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Vietnam seeks gains as China labor costs rise

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Moreover, as in China, factory workers in Vietnam are also ready to stop work. While independent unions are illegal, wildcat strikes have erupted in industrial zones where foreign-owned manufacturers are clustered. Strikes have risen since 2006 and average 400 a year, of which the majority are in textile factories, according to the Ministry of Labor.

In May, a textile workers’ union and a national industry association agreed to raise starting salaries to $82 a month, up from less than $50. But only 70, mostly state-run, companies have signed the pact, says Nguyen Tung Van, the head of the union. Many foreign-owned companies are reluctant to sign, he says.

“We tell the bosses, if you keep paying low salaries, you won’t keep your workers. They don’t want to listen, but they must listen,” he says.

The collective textile-industry pact marks a departure from Vietnam’s practice of setting a general minimum wage for factory labor. Analysts say it may reflect fears that the official Communist Party-affiliated union is losing its relevancy as workers begin to assert their rights, particularly in the booming private sector.

A skills gap

The sharp pickup in exports has created a labor shortage in the textile industry. More broadly, analysts say Vietnam must tackle a skills gap in other industries if it wants to stick to its path of rapid industrialization. Foreign companies that recruit graduates often send them overseas for the type of training that vocational colleges are supposed to provide, says Matthias Duhn, executive director of the European Chamber of Commerce in Vietnam.

Around 60 percent of workers hired by multinational companies need to be retrained for 6 to 12 months before they can start work, according to a report by a Dutch educational nonprofit. “The lack of qualified human resources is the single biggest factor limiting Vietnam’s future development and economic growth,” the report said.

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