The Vietnam Textile & Apparel Association, or VITAS, has come out against a proposed government plan to increase the country’s minimum wage, claiming the industry is still struggling to keep up with a series of hikes imposed in the last decade, according to Vietnamese media reports.
The National Wage Council in August proposed a 6.5% raise in the regional minimum wage for 2018 and submitted the proposal to the government for approval.
The proposed monthly wage hike of $8 to $10 a month is said to be the lowest raise ever offered. VITAS said minimum wage in domestic enterprises increased 21.8% between 2007 and 2017, leading many to reduce workers’ annual bonuses and turn to more automation.
Constantly increasing the minimum wage reduces competitiveness and shifts the labor structure, preventing enterprises from expanding production and taking away job opportunities, VITAS vice chairman Truong Van Cam told media in Vietnam. He said no increase should be imposed.
Amid this concern and even with the U.S. pulling out of the Trans-Pacific Partnership, Vietnam’s apparel shipments to the U.S. continued to grow, increasing 5.6% to $7.7 billion for the first eight months of the year, gaining over a percentage to hold 14.4% of U.S. apparel import market share., according to the International Trade Administration’s Office of Textiles and Apparel.
[Read more about Vietnam’s apparel industry: Vietnam Looks to Cut Sourcing Costs to Boost Garment Exports]
Vietnam determines minimum wages by four regions. Each region is evaluated according to its socio-economic development and present industries.
Region I spans the urban areas of Hanoi and Ho Chi Minh City, Region II covers the rural areas of Hanoi and Ho Chi Minh City, in addition to the urban vicinities of Cần Thơ City, Đà Nẵng City and Hải Phòng City. Region III applies to the provincial cities of Bắc Ninh Province, Bắc Giang Province, Hải Dương Province and Vĩnh Phúc Province, while Region IV covers remaining vicinities.
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If the 2018 regional minimum wage goes into effect, Region I monthly minimum wage will increase to $175 from $165, Region II to $155 from $146, Region III to $136 from $127 and Region IV to $121 from $136.
According to National Wage Council chairman Doãn Mậu Diệp, the council provided two options for members to vote on—an increase of 7 percent or an increase of 6.5%. More than half of the members voted for the second option at the meeting.
Although the council agreed to move forward with the 6.5% increase, some members were concerned about Vietnam’s labor progress and business expansion initiatives.
Many members said they felt unsatisfied with the increase, since it would not allow Vietnam to provide a minimum wage compatible to the minimum standard of living by 2020. What’s more, some said the increase does not favor company development or the welfare of workers.
Vietnam Chamber of Commerce and Industry vice chairman Hoàng Quang Phòng said despite more than 73,000 companies opening facilities in Vietnam this year, 50,000 other businesses have also closed their doors.