Regional Minimum Wage Increase: Positive or Negative Impact on Workers?

Within it, the minimum wage for Region I is raised to VND 3,980,000/month, Region II to VND 3,530,000/month, Region III to VND 3,090,000/month, and Region IV to VND 2,760,000/month.

According to information from the Vietnam General Confederation of Labor, the regional minimum wage will continue to increase in 2019. Thus, it can be said that the regional minimum wage has steadily increased over the years. What impacts will workers face from the increase in the regional minimum wage?

The increase in the regional minimum wage does not only bring positive impacts for workers. Besides the benefits gained from the increase in the regional minimum wage, workers also face pressure from employers. To be specific:

On the positive side, when the regional minimum wage increases, businesses will have to raise the wages for workers who earn less than the current minimum wage. Therefore, a portion of workers will receive a wage increase to match the regional minimum wage.

Along with the wage increase, social insurance contributions will also rise. In practice, businesses often seek ways to only contribute social insurance based on the basic salary as per regulations. Hence, the increase in the regional minimum wage will lead to a higher wage basis for social insurance contributions for workers, thereby increasing the contributions for unemployment insurance and health insurance as well.

However, the steady increase in the regional minimum wage will place pressure on businesses as they annually bear additional human resource-related costs. Therefore, it is likely that businesses will seek to innovate technology, enhance productivity, and reduce personnel to cut related costs such as wages, social insurance, and union fees. This could result in job loss risks for many workers due to the increase in the regional minimum wage.

Learn more about the regulations related to the regional minimum wage at Decree 141/2017/ND-CP.

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