Vietnam Will See 6.5% Minimum Wage Increase Despite Concerns About Competitiveness

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When it comes to wages, there are almost always two sides: the workers who want the wages increased, and the factory owners who don’t because they still want to remain competitive among their low-cost neighbor countries. In Vietnam’s case, the workers won—though their spoils will be less than what was sought.

Starting in January, the minimum wage in Vietnam will rise 6.5%, or an extra 180,000-230,000 Vietnamese dong ($7.94-$10.14) a month, depending on the region. That brings the total monthly minimum wage to between $136 in the lowest rate region and $175 in the highest wage region.

The wage increase is one of the lowest the country has seen, and comes in considerably lower than the 13.3% the National Salary Council had proposed, though higher at least than the 5 percent—or even status quo—the Vietnam Chamber of Commerce and Industry proposed.

Among those in favor of foregoing a wage hike, was the Vietnam Textile and Apparel Association (VITAS), which said minimum wages in the country have increased 21.8% between 2007 and 2017. The pressure from the increases pushed many manufacturers to reduce workers’ annual bonuses and look for more ways to automate processes.

The concern for manufacturers has been maintaining the country’s competitiveness in the face of rising wages, which potentially prevents in-country business from expanding and reduces job opportunities as companies look to have workers do more to avoid hiring more.

Vietnam has even mulled cutting sourcing costs to maintain its competitiveness.

[Read more about Vietnam sourcing: Vietnam Looks to Cut Sourcing Costs to Boost Competitiveness]

The Ministry of Industry and Trade in Vietnam said in October that it’s in the process of drafting legal amendments that would help domestic garment producers cut costs, and they’re also asking for aid with things like administrative procedures to help ease some of the other obstacles to competition.

Chairman of the Vietnam Textile and Apparel Association Vu Doc Giang said the sector aims to export roughly $30 billion worth of textiles and garments in 2017, with the U.S. taking 50 percent of that total, followed by the EU with 20.5%, Japan with 19.5% and Korea importing 7.5% of Vietnam’s garments and textiles.

For the year to October, the U.S. took in $12 billion worth of textiles and apparel from Vietnam, according to OTEXA data. That’s a 6.06% increase over the same period last year, which puts Vietnam commanding 11.41% of U.S. textiles and apparel imports share.

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