Vietnam’s latest labor move could impact the country’s position as a leader in global apparel sourcing.
The nation’s 2018 regional minimum wage is anticipated to increase by 6.5%, equal to $8 to $10 per month. Viet Nam News reported that if it is enacted, it would be the smallest increase ever, which could appease sourcing professionals who are already concerned about the rising labor costs there.
A recent study by the University of Delaware and the U.S. Fashion Industry Association showed that even without TPP, Vietnam is the second most sourced country after China.
Vietnam’s National Wage Council announced the increase on Aug. 7 after concluding its third session on the 2018 regional minimum wage and reaching a consensus between employer and labor representatives. The council will send the proposed wage increase to government officials for final approval.
On a monthly basis, Vietnam determines minimum wages by four regions. Each region is evaluated according to their 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. If the 2018 regional minimum wage goes into effect, region I minimum wage will increase from $165 to $175, $146 to $155 for region II, from $127 to $136 for region III and $113 to $121 for region IV.
[Read more on Vietnam: Vietnam Remains Second Only to China in Sourcing]
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 (VCCI) 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.
Despite concerns about the 6.5% increase, Diệp said the new minimum wage would serve 92-96 percent of the nation’s minimum standard of living for workers. He also said that the gap between minimum wage and the minimum standard of living was an issue faced by many countries.