Discussion on minimum wage in Viet Nam

ISSN 2354-0575
Khoa học & Công nghệ - Số 15/Tháng 9 - 2017 Journal of Science and Technology 107
DISCUSSION ON MINIMUM WAGE IN VIETNAM
Nguyen Thi Mo1, Bui Thi Thu Thuy1, Le Thi Hong Quyen1,
Hoang Van Hue1, Nguyen Thi Xuan Hai2
1 Hung Yen University of Technology and Education
2 County Committee Van Lam
Received: 20/03/2017
Revised: 10/06/2017
Accepted for publication: 10/07/2017
Abstract:
In this article the authors give opinions on minimum wage and discussion on basic minimum wage 
and regional minimum wage in Vietnam. The authors thereby define the role and effects of minimum wage 
on employers, employees and the economy.
Keywords: minimum wage, minimum living standards.
1. Introduction
Wage is not only the economic category but 
also the top factor of the social policies directly 
related to employee’s life. Wage has impacts on 
economic management, finance, labour management 
and production promotion. The State policies on 
wage has changed through periods. However; in the 
current context of high inflation, wage policies are 
exposing many disadvantages and employee’s life 
has many difficulties. Those are the main reasons 
for lots of strikes in the enterprise area and brain 
drain in the State business and administrative 
agencies. Minimum wage is a constitutional part 
of wage regime which plays a crucial role in the 
wage system because it has influences to the whole 
wage policy. Wage is not only simply applied for 
employees but also the important legal framework 
which is the payment basis for labor in the society. 
Minimum wage regulation has the very important 
meaning for not only employees but also the 
economic development, the labor relation stability 
and the socio-political stability. Nevertheless, in 
the current context of price changes, the existing 
regulated minimum wage is too low and not suitable 
to the real circumstance, and cannot do its function 
to ensure employee’s minimum living standards. 
For further understanding of conception, role and 
impacts ofminimum wage, I select the research 
“Discussion on minimum wage in Vietnam” to 
make a contribution to theoretical meaning as 
well as more systematical and full acknowledge of 
minimum wage in Viet Nam.
2. Content
2.1. Minimum wage and role of minimum wage 
2.1.1. Concept of minimum wage (minimum 
wage level) 
First of all, according to the theoretical 
acknowledge, understanding and agreement of 
the minimum wage concept are different. One of 
the arguments is that for whom minimum wage 
is defined and which objects get benefit from 
minimum wage?
As specified in Item 1, Clause 91, Labor 
Law 2012 “Minimum wage is the lowest level 
paid for employees who do the simplest job in the 
normal working condition and shall ensure the 
minimum living demands of the employees and 
their families”.[1]
According to the above concept, who do 
the simplest jobs? Are they gate guards and odd 
job men? In the speech at Conference on minimum 
wage policies - International experiences and 
recommendations for Vietnam in September, 2011, 
Representative from Department of Labor-Wage 
addressed “In fact, it is difficult for this kind of 
labors to exist”[4]. According to Socio-Economic 
Issue Committee under Parliament, minimum wage 
is to defend only the most vulnerable groups in the 
sections such as garments & textile where working 
conditions are still not good and income is low”.
As stated in the Economy and Human 
Resource Management textbook: “Minimum wage 
is the amount of currency, regulated by the State, to 
be paid to the simplest jobs in the normal working 
conditions in the society. The simplest jobs such 
as odd job men, drinking water waiters and gate 
guards, etc.[2] are the ones which any healthy 
person without any training can do”
According to the development routine, 
Vietnam commits to increase minimum wage 
step by step to meet employee’s minimum living 
demands. From 1995 to now basic wage has 
changed continuously.
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Journal of Science and Technology108 Khoa học & Công nghệ - Số 15/Tháng 9 - 2017
Table 1. Basic wage in Vietnam over the years
Unit: Vietnam dongs
No. Decree Applied 
date
Basic 
wage
1 05/CP
dated 26/01/1994
01/01/1995 120.000
2 06/CP
dated 21/01/1997
01/01/1997 144.000
3 175/1999/ NĐ-CP 
dated 15/12/1999
01/01/2000 180.000
4 77/2000/NĐ-CP
dated 15/12/2000
01/01/2001 210.000
5 03/2003/NĐ-CP
dated 15/01/2003
01/01/2003 290.000
6 118/2005/ NĐ-CP
dated 15/09/2005
01/10/2005 350.000
7 94/2006/NĐ-CP
dated 07/09/2006
01/10/2006 450.000
8 116/2007/ NĐ-CP
dated 10/12/2007
01/01/2008 540.000
9 33/2009/ NĐ-CP
dated 06/04/2009
01/05/2009 650.000
10 28/2010/NĐ-CP
dated 25/03/2010
01/05/2010 730.000
11 22/2011/NĐ-CP
dated 04/04/2011
01/05/2011 830.000
12 31/2012/NĐ-CP
Dated12/04/2012
01/05/2012 1.050.000
13 66/2013/NĐ-CP
dated 27/06/2013
01/7/2013 1.150.000
14 NQ99/2015/QH13
dated 11/11/2015
01/05/2016 1.210.000
15 ND47/2017/NĐ-CP 
dated 24/4/2017
01/07/2017 1.300.000
(Source: Collected by the authors)
As shown in Table 1, basic wage has 
increased steadily via years after 14 times of 
basic wage adjustments. From 1995 to now, basic 
wage has increased for over 10 times. However, 
the current basic wage is actually unsuitable to 
the market mechanism; particularly, despite of 
continuous adjustments, increase in basic wage 
has not kept up with price escalation and the 
economic growth. Therefore, actual wage of staff, 
civil servants and employees has reduced and has 
satisfied payment for their necessary demands, but 
not even their families. Minimum wage in Vietnam 
just meets 60% of minimum living demands and 
belongs to the lowest minimum wage group in 
the ASEAN region[3]. According to ILO (2015)’s 
report, minimum wage in Vietnam is just higher 
than Laos, Cambodia and Myanmar; but lower than 
the most developed countries in the ASEAN region.
2 minimum wage levels, basic minimum 
wage (basic wage) and regional minimum wage, 
currently exist in Vietnam on the basis of proper 
and sufficient calculations of minimum demands 
of employees and their families and the socio-eco-
nomic situation of the nation. Vietnam has applied 
regional minimum wage for all enterprises since 
2008. Details are as follows:
Table 2. Regional minimum wage over the years
Unit: Vietnam dongs
Decree Applied date Region 1 Region 2 Region 3 Region 4
110/2008/NĐ-CP From 01/01/2009 to 31/12/2009 800.000 740.000 690.000 650.000
97/2009/NĐ-CP
Dated 30/10/2009
From 01/01/2010 to 31/12/2010 980.000 880.000 810.000 730.000
108/2010/NĐ-CP
Dated 29/10/2010
From 01/01/2011 to 01/10/2011 1.350.000 1.200.000 1.050.000 830.000
70/2011/NĐ-CP
Dated 22/08/2011
From 01/10/2011 to 31/12/2012 2.000.000 1.780.000 1.550.000 1.400.000
103/2012/NĐ-CP
Dated 04/12/2012
From 01/01/2013 to 31/12/2013 2.350.000 2.100.000 1.800.000 1.650.000
182/2013/NĐ-CP
Dated 14/11/2013
From 01/01/2014 to 31/12/2014 2.700.000 2.400.000 2.100.000 1.900.000
103/2014/NĐ-CP
Dated 11/11/2014
From 01/01/2015 to 31/12/2015 3.100.000 2.750.000 2.400.000 2.150.000
122/2015/NĐ-CP
Dated 14/11/2015
From 01/01/2016 to 31/12/2016 3.500.000 3.100.000 2.700.000 2.400.000
153/2016/NĐ-CP
Dated 14/11/2016
From 01/01/2017 to 31/12/2017 3.750.000 3.320.000 2.900.000 2.580.000
(Source: Collected by the author)
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It can be seen in the two summary tables 
that in 2017 regional minimum wage in the region 
1 is as 3 times high as the basic wage of the State 
and minimum wage in the region 4 is as twice high 
as the basic wage of the State. We had only one 
minimum wage which was basic wage before 2008. 
Different regions have allowances for each region 
regardless of civil servants, officers, workers and 
various kinds of enterprises. If minimum wage is 
considered the basic level, there cannot be many 
basic levels because it will be very difficult to 
explain why workers in enterprises can get higher 
minimum wage than civil servants and officials.
At Conference on orientation of wage 
innovation policies for staff, civil servants and 
officials between 2013 and 2020, Ministry of 
Home Affairs set the target: “focus on increase in 
minimum wage of staff, civil servants and officials 
and ensure correlation with average wage in the 
labor market”[5].
2.1.2 Role of minimum wage
- Minimum wage is the State’s legal 
assurance for employees in many careers and 
areas with existence of labor relations in order to 
ensure their living standards in accordance with the 
abilities of the economy.
Originated from the principle of employee 
protection while working, the State regulates 
minimum wage as a legal assurance for employees.
In the labor relations, employees shall 
spend a certain amount of energy to create surplus 
value and then receive an amount of wage paid by 
employers. On their own use value basis, with that 
amount of wage, employee can maintain their own 
lives and families. Minimum wage is the amount of 
money which satisfies the most minimum demands 
of employees. When defining minimum wage, the 
State bases on employee’s suitable agreements with 
pursuant to the country economy; thus, minimum 
wage always assures that employees have suitable 
lives according to the socio-economic conditions in 
each period.
- Minimum wage is also a control tool of 
the State in scope of the whole society and in each 
economic base.
- Minimum wage eliminate potential 
exploitation for salary man under pressure of the 
market. In the market economic conditions, labor 
is considered a kind of goods and liberally traded 
based on agreements between employees and 
employers. Nowadays, unemployment is still high, 
labor supply is more than labor demand which is the 
condition employers can base on to give pressure 
to employees and then pay to them a lower amount 
of wage than the one they are worth being paid. 
Minimum wage regulation clearly limits behaviour 
of employers in salary payment, balance assurance 
and laborer protection from exploitation under the 
market pressure.
Minimum wage is defined upon average 
price in the domestic market, so it has balance with 
the market price and limits inflation. Minimum 
wage removes unfair competitiveness in the labor 
market. Competitiveness is the common rule of 
the market in the excessive labor goods condition; 
particularly, when labor supply is higher than 
labor demand, competitiveness among employees 
is certain. The State regulates minimum wage as 
an important legal framework to ensure that this 
competitiveness is always in the legal framework 
and competiveness in the market is fair.
Minimum wage ensures salary payment 
corresponding to jobs. Minimum wage at a certain 
level is a regulation among employee groups where 
calculations at proper wage levels are not done.
Minimum wage is the basis for calculations 
of subsequent wage levels in the month and 
timesheets. Therefore; employees shall be paid a 
salary equal to jobs.
Minimum wage is to prevent labor conflicts 
and dispute. Satisfactory definition of minimum 
wage levels can remove one of the causes of 
conflicts between employers and employees so as 
to boost the economic development.
2.2. Effects of minimum wage 
2.2.1. For employers
When minimum wage increases, deductions 
under salaries, including social insurance (SI), 
health insurance (HI) and unemployment insurance 
(UI) rises accordingly. From 15% in 2010, more 
1% shall be submitted every two successive years 
to achieve 18% in 2014. Currently, employers and 
employees in Vietnam shall submit total 32.5% (the 
employer bears 22% including 18% of SI, 3% HI 
7 1% UI and the employee bears 10.5% including 
8% SI, 1.5% HI & 1% UI) while it is only 13% in 
Malaysia, 10% in Philippines and 8% in Thailand 
and even lower in other countries[6].
When regional minimum wage increases, 
it is certain that trade union expenses (2%), trade 
union membership fee (1%), working overtime 
money (garments &textile: about 300 hours/year) 
and night working shift salary also rises.
According to preliminary calculations, when 
regional minimum wage increases, enterprises shall 
rise manpower costs at least twice. For Vietnamese 
garments & textile, with 2.5miillion employees, 
the region 2 is the standard one for calculations, 
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Journal of Science and Technology110 Khoa học & Công nghệ - Số 15/Tháng 9 - 2017
when minimum wage increases by 300.000 dongs, 
manpower costs of the whole section will increase 
by 20.000billion dongs which also means that 
profits of enterprises shall reduce.
2.2.2. For employees
For employees, increase in minimum wage 
is an expectation; however, the State’s increase 
in minimum wage only compensates for increase 
in inflation. If increase in minimum wage can be 
closely controlled, a certain amount of employees 
who is getting lower salary than regional minimum 
wage shall receive an increase (by some 10%) so as 
to make sure that their salaries are not lower than 
minimum wage. In case enterprise’s health is good 
enough, the remaining employee’s salary can be 
risen accordingly. In case enterprises are not strong 
enough, they will decrease income of the major 
of employees from the “soft” salary (accounting 
for 30% of income) to compensate for insurances 
and increase in trade union fee and a certain 
amount shared by stakeholders. Weak enterprises, 
especially small & medium enterprises might risk 
stopping production and bankrupt.
One remarkable thing is that according to 
data given by the tax sector in 2014, up to 483,000 
enterprises in Vietnam are small and supersmall; 
of which, 70% of them do not have ineffective 
business operation [7]. Enterprises have difficulties, 
so they have no accumulation for investment into 
new technologies and plant for labor productivity 
improvement resulting into conditions for stable 
increase in employee’s income.
2.2.3. For the economy
Continuous increase in minimum wage at 
high levels in association with high deductions under 
salaries will reduce enterprises’ profits and direct 
revenue from enterprise income tax. Indirect impact 
is that domestic enterprises will have no capabilities 
of investments into production extension for job 
creation and labor recruitment which shall then 
make a contribution to rural agricultural economic 
structure transition. In contrast, foreign investors 
with advantages of funds, technologies and 
management, etc. shall defeat domestic enterprises 
and utilize advantages benefited from free trade 
agreements.
2.3. Some proposals and recommendations 
In order to enable minimum wage to promote 
positive effects, it is required to tackle many related 
issues and implementation conditions such as 
finance and organization. Thus, the authors hereby 
recommend as follows:
Firstly, properly define objects who benefit 
minimum wage. Hence, minimum wage shall be 
defined based on minimum living standards and 
suitable to changes of inflation and the economic 
growth. Minimum living standards shall be annually 
surveyed and issued by General Statistics Office.
Secondly, add minimum daily wage and 
minimum hour wage to more strictly defend 
employee’s rights.
Thirdly, complete the minimum living 
standard definition method step by step; of which, 
clearly define minimum good structures and 
minimum expenses related to employees.
Fourthly, make sure that minimum wage 
adjustment shall show three criteria: compensation 
for price escalation, conformity with increase in 
annual labor productivity and simultaneously gain 
a certain increase to shorten routines and ensure 
employee’s minimum living standards set by the 
State.
3. Conclusions
Minimum wage has very big impacts on 
not only employees but also the national socio-
economic development. Hence, the State shall 
have to draw policies and routines for increase in 
minimum wage accordingly to promote maximum 
effectiveness and defend employee’s rights.
4. Acknowledgement
This research is supported by the Center for 
Applied Research in Science and Technology, Hung 
Yen University of Technology and Education
References
[1]. Labor Law 2012. 
[2]. Tran Xuan Cau, Economy and Human Resource Management textbook National Economics 
University, 2014, P.285.
[3]. Hong Nhung, Minimum Wage and Minimum Living Standards, Audit Magazine in the end of 
Month No.33, March, 2015.
[4]. Conference on Minimum Wage Policies - International Experiences and Recommendations for 
Vietnam. Ministry of Labor, War Invalids & Social Welfare and International Labor Organization. 
September, 2011.
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Khoa học & Công nghệ - Số 15/Tháng 9 - 2017 Journal of Science and Technology 111
[5]. Conference on Orientation of Wage Policy Innovation for Staff, Civil Servants and Officials 
between 2013 and 2020. Ministry of Home Affairs and UNDP Vietnam, December, 2011.
[6]. 
[7]. 
BÀN VỀ TIỀN LƯƠNG TỐI THIỂU Ở VIỆT NAM
Tóm tắt:
Trong bài viết này, tác giả đưa ra các quan niệm về mức lương tối thiểu và những bàn luận về mức 
lương tối thiểu chung, mức lương tối thiểu vùng của Việt Nam. Qua đó, tác giả xác định được vai trò và tác 
động của mức lương tối thiểu đối với người sử dụng lao động, người lao động và nền kinh tế. 
Từ khóa: tiền lương tối thiểu, mức sống tối thiểu.