederation of Labour, a labor-rights consortium, said in the statement obtained by Reuters on Wednesday.
But the move isn’t likely to bring much relief to Vietnam’s 2.5 million garment workers, 80 percent of whom are women. Workers who toil in the world’s third-largest garment exporter after China and Bangladesh face a 57 percent wage gap between the minimum and living wages, according to The Industry We Want, a multi-stakeholder organization that promotes decent work in the apparel and footwear sectors. This is higher than the 45 percent wage gap that workers in the overall industry need to bridge to obtain a decent standard of living.
Garment exports make up 16 percent of Vietnam’s gross domestic product (GDP). Despite the beating it took from Covid-19 last year, the textile and apparel sectors still finished “an impressive 2021” with an export turnover of $40 billion, the Vietnam Textile and Apparel Association (VITAS) wrote in its March newsletter. Exports in the first two months of 2022 topped $6.9 billion, up 26.5 percent from the same period the year before.
The trade group expects exports to hit $48 billion in 2022 even as it continues to grapple with absenteeism due to a recent surge in infections. Factories will have to be creative, it said, whether by ramping up recruitment, employing more automation or adjusting schedules.
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The garment industry faces a labor shortage rate of between 5 percent and 7 percent in the southern enterprises and between 8 percent and 10 percent in the northern ones, VITAS chairman Vu Duc Giang said in the publication. “Textile and garment enterprises are having to restructure production lines, many enterprises have to move orders [to] another local factory to ensure order progress,” he said.
Though the virus resulted in a daily 250,000 case average in mid-March, according to the Johns Hopkins Coronavirus Resource Center, Vietnam’s high vaccination rate should help it swerve from the widespread lockdowns that hobbled much of its production in 2021, VITAS has previously said. Standard Chartered analysts said this week they expected the country’s GDP to grow by 6.7 percent.
The organization did not respond to a request for comment on the minimum-wage boost, though employers are unlikely to be eager about the prospect, particularly as so many headwinds—from power outages, from soaring logistics costs, from omicron—remain.
Bach Thang Long, deputy general director of Garment 10 Corp, for instance, said last week that the resurgence of the coronavirus in the first quarter has weighed heavily on the manufacturer’s bottom line. Higher payroll costs would drag it further.
“Minimum wages should increase only to offset the rise in inflation,” he told Vietnam News/Asia News Network, suggesting that any wage increase be delayed until 2023 to allow businesses time to recover. “Economic growth and living standard should be factored in next time.”