Vietnam workers's wage

Workers Wages in Vietnam Rise to Meet Labor Demands

by Charles Runckel

Vietnamese Prime Minister Phan Van Khai has decreed a minimum salary increase for workers at foreign invested enterprises (FIEs) across Vietnam in an effort to get thousands of striking workers in the South back to work. At least ten stikes were reported in areas around Ho Chi Minh City, with most of them taking place in textile, garment and footwear enterprises owned by Hong Kong, Taiwan and South Korean companies. Among them are Kolan, Latek, Danu Vina, Hugo, Sprinta and Quint Major in Ho Chi Minh City’s Linh Trung Export Processing Zone. Workers at Chutex and the Plantation Grown Timber Co. in Song Than Industrial Zone also went on strike. Low pay seemed to be the precipitating factor in all the strikes.

Labor unrest in the South was particularly intense against Korean FIEs. Korean owned facilities have incurred considerable bad feeling not only because of low pay but also because of previous incidents in which Korean managers were insensitive to Vietnamese staff and carried out discipline that was not in line with the offense or perceived offense. These past stories have now created an environment where little trust often exists on either side and small differences can quickly blow up into major controversies.

Prior to action by the Prime Minister, workers basic monthly salary was roughly VND 500,000 ($31.6) at most Taiwanese companies, more than VND 700,000 ($44.35) at Japanese companies and VND 800,000 ($50.60) at European companies according to a report in the Vietnam Investment Review (January 9-15, 2006, pg 3). With additional government required allowances, generally most workers earned near VND 1 million ($63) per month.

Prime Ministerial Decree No. 03/2006/ND-CP raises minimum salaries for unskilled and manual laborers in FIEs in all three labor zones: from $45 to $55 USD monthly in urban Hanoi and Ho Chi Minh City, from $40 to $50 in suburbs of those cities and within many of Vietnam’s major cities and ports, and from $35 to $45 in all other areas. The Ministry of Labor, War Invalids and Social Affairs (Molisa) estimates the decree will result in an almost 40% raise in pay, the first in six years. These results were largely met as Sprinta, one of the companies subject to labor action, increased its pay by VND 100,000 per employee and Chutex, another company subject to strike authorizing a 36 percent increase.

FIE labor pools are required to obey the decree, which sets base rates of pay. Skilled workers must earn at least 7% more than these base rates for unskilled and manual laborers. Nearly one million workers will benefit from the salary increases. The raise was to take effect on April 1, following requests from FIEs that the raises not coincide with bonuses they would pay out at Tet, Vietnamese New Year. Thousands of workers went on strike in the garment, wood processing and footwear industries in Ho Chi Minh City and Binh Duong, however, to protest the delay. The increase is now scheduled for February 1^st.

Molisa stated that the PM’s response was intended to both diffuse worker tensions in the south and to raise labor rates closer to Vietnam’s neighbors. Cambodia’s minimum wage is $45 per month, with Beijing at $63, Shanghai at $70 and Thailand at $70. When benefits are factored in, Shanghai and Beijing generally have higher labor costs than Vietnam, which is the cheapest labor rate in the region followed by Cambodia and Thailand. In general, wages for assembly workers in Shanghai average about RMB 1,000. (nearly $130). When benefits are added often the effective rate of wages is close to $200 per month per worker in Western China’s coastal areas. Vietnamese workers pay rates are at about two-thirds of this level and about 10-15% cheaper than Thai wages.

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