The 6% increase in regional minimum wages for enterprises since July 1 has created pressure on textile and garment enterprises as costs related to wages and insurance increase. To solve this problem, enterprises in the textile and garment industry have implemented many solutions to increase labor productivity, reduce intermediary steps to optimize profits.
According to calculations, the average salary increase for workers ranges from 200,000-280,000 VND/month. Specifically, region 1 increases to 4.96 million VND; region 2 is 4.41 million VND; region 3 is 3.86 million VND and region 4 is 3.45 million VND. Along with that, the hourly minimum wage increases by 6%, ranging from 16.6-23.8 thousand VND.
Facing many difficulties
Chairman of the Board of Directors of Hung Yen Garment Corporation (Hugaco) Nguyen Xuan Duong commented that currently, all units in the system are paying salaries above the regional minimum wage.
However, increasing the minimum wage increases the cost of salary, insurance, union fees, etc. for about 2,000 employees working at the parent company. It is estimated that this cost will increase by about 4 billion VND per year, an average of about 2 million VND per employee per year.
In the first 6 months of the year, the unit had to increase the average salary to 10 million VND/person/month compared to the average of 9.5 million VND/person/month in 2023. That shows that businesses must increase income to retain workers and stabilize production.
For labor-intensive businesses such as the garment industry, costs related to wages and insurance increase while orders decrease, causing businesses to face many difficulties because they cannot increase profits when the market is constantly fluctuating.
Sharing the same view, Chairman of the Ho Chi Minh City Textile, Embroidery and Knitting Association Pham Xuan Hong said that most businesses in the region are paying workers above the regional minimum wage, so the benefits workers receive from this policy are insignificant.
For businesses, when the market is still facing many difficulties, increasing the regional minimum wage causes businesses to "bear" another expense, creating new pressure for businesses.
Increasing regional minimum wages can also cause a domino effect, meaning prices can increase as wages increase, resulting in workers not benefiting.
According to General Director of Dap Cau Garment Corporation Luong Van Thu, with the increase of the minimum wage by region of the enterprise to 6%, in addition to increasing the salary for employees, the costs of insurance and union fees will also be adjusted. To offset this cost while the processing unit price has not improved much, the unit must implement many synchronous measures, focusing on finding solutions to increase labor productivity and improve efficiency.
For example, deploying technology applications, innovating automatic and semi-automatic equipment, searching for products that match the strengths of the enterprise to help increase productivity, cut unnecessary costs. Along with that, departments, offices, enterprises and trade unions also encourage and motivate workers to overcome difficulties with the enterprise; launch emulation movements to increase productivity, have incentives for innovations that benefit the enterprise; thereby bringing efficiency to the workers themselves and the enterprise.
Calculate the appropriate increase
Chairman of the Board of Directors of Hugaco Nguyen Xuan Duong said that to solve the problem of optimizing profits while revenue does not increase, the only way for businesses is to increase labor productivity, reduce intermediaries and sign contracts directly with brands.
"For businesses with sufficient financial and human resources, labor productivity can be increased through technology. If done well, productivity can be increased by 5-7%. In addition, productivity can be increased through technology such as investing in more automatic machines; at the same time, innovation in management and application of digital technology can also reduce indirect labor, warehouse labor, and end-to-end distribution time. When having sufficient technological potential and good management software, garment businesses can sign orders directly with American and European partners,... instead of going through intermediaries as before," Mr. Nguyen Xuan Duong emphasized.
For small and medium enterprises that do not have enough financial resources, Chairman of the Ho Chi Minh City Textile, Embroidery and Knitting Association Pham Xuan Hong affirmed: In addition to improving management and rationalizing production organization to increase productivity and reduce costs, many enterprises are focusing on encouraging and motivating opinions and ideas to increase productivity and improve processes to benefit the enterprise. Along with that, the business community builds connections between enterprises, shares orders, and builds satellite factories to exchange timely information about the market when the situation is constantly changing.
According to the General Statistics Office, the consumer price index (CPI) in June 2024 increased by 0.17% compared to May 2024 and increased by 1.4% compared to December 2023, up 4.34% over the same period in 2023. In the first 6 months of this year, the CPI increased by 4.08% over the same period last year. The reason is believed to be due to some localities increasing tuition fees for the 2023-2024 school year. Along with that, medical service prices were adjusted according to Circular No. 22/2023/TT-BYT of the Ministry of Health. The group of food, services, housing, electricity, water, fuel and construction materials, etc. also had price increases due to increased consumer demand.
Given the fact that the consumer price index in the first 6 months of the year increased by over 4%, along with the salary increase from July 1, some costs of healthcare, electricity, university tuition, etc. are expected to be adjusted up in 2024.
Regarding this issue, economic expert Dinh Trong Thinh said that the groups of goods related to medical services, education, electricity, etc. are groups of goods managed by the State, so it is necessary to calculate appropriate increases, have a time gap, and not create price shocks; price adjustments should not be concentrated at the end of the year, when consumer demand increases, causing high expected inflation.
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