Vietnam Approves 7.8% Minimum Wage Increase

Vietnam’s National Wage Council agreed to raise the regional minimum wage by 7.8% effective January 1, 2027, following a meeting on July 16. The increase aims to balance the needs of workers, businesses, and national productivity.

Council members discussed the minimum wage as a foundation for social insurance contributions, unemployment insurance, healthcare, and union funding, emphasizing its importance for long-term worker welfare. The council acknowledged pressures on the manufacturing sector, including high interest rates and global economic risks, and deemed the 7.8% increase manageable for businesses.

They also argued that maintaining excessively low wages can stifle innovation, as companies may prioritize cheap labor over investing in technology. The council proposed shifting from annually negotiating a fixed wage increase to adopting a predictable formula: Inflation + (Benefit-Sharing Coefficient x Growth Rate).

This formula would allow businesses to forecast labor costs. The council intends to discuss the benefit-sharing coefficient annually, considering the gap between minimum and average wages, labor supply and demand, and labor productivity growth.