Wage setting
Minimum wage and effective collective bargaining – key to maximize benefits of economic integration
Viet Nam has made an important step in minimum wage setting but it is not enough. The legal and institutional system for collective bargaining should be improved and international labour standards offer useful frameworks and tools to do this.
HANOI (ILO News) – Viet Nam’s wage setting policies and institutions need to continue to adapt to meet the demands of its changing labour market and ensure that deeper integration into the regional and global economy benefits workers, enterprises and the Vietnamese economy broadly.
This was a key message at the national conference on “Viet Nam wage policy in the context of a market economy and economic integration” organized in Hanoi on 25 - 26 November.
Co-hosted by the Ministry of Labour, Invalids and Social Affairs (MoLISA) and the International Labour Organization (ILO), the event emphasized the necessity of a good balance between promoting enterprise development and providing workers with a fair share of enterprise productivity gains.
“Viet Nam has been conducting a strong reform to improve its mechanisms and policies, including those that cover wage issues, to meet the demands of the market economy and deeper integration into the regional and global economy,” said Minister of MoLISA Pham Thi Hai Chuyen.
In Viet Nam, about one-third of the employed people depend on wages for their livelihoods, compared to the world’s average of over 50 per cent. However, Viet Nam is expected to narrow this gap as the share of wage earners in total employment is projected to grow rapidly in the coming decades. In 2013, wage workers represented 34.8 per cent of total employment, up from only 16.8 per cent in 1996.
“Wage employment is growing rapidly in developing Asian countries, including Viet Nam. So the level and purchasing power of wages have strong implications for living standards,” ILO Deputy Director-General Sandra Polaski said. “Whether wages are sufficient to meet workers’ basic needs will decide not only if people can feed their family, but also if they can build a better future for themselves and their children.”
Minimum wage setting and collective bargaining are two important tools that complement each other in the wage adjustment system of a market economy. While minimum wages protect the poorest workers, collective bargaining offers opportunities for wage adjustments for those earning above the minimum wage. The development of sound industrial relations can help enterprises and workers adapt to changes brought by deeper regional and global integration.
With the establishment of the National Wage Council in 2013, Viet Nam significantly strengthened its minimum wage setting mechanism. The council gives trade unions’ representatives and employers’ representatives a direct stake in minimum wage negotiations and recommendations.
While Viet Nam has made an important step in minimum wage setting, collective wage bargaining remains rare in the country.
“Collective wage bargaining has not been realized in Viet Nam. It is often ignored because of employment pressures,” said Vice Minister of MoLISA Pham Minh Huan.
This gap often results in wildcat strikes through which workers try to achieve improvements in wages and working conditions.
“Minimum wages cannot be the only tool to set wages,” said Ms Polaski. “Collective bargaining gives workers and employers a mechanism to better link wages and productivity growth and resolve disputes constructively which benefits both parties.”
Collective bargaining also gives workers and employers flexibility to adapt to changing circumstances, which explains why countries with strong collective bargaining and social dialogue institutions have found creative solutions to deal with the impact of the economic and financial crisis.
As the share of wage earners in total employment increases and the economy integrates more deeply into global markets, the need to improve and expand collective bargaining on wages to a foster constructive and predictable industrial relations climate will continue to grow.
To this end, improving the legal and institutional framework for collective bargaining and the democratic representation for workers, and strengthening the capacity of employers’ and workers’ organizations to engage in effective collective agreements are all critical, as is improving dialogue and dispute resolution systems.
“International labour standards offer useful frameworks and tools to do this. Viet Nam can benefit by joining the more than 150 other countries in ratifying the key international conventions,” the ILO Deputy Director-General said.
According to Vice Minister Huan, Viet Nam will consider ratifying ILO Convention 95 on Protection of Wages and Convention 131 on Minimum Wage Fixing.
See Viet Nam Country Brief on Wage and Ms Polaski's opening speech.
This was a key message at the national conference on “Viet Nam wage policy in the context of a market economy and economic integration” organized in Hanoi on 25 - 26 November.
Co-hosted by the Ministry of Labour, Invalids and Social Affairs (MoLISA) and the International Labour Organization (ILO), the event emphasized the necessity of a good balance between promoting enterprise development and providing workers with a fair share of enterprise productivity gains.
“Viet Nam has been conducting a strong reform to improve its mechanisms and policies, including those that cover wage issues, to meet the demands of the market economy and deeper integration into the regional and global economy,” said Minister of MoLISA Pham Thi Hai Chuyen.
In Viet Nam, about one-third of the employed people depend on wages for their livelihoods, compared to the world’s average of over 50 per cent. However, Viet Nam is expected to narrow this gap as the share of wage earners in total employment is projected to grow rapidly in the coming decades. In 2013, wage workers represented 34.8 per cent of total employment, up from only 16.8 per cent in 1996.
“Wage employment is growing rapidly in developing Asian countries, including Viet Nam. So the level and purchasing power of wages have strong implications for living standards,” ILO Deputy Director-General Sandra Polaski said. “Whether wages are sufficient to meet workers’ basic needs will decide not only if people can feed their family, but also if they can build a better future for themselves and their children.”
Minimum wage setting and collective bargaining are two important tools that complement each other in the wage adjustment system of a market economy. While minimum wages protect the poorest workers, collective bargaining offers opportunities for wage adjustments for those earning above the minimum wage. The development of sound industrial relations can help enterprises and workers adapt to changes brought by deeper regional and global integration.
With the establishment of the National Wage Council in 2013, Viet Nam significantly strengthened its minimum wage setting mechanism. The council gives trade unions’ representatives and employers’ representatives a direct stake in minimum wage negotiations and recommendations.
While Viet Nam has made an important step in minimum wage setting, collective wage bargaining remains rare in the country.
“Collective wage bargaining has not been realized in Viet Nam. It is often ignored because of employment pressures,” said Vice Minister of MoLISA Pham Minh Huan.
This gap often results in wildcat strikes through which workers try to achieve improvements in wages and working conditions.
“Minimum wages cannot be the only tool to set wages,” said Ms Polaski. “Collective bargaining gives workers and employers a mechanism to better link wages and productivity growth and resolve disputes constructively which benefits both parties.”
Collective bargaining also gives workers and employers flexibility to adapt to changing circumstances, which explains why countries with strong collective bargaining and social dialogue institutions have found creative solutions to deal with the impact of the economic and financial crisis.
As the share of wage earners in total employment increases and the economy integrates more deeply into global markets, the need to improve and expand collective bargaining on wages to a foster constructive and predictable industrial relations climate will continue to grow.
To this end, improving the legal and institutional framework for collective bargaining and the democratic representation for workers, and strengthening the capacity of employers’ and workers’ organizations to engage in effective collective agreements are all critical, as is improving dialogue and dispute resolution systems.
“International labour standards offer useful frameworks and tools to do this. Viet Nam can benefit by joining the more than 150 other countries in ratifying the key international conventions,” the ILO Deputy Director-General said.
According to Vice Minister Huan, Viet Nam will consider ratifying ILO Convention 95 on Protection of Wages and Convention 131 on Minimum Wage Fixing.
See Viet Nam Country Brief on Wage and Ms Polaski's opening speech.