Where is the fund for wage reform?

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Streaming organizational structure to have fund

Although the wage policies have been reformed 4 times and the basic wage has been increased 16 times, these policies still have many shortcomings.

According to many experts, the low wage and the 4 times of failure in wage reform due to insufficient sources for wage reform, are specifically due to the massive apparatus. The funds for wage reform for public sector are still paid by the State budget (about 98% in 2011-2016), of which was mainly from the Central budget (about 68%).

The Deputy Minister of Labor Invalids and Social Affair Doan Mau Diep, said that there were 2 reasons leading to the failure of the previous wage reform. The first, it is due to the wage reform being disassociated with the apparatus streamlining and efficiency of the State management apparatus. Specifically, when implementing the wage reform, the number of staff does not reduce but increases. Thereby, the average wage must be allocated gradually, and it is difficult to reform. The second reason is the fund for wage reform. The Central budget and local budget must pay for other things. Thereby, there is no fund for wage reform.

The Deputy Minister added that “in this reform, the financial management mechanism is implemented in parallel with the wage reform. It is expected that there will be a fund from the increase in revenue and from localities. Accordingly, localities will keep 50% of their revenue for wage reform. If the fund for reform in the year is not used up, it will be used the next year. The previous shortcomings on staff, apparatus and fund will be handled in this scheme ”.

Agreeing with this opinion, Mr. Pham Minh Huan, former Deputy Minister of Labor Invalids and Social Affair and former chairman of the National Wage Council said that for the public sector, the wage is reallocated, meaning that the wage paid for the public sector was taken from tax revenue of the people and enterprises. Thus, when implementing wage reform for the public sector, the two main issues which need to be noted are beneficiaries and fund for wage payment. It is difficult to implement the wage reform, if the fund for wage payment is limited and the beneficiaries increase.

Creating fund to increase wage

According to Pham Minh Huan, “besides the streamlining of staff, how to create the fund for wage reform is also a big difficulty. How we create a fund when the State budget is still low, and while the administrative sector from central level to commune level still uses funds from the State budget. The public non-business units need to gradually shift to an autonomous mechanism. Because the production sector is the revenue resource, the public sector is the sector allocating the revenue, which depends on the private sector. This means the production sector shall decide the revenue contributed to the State budget, thereby deciding the wage payment for the public sector. In developed countries, enterprises develop strongly and contribute significantly to the State budget. When they have a great budget, they easily allocate. For Vietnam, the budget is difficult, therefore, the wage is low”.

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“Hence, in order to implement the scheme on wage reform, we need to save from various sources, how to increase State budget and wage reform must be associated with streamlining of staff and reduction of Party’s committees, as well as administrative apparatus from central level to the district and commune level. Therefore, the wage reform will be implemented effectively” Mr. Huan said.

Mr. Bui Sy Loi, Vice chairman of the National Assembly's Committee for Social Affairs, said that the nature of wage reform is to streamline the apparatus to promptly arrange working position and staff. If we want to implement wage reform, the first step is to reform, renovate and improve the capacity, efficiency and qualification of public non-business units to minimize the number of public services that the State budget must pay for. The payment for public services will base on performance results or is fixed by the State. It is not necessary to be paid by the State budget. Thus, there is a fund for comprehensively implementing wage reform policy.