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Despite Wage Increase, Vietnamese Workers Still Far From Living Wage

With more than 2.5 million workers and 6,000 factories, Vietnam is the third largest garment-exporting country in the world, trailing only China and Bangladesh—and a new report has found that many of those workers must work excessive overtime hours just to pay for basic necessities.

The Fair Labor Association’s new report, “Toward Fair Compensation in Vietnam: Insights on Reaching a Living Wage,” collected data from 13,000 workers in 38 factories over a three-year period. The report found that many of the workers employed in Vietnam are unable to support themselves on a minimum wage that is far lower, and provides for a life that is far less, than the international standard.

Instead, Vietnamese workers working at or near the minimum wage have to work excessive overtime hours in order to support themselves. According to the report, it is not uncommon for workers to log more than 50 hours of overtime a month.

“The global supply chain still doesn’t work for workers on the factory line,” Sharon Waxman, president and CEO of the FLA said in a statement. “Individuals should not have to work excessive overtime week after week to compensate for low wages so they can put food on the table. People go to work so they can provide for themselves and their families. Global apparel brands, the government of Vietnam and civil society need to redouble efforts to make fair wages a reality, without excessive overtime.”

Using the standard provided by the Global Living Wage Coalition (GLWC), which includes housing, food, non-food purchases and modest savings, FLA researchers determined that the net annual payout for a full-time worker on a monthly minimum wage of 4,645,122 Vietnamese dong ($200.11) was about 25 percent lower than would be necessary to achieve even the most basic standard of living in the country’s urban centers.

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In order to reach the standard set by the Coalition, workers would need to make around 1,114,976 dong—or about $48—more per month after deductions.

Vietnam’s National Wage Council implemented a 5.3 percent minimum wage increase at the start of 2019, but, FLA researchers contend the increase barely keeps up with inflation (which was 3.8 percent in 2018) and is markedly lower than the 6.5 percent increase in 2018 and the 7.3 percent increase in 2017.

The only way for minimum wage workers to overcome the disparity between what governments outline for employers to pay their workers and an actual living wage, researchers say, is to work to an unhealthy degree. What’s more, employers have started implementing incentive pay that only kicks in once a worker has put in a certain amount of overtime hours, cementing the culture of overworking employees in line with company policy.

“The fact that both overtime and incentive pay (in part) are earned during overtime hours is crucial to understanding how these wage estimates impact the quality of life of garment workers in Vietnam,” the report said. “Not only do garment workers in Vietnam rely on overtime compensation to earn a living wage, they are also often required to work levels of overtime that violate international standards and FLA Compliance Benchmarks.”

The FLA report also offers advice for government agencies and advocates to lessen the pressure that is being placed on workers. And for brands operating in the region, it all starts with responsible sourcing practices. In order to promote a living wage, brands should keep in mind the effect that harsh negotiating tactics and unrealistic timelines can have on the average worker, researchers say. Additionally, both a brand and its supplier should create production cycles that allow for regular work weeks and don’t assume overtime, either voluntary or prescribed.

“Increased transparency, better planning, and improved efficiency can go a long way toward improving worker wages,” researchers said. “The difficult truth is that all potential solutions involve some monetary cost that must ultimately be shared by brands, suppliers, and consumers. As such, all stakeholders—including civil society organizations, universities, and other consumer groups—have a significant role to play as advocates and educators of worker rights and worker well-being.”