Vietnam: Deputies Debate Base Salary Increase, Questioning Sufficiency Amidst Inflation

National Assembly deputies are debating the proposed increase in the base salary, with some arguing that the 2.53 million VND per month suggested by the Ministry of Home Affairs, while technically sound, falls short of significantly improving the lives of civil servants, public employees, and officials. The sentiment among these representatives is that a more substantial increase, closer to 2.65-2.7 million VND, is necessary to alleviate financial pressures and ensure dedication to their work, especially given the persistent high prices of essential goods.

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The proposed increase in the base salary to 2.53 million VND per month by the Ministry of Home Affairs is technically reasonable, but not strong enough to significantly improve the lives of civil servants, public employees, and officials.

Economists, like PGS-TS Nguyen Thuong Lang from the National Economics University, echo these concerns, highlighting that salary adjustments must align with actual economic realities, particularly inflation. Lang points out that the current proposal, calculated based on previous economic conditions, may no longer be adequate due to rapid changes in the prices of oil, raw materials, and gold, which directly impact the cost of living. He stresses that the real income, after accounting for inflation, is what truly matters for public sector workers.

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The base salary needs to be raised to about 2.65 - 2.7 million VND per month, an increase of 13 - 15% compared to the current level. This is considered a threshold that helps public sector workers reduce spending pressure and feel secure in their work amidst the high prices of many essential goods.

Lang supports the deputies' call for a higher salary, suggesting that 2.7 million VND is closer to the current economic reality. He further advises that if the Consumer Price Index (CPI) continues to rise, salaries may need further adjustments to maintain workers' living standards. The expert also notes the broader economic impact: improved incomes can boost aggregate demand, stimulating production and economic growth, thereby contributing to social stability.

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The important thing is not how much nominal income increases, but how much real income remains after deducting inflation. If the increase remains low as before, the real income of budget-paid employees can hardly improve.

Addressing the common fear of a "wage-price spiral," Lang advocates for synchronized macroeconomic policies, focusing on inflation control and stabilizing prices of essential goods. He argues that if salary increases are outpaced by price hikes, workers gain no real benefit. Therefore, controlling input costs like fuel and keeping prices of utilities, food, and other necessities stable are crucial for preserving purchasing power. Lang also recommends government measures such as stimulating supply, guiding consumption, offering tax relief, and cutting unnecessary administrative costs to ensure the effectiveness of salary policies.

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The proposed 2.7 million VND per month is considered closer to reality. Even if the consumer price index (CPI) continues to rise, it is necessary to recalculate to adjust the salary higher to ensure the living standards of workers.