The Vietnamese government’s recent decision to increase the minimum wage by 14 percent has failed to spark any enthusiasm among workers.

Not only does it fail to match recent price hikes, it actually raises concerns about accelerating inflation and making things worse for most workers.

As of May 1, the monthly minimum wage has gone up to VND830,000 (US$40) from VND730,000 ($35).

“The government’s policy will help the lowest income laborers in the society deal with part of their difficulties in the current context of high inflation,” Cao Sy Kiem, chairman of the Vietnam Association of Small- and Medium-Sized Enterprises (SMEs), told Thanh Nien Weekly. “However, the wage increase has not kept up with inflation. Thus, for most workers, life will remain difficult.”

Consumer prices rose 17.51 percent in April from a year earlier, the largest jump in 28 months, stoked by increases in fuel and electricity prices, according to the General Statistics Office.

Ha Que Huong, who has worked for a research institute in Hanoi for nearly three years, said her monthly salary, which is calculated based on the minimum wage, was about VND2 million. Every month, she also receives allowances of over VND2 million.

“I have not yet received this month’s salary. So, I do not know exactly by how much it will go up,” Huong said. “But I estimate that the rise is insignificant, only some VND200,000-300,000. Meanwhile, it can trigger a rise in prices of consumer goods. Thus, it’s better that wages do not increase.”

Like Huong, employees of other state-owned firms are also not interested in the minimum wage increase, as the majority of their income comes from allowances and bonuses which are often based on how well the business does.

Nguyen Thu Thuy, who works for a construction firm, said her monthly income is over VND8 million, of which two-third comes from allowances.

“Minimum wage increases have never significantly raised my total income,” she said. “The wage increase is not even sufficient to make up for the hike in electricity and gas prices I pay every month.”

Hoang Minh Hao, deputy head of the salary department under the Ministry of Labor, War Invalids and Social Affairs, said the minimum wage level now is very low, so the laborers’ income level will remain low, despite the increase.

According to a recent survey by the ministry, the average monthly income of a laborer was VND3.2 million in 2010, up 10.3 percent over 2009.

Inflation concerns

The government is expected to use VND27 trillion ($1.3 billion), about 3.7 percent of the total estimated state budget spending for this year, to fund the minimum wage increase in 2011.

Kiem of the SME association said the salary increase may raise the prices of goods and services, creating inflationary pressures in the short term.

Nguyen Tien Thoa, head of the price control department under the Ministry of Finance, allayed such concerns.

Vietnam is not issuing more cash to fund the increase, so the economy will not experience greater inflationary pressure because of the salary hike, he said.

In fact, inflation could ease in the coming months, he said. “We will try to keep it at the level it was last year (11.75 percent). Some international economic organizations have predicted that our country’s inflation may reach 11-13 percent.”

However, a report by the Hanoi-based Vietnam Center of Economic and Policy Research has forecast that this year’s inflation may climb to 15.5-18.2 percent.

This is not very good news for workers.

“Salaries rise once a year, while the price of goods grows every day. We can’t expect minimum wage increases to help improve life,” said Thuy, the construction firm employee, as she shopped at a supermarket in Hanoi. “The only thing that workers like us can do is to earn more money by doing extra jobs.”