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Vietnam Prices and Wages
During the early 1980s, the trend was toward greater price
flexibility, but prices of both intermediate and consumer goods
continued to be determined largely by the central government.
Prices of agricultural and non-agricultural cooperative products
were closely related to the government's procurement policy and
the two-way contract system. Under this system, the government
assigned production quotas. Production achieved in excess of the
quota could then be sold either to the government at negotiated
prices or to buyers in the free market. Negotiated prices
normally were higher than quota prices but lower than free-market
prices.
Prices of the products of state-owned enterprises were
established on the basis of average cost norms, applicable taxes,
and a fixed profit margin. Production in excess of quotas or from
inputs not supplied by the state could be sold at higher prices,
enabling producers to recoup input cost while providing an
incentive for above-quota production.
Consumer prices for commodities distributed by the state were
different from those for products distributed in the free market.
Official consumer prices fell into three categories depending on
the type of goods as well as on the type of consumer. The first
two categories consisted of essential commodities, such as rice,
pork, textiles, and soap, which were distributed under rations at
two different price levels. Civil servants, workers in state
enterprises, and selected groups of consumers, such as students,
pensioners and welfare recipients, were permitted to purchase
these goods at substantial subsidies. A third price category for
the same commodities was based on cost and was reserved for
members of cooperatives and for individuals associated with
contract work for the government. The subsidized prices remained
unchanged for twenty years, but the cost-based prices continued
to rise.
Party leaders at the Central Committee's Eighth Plenum (Fifth
Congress) in 1985 experimented with eliminating fixed prices and
removing subsidies on staples, thus causing a price increase for
basic items. At the Second Plenum (Sixth Congress) held in April
1987, a policy of rational pricing based on cost and projected
consumer demand was implemented for industries.
Wage increases of between 90 and 110 percent were granted in
mid-1981 to civil servants and employees of state enterprises.
Before the wage increase, state employees had benefited from
access to state-supplied commodities at subsidized prices.
Afterwards, purchases of state-supplied commodities, as part of
the total expenditures of civil servants and manual laborers,
fell, a development that contributed to a decline in the real
incomes of these workers.
Reform measures introduced in 1985 instituted major changes
in wage policy. Beginning at that time, wages were determined on
the basis of performance and paid in cash. Previously wages had
been paid partly or entirely in kind. Government employees
(including the military) received a further increase in salary
but lost the supplements to their income that had previously
included food subsidies. Wages for workers in state-run factories
were increased at the April 1987 party plenum but any wage
increases were directly translated into, and offset by, higher
prices.
Data as of December 1987
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