Vietnam's garment workers have been granted a pay hike of 12.4 per cent but factory owners want to make that six or seven per cent. They say, a wage hike beyond 6 to 7 per cent would prevent them from making profits, and likely lead to shutdowns and layoffs, ultimately weakening the country’s competitiveness.

They argue even a 10 per cent pay increase would lead to a more than $1.03 billion increase in total labor costs for the 2.5 million workers employed in the sector, including $387 million for insurance payments and $23.6 million for labor union fees. A six to seven per cent increase, on the other hand, would cost a relatively affordable $756 million in additional labor costs.

Regional minimum wages in Vietnam have more than doubled since 2010 and businesses have had to cover higher insurance payments, which have increased from 18 per cent in 2010 to 22 per cent last year. In order to keep business sustainable, factory owners have asked Vietnamese government to consider lowering insurance payments and cutting labor union fees.

Vietnam’s garment workers got the wage hike after months of negotiations. They were looking for a 16 per cent hike but finally had to agree to come down to 12 per cent.