Time for Vietnam to Apply Minimum Wage to Gig Economy Workers

On 1 July 2022, Vietnam raised its minimum wage for the first time in 2.5 years. The increase was delayed by the Covid-19 pandemic, which had hit Vietnam and the rest of the region in early 2020. The rise is laudable, but should apply not only to salaried workers, but gig workers in the economy.

Since the establishment of the National Wage Council in 2013, representatives from three sectors would meet every summer to negotiate an annual minimum wage rise to take effect the following January. They represent labour (the state-led Vietnam General Confederation of Labour, VGCL), employers (the Vietnam Chamber of Commerce and Industry, VCCI) and the state (the Ministry of Labour, Invalids and Social Affairs, MOLISA).

After January 2020, when the pandemic began to take hold, representatives of employers and the state quickly started to suggest that there should be no minimum wage rise in 2021. The VGCL opposed the freeze, but was unsuccessful in fighting for an increase. The minimum wage rise on 1 July is therefore the first time it has been announced in the middle of the year rather than at the beginning of the year as has always been the case previously.

Vietnam’s minimum wage is region-based. There are four regions, from region 1, which covers the big cities and major industrial areas, down to region 4, which covers mostly rural areas. The region 1 minimum wage is the highest, region 4 the lowest, with regions 2 and 3 falling in between. The recent rise has increased minimum wages by 6 per cent, with region 1’s minimum wage rising from VND4,420,000 (US$189) to VND4,680,000 (US$200) per month.

While Vietnam’s minimum wage supposedly covers all workers, those working in the gig economy, including app-based drivers, are still excluded. This is because they are not classified as workers but as independent contractors.

The minimum wage system is by no means perfect. It is barely enough to cover living costs, and the VGCL has criticised the increase for not being enough for workers who have waited 2.5 years for a pay rise. During that time, prices and living costs have kept rising, and the 6% rise is not enough to match 2.5 years of inflation. Indeed, the region 1 minimum wage still falls far short of the estimated living wage, which back in 2020 was estimated at VND7,446,000 (USD$318.50) per month. Nevertheless, the rise is certainly better than nothing, and will be a relief to many workers.

A new feature of the minimum wage this year is that there is now an hourly rate. Previously, the minimum wage was set at a monthly level. This meant that workers who were not employed on a full-time basis did not necessarily get paid the pro-rata equivalent of the minimum wage. Now, however, such workers must be paid at least the hourly minimum wage, which in region 1 is VND22,500 (USD$0.96).

While Vietnam’s minimum wage supposedly covers all workers, those working in the gig economy, including app-based drivers, are still excluded. This is because they are not classified as workers but as independent contractors.

At first glance, the incomes of app-based drivers seem to already be higher than the minimum wage. One recent report by a popular online recruitment platform, Việc Làm Tốt, suggested that the monthly income of delivery drivers is higher than those doing many other jobs, at around VND10 million (US$428) in Ho Chi Minh City, the country’s biggest urban centre. This estimate seems to be a bit too optimistic; it is based on an assessment of the job adverts posted on the recruitment platform, which, unsurprisingly, advertise high potential incomes to attract drivers. Other studies suggest that the average monthly income of app-based drivers in Ho Chi Minh City is lower, at VND9,290,000 (US$398).

This is higher than the official minimum wage and sounds like a decent income. But there are several issues with comparing this figure to the minimum wage. First, in order to achieve such income levels, drivers have to work far more than the standard full time working hours, which in Vietnam are eight hours per day and 48 hours per week. In contrast, studies suggest that moped drivers work an average of between nine and eleven hours per day.

Second, gig economy workers have to shoulder almost all the costs of performing the work themselves, including vehicle and maintenance costs, phone and internet costs, petrol, and safety equipment. One unpublished survey for FES found that app-based drivers, if they worked the standard 48 hour working week, would earn an average of VND5,875,462 (US$251) per month after costs. This is significantly lower than the living wage, above, but still appears to be higher than the minimum wage.

There is, though, a third factor. Formal employees receive other benefits, including: employer contributions to different types of social security, totalling over 20% of the basic wage; maternity and paternity leave and benefits; annual leave; overtime paid at 150%-300% of normal hours depending on the circumstances; and often other benefits including food and transportation allowances. Gig economy workers do not receive any of this.

In early 2020, there was some talk of implementing an hourly minimum wage specifically to cover those in the gig economy, but these ended with the Covid-19 pandemic and have not yet been revived. Perhaps the time has come. Vietnam’s gig economy is growing while prices are rising, and workers are increasingly unwilling to accept such insecure work with few benefits and high costs. While the minimum wage in Vietnam has huge issues — it is not enough to cover living costs, has been frozen for 2.5 years, and employers often cut benefits to offset wage increases — it at least gives workers some sort of guaranteed minimum income level. To deny this to gig economy workers seems obscene and a sure-fire way to create more social tensions and disharmony. Hopefully, building on this year’s innovation of an hourly minimum wage, this will soon be extended to those who are not currently covered.

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