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Inflation and Food Problems

July 24, 2011

Workers at several garment factories have gone on strike in order to protest the quality of food their employers are serving them for lunch. Factory owners and management are blaming the substandard quality of food on our good friend inflation.

The workers’ demands are simple: they want “the company [to] spend an extra 5,000 dong (24 US cents) on each worker’s lunch, up from the current 10,000-dong budget” because the factories are now serving “fatty pieces of pork” that most of the workers cannot eat instead of the “lean pork, rice and more” that help them get through their 12-hour shifts.

The factories insist that that their food budget hasn’t changed; they claim they cannot keep up with inflation. With exports “not good now,” companies are warning they may go bankrupt.

One factory gave into its workers demands and increased its food budget to 15,000 dong per worker, but what about the others?

I haven’t studied much of Vietnam’s economy, but I wonder why these factories’ prices for their goods are not keeping up with inflation. Typically, firms will increase their goods’ prices when the cost of the inputs increase, or find new ways to add revenue, such as when oil prices increase for example. We’ll see airlines create new fees and/or raise prices for airfare. Should oil prices decrease, hardly will we ever see airlines pass any savings on to their customers–we still have baggage fees with most airlines after all.

In order to compete with countries like China or India, Vietnamese factories may feel pressure not to increases prices for their goods too much or not at all in order to continue attracting foreign business and capital.

In the end, these wildcat strikes may be a blessing in disguise for Vietnamese workers as they “develop long-term political skills and awareness, which could have a positive impact on the communist country’s wider political culture.”

Solidarity!

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