Wage hike needs to keep up with inflation control

Việt Nam is set to increase the base wage from July 2023.
Wage hike needs to keep up with inflation control
People shop in a supermarket in Hà Nội. Wage hikes are considered an urgent issue as Việt Nam is facing rising inflation pressure. — VNS Photo Mai Hương

Việt Nam is set to increase the base wage from July 2023.

On October 20, Finance Minister Hồ Đức Phớc presented the Government's plan to allocate VNĐ12.5 trillion (US$509 million) for wage reforms, including a 20.8 per cent increase in the basic wage of civil servants from VNĐ1.49 million (US$60) to VNĐ1.8 million ($73.30) from July 1, 2023.

If approved by the National Assembly, this is the second base salary hike since July 1, 2019, after a four-year delay due to the COVID19-pandemic.

The base salary in Việt Nam is the reference for calculating the total salary for civil servants by multiplying it with its corresponding coefficient.

The wage hike is considered an urgent issue as Việt Nam is facing rising inflation pressure due to increases in fuel prices and other commodities as a result of the Russia-Ukraine war.

At the Q&A session of the 15th National Assembly meeting on Saturday, Minister of Home Affairs Phạm Thị Thanh Trà agreed it was reasonable to increase the basic wage as it would help create new motivation among civil servants and public employees and keep them in the state sector given the fact that nearly 40,000 civil servants left their jobs, primarily in education and healthcare sectors, during January 1, 2020 to June 30, 2022.

Many National Assembly (NA) deputies also called for a wage hike from January 1, 2023, six months ahead of the Government's proposed schedule, to compensate for the price surges which have increased 4 per cent annually.

"This creates a shift of human resources from the public to the private sector," said Huỳnh Thanh Phương, a delegate from Tây Ninh Province.

Earlier on July 1 this year, the minimum wages of employees who work under labour contracts increased by 6 per cent. The increase varies from $140 to $202 depending on the living expenses in their particular region.

Suitable time for wage hike

Not only in Việt Nam, workers worldwide are asking for higher wages amid steep inflationary pressure. In some EU countries, there have been strikes and protests due to high energy prices and escalating costs of living.

But while inflation has indeed led to depressed real wages and a substantial squeeze on living standards, there have also been arguments that increases in wages could lead to further inflation – a so-called “wage-inflation spiral”.

The idea suggests higher price inflation makes workers demand higher wages but higher costs will then lead firms to raise prices to protect their profit margins.

This psychology is true in Việt Nam when information on wage hikes often goes along with the worry that prices will go up higher than salary and even before the wage hike takes effect.

Perhaps because of this phenomenon, the Government proposed to increase the base salary for civil servants and public employees from July 1 instead of January 1, 2023.

The Ministry of Finance said in the face of high inflation risk, the reform of salary policy should be carried out cautiously and in harmony with the objectives of socio-economic management in general.

January is close to the festive season with the New Year and Lunar New Year, so the demand for shopping and buying goods and services increases sharply. If the wage increase is implemented at this time, "it will put more pressure on price management because the psychology of increasing wages is accompanied by price surges, making it difficult to control inflation," the ministry said.

Thus, the Government proposed not to implement Resolution 27 of the National Assembly on the reform of salary policy for civil servants, public employees, the armed forces and workers of enterprises in 2023. Instead, the Government suggested increasing the base salary for civil servants and public employees by 20.8 per cent to VNĐ1.8 million/month from July 1, 2023.

The postponement of wage reform under Resolution 27 after 2023, according to the ministry, is also due to "the global and domestic context being under great inflationary pressure".

In the 2023 state budget estimate, the Government plans to spend about VNĐ60 trillion for salary hikes. Funding is expected to be sourced from increasing budget revenue and annual expenditure saving.

However, according to analysts, the wage hike is only meaningful when the Government takes strong measures to control inflation to avoid a situation in which people receive one more đồng but have to spend two because of inflation.

Việt Nam among top countries with real wage hike

As Việt Nam’s economy continues to grow despite the pandemic, rising wages will be an unavoidable feature of doing business in the country.

According to the annual Salary Trends Report by data company ECA International, Việt Nam is forecast to see the second highest growth in real wage increase worldwide at 4 per cent in 2023 in comparison with 2022, trailing behind India at 4.6 per cent.

Asia Pacific is only the region predicted to see the average real salary increase — which is nominal wage growth minus the rate of inflation — by 1.3 per cent. That’s compared to other regions which will see drops in average real salary of 1.5 per cent for Europe, 0.5 per cent for North and South America, and 0.1 per cent for Africa and the Middle East.

Eight out of the top 10 countries with the highest real salary increases globally are from Asia-Pacific this year, ECA international added.

Within Southeast Asia, Việt Nam, Malaysia and Thailand are expected to see higher rates of real salary growth in 2023 as the post-pandemic economic recovery continues accompanied by falling inflation.

“Overall, workers in many ASEAN locations will see real salary growth in both 2022 and 2023,” said Lee Quane, ECA International’s regional director. “Workers based in Việt Nam benefitted from having the second highest rate of real salary growth this year in the region and are expected to do so again in 2023.”

According to the Government's report at the 4th session of the 15th National Assembly, Việt Nam’s GDP is expected to grow 8 per cent in 2022, surpassing the Government’s target of 6-6.5 per cent for the whole year, and inflation is kept under 4 per cent. — VNS

Source: VNS
vietnamnews.vn

Related News

Developing specialty coffee to enhance the value and reputation of Vietnamese coffee

Developing specialty coffee to enhance the value and reputation of Vietnamese coffee

VCN - Investing in the high-end segment is a way to increase value for the coffee industry, in which specialty coffee is a direction that businesses and cooperatives are interested in and is bringing positive results.
Vietnam automobile market and support problem

Vietnam automobile market and support problem

VCN - Continuing the downward trend of 2023 (up to 25%), in the first 4 months of 2024, the number of cars consumed on the market is still falling to a worrying level, high inventory, causing difficulties for automobile manufacturing and trading enterprises. The question is how the Vietnamese automobile industry will develop and how competitive the products will be in the context of the import tax reduction roadmap implemented when Vietnam implements its commitments in the Free Trade Agreement between Vietnam and the European Union (EVFTA).
Finance Ministries of Vietnam and Laos promote comprehensive cooperation

Finance Ministries of Vietnam and Laos promote comprehensive cooperation

VCN – On May 28, Minister of Finance Ho Duc Phoc had a meeting with Mr. Santiphab Phomvihane, Minister of Finance of the Lao People's Democratic Republic.
Many foreign enterprises find opportunities and expand investment in Vietnam

Many foreign enterprises find opportunities and expand investment in Vietnam

VCN - In the context of the world investment wave shifting, Vietnam has the opportunity to become the world's factory, many foreign enterprises have been looking for investment opportunities as well as expanding investment in Vietnam.

Latest News

PM orders sustainable development of construction materials industry

PM orders sustainable development of construction materials industry

Prime Minister Pham Minh Chinh on June 15 required restructuring in terms of organisation, administration, finance, and input materials at enterprises in the construction materials industry towards their sustainable development.
Seeking growth drivers for the Red River Delta region

Seeking growth drivers for the Red River Delta region

VCN - According to enterprises, promoting digital transformation alongside concretizing certain policy contents for the development of free trade zones will create numerous incentives for regional economic development, including the Red River Delta region.
Proactively forecast and carefully consider when to adjust prices

Proactively forecast and carefully consider when to adjust prices

VCN - In price management, the Government and the Ministry of Finance strongly require the implementation of solutions to stabilize market prices, along with public and transparent price declaration activities and not unreasonably increase prices of goods and services.
PM demands stronger efforts to make strategic institutional breakthrough

PM demands stronger efforts to make strategic institutional breakthrough

Prime Minister Pham Minh Chinh on June 13 demanded that the Government continue to enhance discipline, reform mindset and working methodology, and effectively implement the strategic institutional breakthrough to unlock all resources for development.

More News

PM urges stronger efforts to complete expressway target

PM urges stronger efforts to complete expressway target

Prime Minister Pham Minh Chinh has asked for greater efforts from ministries, sectors, and localities to realise the goal of completing 3,000 km of expressways nationwide by December 31, 2025.
Singaporean newspaper: Vietnam’s economy poised for gradual recovery

Singaporean newspaper: Vietnam’s economy poised for gradual recovery

Singapore’s maritimefairtrade.org recently published an article on the recovery of the Vietnamese economy, citing the latest World Bank Taking Stock bi-annual economic update with growth forecast to reach 5.5% in 2024 that will gradually rise to 6% by 2025.
China remains top priority in Vietnam’s foreign policy: President

China remains top priority in Vietnam’s foreign policy: President

Vietnam considers developing friendship and cooperative ties with China as a strategic choice and a top priority in its foreign policy of independence, self-reliance, and diversification and multilateralisation of external relations, President To Lam told Chinese Ambassador to Vietnam Xiong Bo at a reception in Hanoi on June 11.
Vietnam among six ASEAN countries with good economic growth: Maybank

Vietnam among six ASEAN countries with good economic growth: Maybank

The gross domestic product (GDP) growth of six ASEAN countries - Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam - will recover to 4.5% and 4.7% in 2024 and 2025, respectively, from 4% in 2023, according to Maybank Research Pte Ltd forecast.
Domestic production sees green shoots

Domestic production sees green shoots

Vietnam ran a trade deficit in May as the import of major materials rebounded, signaling that green shoots are sprouting in domestic production, experts have said.
With the recovery momentum returning, businesses need to speed up credit

With the recovery momentum returning, businesses need to speed up credit

VCN - In recent instructions, the monetary policy regulator continues to urge banks to implement practical and effective solutions to strive for system-wide credit growth, which will be 5-6% by the end of the second quarter of 2024.
School-business cooperation for the goal of 50-100 thousand high-quality human resources

School-business cooperation for the goal of 50-100 thousand high-quality human resources

VCN - In the current context, the connection between schools and businesses is an inevitable trend, to both ensure and improve the quality of the school's training products and create quality human resources input for businesses.
Numerous factors behind the non-allocation of over VND 17.6 trillion in public investment capital

Numerous factors behind the non-allocation of over VND 17.6 trillion in public investment capital

VCN - According to the Ministry of Finance, the failure to allocate a relatively large amount of more than VND 17.614 trillion has affected the disbursement rate of public investment capital from the state budget in the early months of 2024.
Green economy needs joint efforts: insiders

Green economy needs joint efforts: insiders

Businesses need more support from the State to overcome obstacles in terms of capital, personnel, science and technology in order to promote green, sustainable production, insiders have said.
Read More

Your care

Latest Most read
PM orders sustainable development of construction materials industry

PM orders sustainable development of construction materials industry

Prime Minister Pham Minh Chinh on June 15 required restructuring in terms of organisation, administration, finance, and input materials at enterprises in the construction materials industry towards their sustainable development.
Seeking growth drivers for the Red River Delta region

Seeking growth drivers for the Red River Delta region

VCN - In early May, Prime Minister Pham Minh Chinh signed Decision 368/QD-TTg approving the planning for the Red River Delta region for the period 2021-2030, with a vision to 2050. Accordingly, the goal is for the region's gross regional domestic product
Proactively forecast and carefully consider when to adjust prices

Proactively forecast and carefully consider when to adjust prices

In price management, the Government and the Ministry of Finance strongly require the implementation of solutions to stabilize market prices, along with public and transparent price declaration activities
PM demands stronger efforts to make strategic institutional breakthrough

PM demands stronger efforts to make strategic institutional breakthrough

Prime Minister Pham Minh Chinh on June 13 demanded that the Government continue to enhance discipline, reform mindset and working methodology, and effectively implement the strategic institutional breakthrough to unlock all resources for development.
PM urges stronger efforts to complete expressway target

PM urges stronger efforts to complete expressway target

Prime Minister Pham Minh Chinh has asked for greater efforts from ministries, sectors, and localities to realise the goal of completing 3,000 km of expressways nationwide by December 31, 2025.
Mobile Version