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The Vietnam News

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Rising inflation unsettles Vietnam's workers

For five days in November, 13,000 Vietnamese workers at a South Korean-owned factory producing athletic shoes for Nike went on strike for travel allowances and better food in the canteen. The owners of Tae Kwang Vina, one of Nike's 10 contract producers in Vietnam, agreed a VnD70,000 ($4.50) a month travel allowance and improved food. It was a quick and relatively painless end to what Erin Dobson, a director of corporate responsibility communications at Nike, called the beginning of "strike season" in booming Vietnam.

Communist-ruled Vietnam is experiencing rapid industrialisation, with hundreds of thousands of young people leaving villages and family farms to join factories producing everything from shoes and clothes to electronics goods for the global market. But young workers are also beginning to flex their collective muscles, especially as rapid inflation erodes the value of their wages, and tales of others winning instant riches heightens aspirations. In recent years, factory workers have shown an increased willingness to walk off the job to press for more money, often in the form of allowances and bonuses.

In 2006, workers went on strike 400 times at different factories, including at 300 foreign-invested enterprises, businesspeople say. "These strikes are evidence of how rapidly Vietnam is growing," Ms Dobson says. "The workers have a feeling of empowerment. Ms Dobson says industrial action in factories often occurs towards the end of the calendar year, as managers prepare their wage offer for the year ahead. Part of the problem is that rapid inflation is squeezing workers at the bottom of the wage scale. Officially, inflation is running at 9 per cent a year, fuelled partially by higher prices of rice and other food, which has tracked higher oil prices.

Jonathan Pincus, chief economist at the United Nations Development Programme, says that factory workers are grappling with inflation as high as 15 per cent, since they spend a large proportion of their monthly income on food. "At the minimum wage, workers are finding it difficult to make ends meet without working lots and lots of overtime," Mr Pincus says. At the same time, factory workers are bombarded with media tales of Vietnam's new rich enjoying luxurious lifestyles. "You've got this very hot environment, where people are getting rich all of a sudden in land or stock," says Fred Burke, a partner at Baker & McKenzie in Ho Chi Minh City, Vietnam's business capital. "People who are working hard in factories are saying, 'Hey, I should get a little more of this myself.'"

Workers have the right to unionise, though factory-level unions must affiliate with the Vietnam General Confederation of Labour, an arm of the Communist government. Traditionally, the federation was seen as doing little to help workers, especially in state-owned enterprises. "Like state-sponsored unions anywhere, their main purpose is industrial peace," Mr Pincus says. In recent years, the confederation appears to have grown more responsive to its members. "They tend to try to work things out before it comes to strikes, but it isn't completely top-down," says Mr Pincus. In theory, Vietnamese workers have a legal right to strike only if intensive efforts to resolve disputes through mediation have failed, and they obtain permission from senior union officials. But in reality, illegal strikes are becoming more frequent, and sometimes have the tacit support of the labour bureaucracy. "Workers are becoming increasingly knowledgeable about the law, and knowledgeable about what is going on in other places," says one executive of a multinational company that sources in Vietnam. "News travels like wildfire with SMS."

While the government has responded to the salary squeeze by raising the national minimum wage - and will do so again in January - Hanoi is reluctant to raise it too much, as civil servants' pay scales are also linked to the minimum wage. All this means that factory owners, managers and the multinational companies that buy from Vietnamese factories need to ensure that small grievances among workers are dealt with before they erupt. Many businesspeople say effective communication between factories and workers is essential. That has been a problem in Asian-owned factories, where managers may not speak very good English or Vietnamese, generating confusion and resentment. "A lot of it is down to communications - making sure that workers know they are getting what they are entitled to," says Mr Burke.

At the Tae Kwang factory, Ms Dobson says, workers generally earn about 20 per cent more than the minimum wage, and the factory also provides transport that some workers use to get to work. However, she concedes that the factory "probably could have done a better job communicating regarding wages".

By Amy Kazmin - The Financial Times - January 24, 2007.