Econ
Increasing wages along with productivity
This time every year, when National Wages Council (NWC) has a meeting on raising minimum wage, the media becomes a battlefield between those representing workers and the employers on how much the minimum wage should be raised. And the two sides tend to accept a number that does not satiate their concerns.
The minimum wage increase this year is agreed at 6.5% after many arguments. On the side of employees, the General Confederation of Labor proposed the higher level of minimum wage increase which is obviously more beneficial for employees. Social insurance is proposing to calculate premiums based on income rather than salary. The Ministry of Health is planning to raise health insurance premiums.
On the side of employers, the majority of enterprises complain that increase in wages means increase in input costs, adding them a heavier burden. According to statistics, labor costs represent about 8 to 10% of business operational costs. If these costs increase, enterprises will have to cut other business expenses. Some businesses take the extreme measure of laying off workers. “90% of employees in a factory in Binh Duong have been laid off to be replaced by robots!” was the hot news last week. That labor costs unmatching productivity has led to unemployment rise. Even though that robots stealing jobs from employees is rare, but it has posted the issue of workers retraining in face of the Industrial Revolution 4.0.
Experts suggest the government to take a longer vision to deal with long lasting arguments on raising minimum wage. Some international experience shows that in some countries, the minimum wage makes up about 40 to 60% of the average salary, leaving the remaining for employees and employers to negotiate. If the negotiation is smooth, the average income will be higher. Therefore, if the average wage is set as the basic foundation to distinguish the benefits among sectors, besides marking the wage differences according to regions , workers will receive a more flexible income. This is also a way to channel the flow of labor to avoid the concentration of workers in one trendy occupation. This strategy is indeed a lasting and sustainable solution for the current job market.
On the side of employers, the majority of enterprises complain that increase in wages means increase in input costs, adding them a heavier burden. According to statistics, labor costs represent about 8 to 10% of business operational costs. If these costs increase, enterprises will have to cut other business expenses. Some businesses take the extreme measure of laying off workers. “90% of employees in a factory in Binh Duong have been laid off to be replaced by robots!” was the hot news last week. That labor costs unmatching productivity has led to unemployment rise. Even though that robots stealing jobs from employees is rare, but it has posted the issue of workers retraining in face of the Industrial Revolution 4.0.
Experts suggest the government to take a longer vision to deal with long lasting arguments on raising minimum wage. Some international experience shows that in some countries, the minimum wage makes up about 40 to 60% of the average salary, leaving the remaining for employees and employers to negotiate. If the negotiation is smooth, the average income will be higher. Therefore, if the average wage is set as the basic foundation to distinguish the benefits among sectors, besides marking the wage differences according to regions , workers will receive a more flexible income. This is also a way to channel the flow of labor to avoid the concentration of workers in one trendy occupation. This strategy is indeed a lasting and sustainable solution for the current job market.
