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Curbing Price Hikes After Wage Increases: Monitoring Price Display and Transparency

The upcoming increase in base salaries, retirement pensions, and minimum wages from July 1st onwards, with a projected rise in regional minimum wages in the latter half of 2024, is unlikely to significantly impact the prices of goods. To assuage concerns about a potential surge in prices, authorities have proposed a range of solutions to prevent any excessive increases.

Administrator

9 July, 2024

Total salary increase not significant

On July 3, at a workshop on market and price movements in Vietnam in 2024, Dr. Nguyen Duc Do, Vice President of the Institute of Economics and Finance, Academy of Finance, assessed that the 30% increase in basic wages from July 1 would not have much impact on the price level. According to Mr. Do, Vietnam has about 50 million workers, but the proportion of public sector workers (who receive the base wage increase) accounts for only about 8%. Therefore, the increase in wages will not significantly affect the general price level.

People shopping at BigC Thang Long. Photo: Nhu Y.

According to Dr. Nguyen Ngoc Tuyen, former President of the Institute of Economics and Finance, in the second half of 2024, there will be three groups of beneficiaries of the wage increase: a 30% increase in basic wages for public sector workers; a 15% increase in pensions; and a proposed 6% increase in minimum wages.

“The total amount of pension and social insurance benefit increases is about VND 16,000 billion in the last six months of 2024. This is equivalent to nearly VND 3,000 billion per month from the wage increase. This amount is not too large, so it will not significantly affect the prices of consumer goods,” said Mr. Tuyen.

However, there has been a tendency in the past for prices to rise immediately after wage increases. To prevent this, Mr. Tuyen suggested that authorities need to coordinate multiple solutions. The government should direct price controls to avoid unreasonable price increases, while ministries, sectors, and localities should ensure abundant production and smooth circulation and supply of goods.

“For goods managed by the state such as healthcare and education, localities need to coordinate under the direction of the ‘conductor’ – the government – to help prevent increases in the prices of goods when wages rise,” Mr. Tuyen proposed.

Previously, from July 1, the basic wage (for civil servants and public employees) increased by 30%, corresponding to an increase from VND 1.8 million to VND 2.34 million. Pensions increased by 15%, with those receiving less than VND 3.5 million seeing an increase of VND 300,000 per month. The regional minimum wage (for employees in enterprises) is also proposed to increase by 6%.

Commodity prices in the second half of 2024 will be stable

Dr. Nguyen Duc Do forecast that inflationary pressure in 2024 would not be significant. He predicted that in the second half of 2024, there would be no major factors causing sudden price increases. Therefore, average inflation for the whole year of 2024 is expected to be around 3.2 – 3.6%.

According to the Price Management Department of the Ministry of Finance, Vietnam’s inflation is currently controlled at an appropriate level to support economic growth. Prices of goods with state-set prices have remained stable. For essential consumer goods such as food and foodstuffs (which account for a large proportion of the CPI basket), prices have been relatively stable. The production indices of these goods have grown quite high, with abundant supply meeting domestic consumption and export needs.

“We require localities to strengthen the supervision of measures related to price declaration, price listing, and price information disclosure. Authorities will organize inspections and examinations of compliance with price laws and timely detection and handling of irregularities, as well as strict handling of violations,” said a representative of the Price Management Department.

The Institute of Economics and Finance presented three inflation scenarios for 2024. In the high scenario, CPI is expected to increase by 0.23% per month in the second half of 2024 (equivalent to the increase in the first six months of 2024). Inflation compared to the same period in December 2024 is expected to be 2.8%, with average inflation for the whole year at 3.6%.

In the medium scenario, with stable oil prices and exchange rates, CPI is expected to increase by 0.1% per month in the second half. Average inflation for the year will be 3.4%. In the low scenario, if the US economy falls into a recession in late 2024, oil prices and exchange rates will decrease, and CPI is expected to increase by 0% per month or even decrease in the last six months. In this scenario, inflation compared to the same period in December 2024 will fall to 1.4%, and average inflation for the whole year will be 3.2%.

According to economic expert Ngo Tri Long, to control inflation and promote economic growth in 2024, authorities need to closely monitor market movements for each commodity, especially essential goods and services. Units should proactively review plans to adjust the prices of goods managed by the state, as well as public services that are currently implementing market-oriented roadmaps, carefully evaluating the impact on the price level and inflation control targets to have appropriate price adjustment plans.

From July 1, the basic wage for civil servants and public employees increased by 30%, from VND 1.8 million to VND 2.34 million. Pensions increased by 15%, with those receiving less than VND 3.5 million seeing an increase of VND 300,000 per month. The regional minimum wage for employees in enterprises is proposed to increase by 6%. The General Statistics Office recommended several solutions to control prices, including enhancing the implementation and supervision of price declaration, listing, and information disclosure. Ministries, sectors, and localities must also prepare sufficient supplies of essential consumer goods such as food and foodstuffs to meet the needs of the people.

Ngoc Linh