Restructuring the labor market for economic development in Vietnam
In accordance with the new situation, it is necessary to restructure the economy to meet development demands. Especially with the “shock” resulted from the Covid-19 pandemic in the past two years, the requirement for economic and labor restructuring becomes even more urgent and needs to be accelerated.
1. Current situation of Vietnam’s labor structure
According to the General Office of Statistics’ figures regarding labor and employment situation in Vietnam, the total labor force in 2021 is 50.5 million people, decreased by 791.6 thousand people compared to the year 2020. Employed people are 49 million, reduced by 1 million people. Of which, the decrease is mostly in rural areas and male workers. In 2021, the prolonged and complicated situation of the Covid-19 pandemic has caused millions of people to lose their jobs, and the number of jobs in industries continues to decline, especially in the service sector. Labor in industry and construction is 16.3 million people (accounting for 33.2%), down 254.2 thousand people; the service sector has 18.6 million people employed (accounting for 37.9%), a decrease of 800.8 thousand people; the agriculture, forestry and fishery sector has 14.2 million people (accounting for 28.9%), an increase of 37.3 thousand people. The number of employees with formal and informal jobs both decrease, specifically, employees with formal jobs are 15.4 million people, a decrease of 469.8 thousand people compared to 2020; informal employment is 19.8 million people, a decrease of 628 thousand people (1).
The number of people who lacked jobs in 2021 was more than 1.4 million people, an increase of 370.8 thousand people compared to 2020. The unemployment rate was 3.10%, increasing by 0.71 percentage points. The unemployment rate was higher in urban areas than in rural areas. This was contrary to the labor market trend commonly observed in our country with the situation of lacking jobs in rural areas higher than in urban areas. The number of unemployed people in 2021 was more than 1.4 million people, an increase of 203.7 thousand people compared to the previous year. The unemployment rate in urban areas was 4.42%, 1.94% higher than in rural areas. The youth unemployment rate (15-24 years old) was 8.48%, an increase of 0.52% over the previous year. Meanwhile, the youth unemployment rate in urban areas was 11.91%, an increase of 1.33% compared to the previous year(2).
According to the Government’s report in November 2021, the efficiency of labor utilization in the past period has improved; Labor productivity has achieved the target growth rate but with low absolute value. The labor market, in general, is still in a surplus of human resources; with low job quality; unequal development with an imbalance in labor supply-demand among regions and economic sectors. The intermediary institutions, welfare, and insurance policies of the labor market are still weak, with low coverage, and low effectiveness. The structure of trained labor is low and not suitable for practical needs. The rate of trained workers is about 67%, but mainly are primary training; only 26.1% trained workers have degrees and certificates(3). In addition, informal workers and unskilled workers still account for the majority. This is the sector assessed as the weakest in terms of occupational skills.
The distribution of labor by geographical area is also uneven and unreasonable. The labor force is mostly concentrated in the Red River Delta, then come North Central Coast, Central Coast, and the Mekong River Delta. Meanwhile, according to CIEM, the large-scale area with a low labor rate is the Northern Midlands and Mountains, accounting for 13.87% of the labor force, and the Central Highlands accounting for 6.25% of the labor force. The Southeast region - the key economic region of the country, always in a high shortage, usually lack 10% - 20% of labor compared to the actual recruitment demand(4).
Looking at urban and rural areas, the labor structure also diverges, when nearly 70% of the labor force is still concentrated mainly in rural areas. Though this number tends to decrease over the years but still remains high.
The situation of labor restructuring in the market is slow, unable to keep up with economic restructuring, and therefore results in an imbalance between labor supply and demand among regions and economic sectors.
According to the Vietnam Chamber of Commerce and Industry (VCCI), and the population and labor census results from 2015 to 2019, the percentage of unskilled workers occupies the highest contribution. In 2019, 35% of employees are working in the “simple occupations” sector, down 4% compared to 2015; service sector employees are 18%, up 1% compared to 2015; the group of craftsmen and other workers increased from 12% in 2015 to 14% in 2019; assemblers of machinery and equipment increased from 9% in 2015 to 12% in 2019. The group of traditional occupations in agriculture and forestry accounted for only one-fifth of the proportion of Vietnam’s labor structure and decreased by 3% from 2015 to 2019. Meanwhile, the group of workers in the high-level professional and technical sector accounts for only 8%, just 1% higher than the agriculture, forestry and fishery sector in 2019. Mid-level professional and technical industries, employees and leaders account for 3%, 2%, and 1% respectively of the labor structure(5).
Labor data from 2015 to 2019 reflects the trend of changing occupational structure in the normal state in Vietnam in two trends: First, there is a transition from simple occupations to technical expertise occupations. Second, the proportion of labors working in traditional occupations such as agriculture, forestry and fishery decreased, replaced by employment in industry, construction and services. Specifically, labor in agriculture, forestry and fishery decreased sharply by 26%, from 5.3 million workers in 2015 to 4 million in 2019. Instead, the group of professional and technical workers escalates. In 2019, workers in occupations that required “high technical expertise” and “craftsmen and other related workers” increased by more than one fifth compared to 2015; “Machine and equipment assemblers and operators” alone increased by more than two-fifth at 43%, from 4.6 million in 2015 to 6.6 million employees(6).
Thus, considering both the labor structure and the epidemic context, the labor market in Vietnam is enduring various disadvantages, making it difficult to meet the country’s goals of industrialization and modernization in the era of industry revolution 4.0 today.
2. Direction for labor market restructuring
On February 5, 2021, the Prime Minister issued Decision No. 176/QD-TTg on promulgating the “Labor market development support program through 2030” to create a solid premise for the construction and synchronously develop labor market factors, contribute to effective mobilization, allocation and use of resources to promote socio-economic development, shift labor structure towards modernity, ensure the connection of the domestic and international labor market.
The program defines objectives of maintaining the overall unemployment rate at less than 3%(7). The State will play the role of creating and supporting the development of the labor market by completing and improving the effectiveness and efficiency of mechanisms, policies and legal documents on developing labor market, promoting reform of administrative procedures to reduce risks related to workers’ rights in the context of the Industrial Revolution 4.0. At the same time, actively integrate into the world, promote the connection between domestic labor supply and demand in association with the international labor market.
Along with that, the State supports the development of the labor market by perfecting institutions, synchronous and unified legal policies for the labor market to develop in a modern direction; supporting the development of labor supply-demand; supporting the development of the labor market information system, connecting labor supply and demand; supporting the development of safety nets and insurance; supporting the connection of domestic and foreign labor markets, developing specific labor markets; improve the efficiency of the organization and operation of the labor market. In which, the development of welfare and insurance is considered the most important task of the Program.
The restructuring of the labor market requires a synchronous implementation of different policies and solutions with the three main directions as follow:
First, reallocating the labor force by geographical area, among geographic regions; among key economic regions and other provinces, avoid overcrowding of labor force in some areas. This will contribute to reducing the load on infrastructure, residential, living space, cultural facilities for employees; higher security, environmental quality; better conditions for medical care, education for employees’ children, etc. Especially, to avoid mass migration, immigration, and evacuation, which is difficult to control like in the fourth wave of the Covid-19 pandemic. With more than 1.3 million people moving back to their hometowns, the labor supply-demand is imbalanced. Key provinces and cities such as Ho Chi Minh City, Binh Duong, Dong Nai, and Long An have faced serious labor shortages, while some provinces such as Thanh Hoa, Nghe An, and Ha Tinh have a sudden surplus of the labor force that the job market can not absorb, leading to unemployment.
Second, restructuring the investment and development sector. It is the renewal of the growth model in the direction of restructuring the production and service industries in accordance with specific conditions of each region; promoting the restructuring and adjustment of business development strategies; rapidly increasing domestic value, added value and competitiveness of products and services of enterprises.
This comes from the fact that some provinces and cities have determined the direction of development investment based on the advantages of natural conditions or the characteristics, habits, professions of local tradition, but do not consider any balanced and hedging strategy. Therefore, when there are market fluctuations, goods stagnation, low consumption of products and services, the market would be leading to excesses, supply-demand imbalance, market freezing, as well as the risk of crisis. Particularly, when the pandemic broke out and lasted like the past 2 years, many economic sectors faced a dilemma, such as tourism and travel, transportation, retail services, food services…
Therefore, it is necessary to have a balanced investment and development strategy in the direction of focus, but also encourage multi-industry and multi-field development, to take advantage of attracting more investment capital while allocating the labor force, as well as anticipating the trend of changing production, science and technology, and avoiding risks...
Third, restructure professional training by balancing distribution between levels and types. It is necessary to overcome the situation of training that is not according to the needs of the market, or the situation of “too many teachers, too few workers”. In recent years, the situation of labor in industry, construction and services has decreased sharply, in contrast, labor in agriculture has tended to increase. The employment structure was changed suddenly, leading to a surplus of labor in the agriculture, forestry and fishery sectors and a decrease in employment in the industrial and service sectors. Specifically, the number of employed workers in the third quarter of 2021 is 47.2 million, a decrease of nearly 2.6 million people compared to the previous quarter, of which the agriculture, forestry and fishery sector reached 14.5 million, an increase of 673.1 thousand people; industry and construction has 15.7 million employees, down 952.5 thousand people; service sector has 17.1 million people, down 2.3 million people. In addition, the number of workers in the formal sector also decreases and shifts towards the informal sector.
By industry, the labor shortage occurs in two groups. The first one is the group of high-tech experts such as electronics (shortage of 55.6%) and manufacturing of electrical equipment (shortage of 44.5%). The second group is the industry with labor-intensive but manual labor, such as leather and footwear (shortage of 51.7%), garment (shortage of 49.2%), textile (shortage of 39.5%)(8). Therefore, the development of training and vocational training strategies should be intricately linked with market demand.
3. Solutions and responsibilities of stakeholders
First, it is necessary to build a database on the labor market.
The flexibility, dynamism and efficiency of the labor market is not based solely on the quantity of mechanical labor. In the era of the Industrial Revolution 4.0, the value of the labor market is also promoted based on association, the exploitation of the network to serve the connection of supply and demand, forming a digital market of labor and employment, or aiming to research and understand the the habits, needs, requirements of consumers, etc. Big Data, along with the Internet of Things and Artificial Intelligence are the three core pillars of the digital economy era that Vietnam could not stand aside. It is essential to have a comprehensive, reliable and up-to-date database system on labor and employment to connect, share and exploit. Besides, this database system also has active value in forecasting and developing short-term, medium-term and long-term response scenarios for the labor market. Therefore, it is critical to accelerate the progress of inter-connecting the labor market, even earlier than Decision 176/QD-TTg promulgating the labor market development support program through 2030. Because under this Decision, database interconnection is only possible from 2026 onwards. This is quite slow compared to the operation and transformation of the labor market.
Second, it is required to establish a coordination mechanism.
It is necessary to have responsible, smooth and reliable coordination among State agencies in the design, allocation, operation and regulation of the labor market. For example, the construction of a database on the labor market needs to be implemented quickly, synchronously and smoothly among departments, ministries, according to all four administrative levels from central to local levels. In particular, it should be placed under the command and regulation of an advisory board or specialized committee, chaired by the Prime Minister or the Deputy Prime Minister.
Third, it is needed to implement synchronous and unified policies and laws for the development of labor market in a modern direction.
Decision No. 176/QD-TTg dated February 5, 2021, clearly stipulates the responsibilities of ministries, sectors, and localities to have supportive policies as well as well orientation for the development of the labor market to meet the needs of enterprises on employment. Specifically, it is imperative to review and propose competent agencies to amend and supplement relevant legal documents on labor supply-demand, as well as the labor supply-demand connection to be consistent with the norm of the market and the legitimate interests of employees and employers. In addition, implementing programs, schemes and plans of the central and provincial governments to support job creation and participation in the labor market for specific labor groups (such as people with disabilities; ethnic minority workers; workers in rural areas; students, new graduates from universities and the system of vocational education institutions).
Fourth, it is imperative to support the development of labor supply and demand.
It is necessary to develop and provide training programs, fostering vocational skills for new graduates; training programs to improve labor skills in the working process that are suitable to the specific characteristics of each type of employee. Encourage employers to participate in the process of training and vocational education; improve the capacity and effectiveness of mechanisms to monitor, evaluate and recognize occupational skills according to national standards so that employees are evaluated and recognized, reflecting their actual working capacity. Developing training programs and fostering labor skills based on vocational skills standards, applying science and technology; developing policies to support training and improve vocational skills for specific groups of workers. Encourage the organization of short-term training courses on digital skills in a regular and flexible form for employees. Review and simplify procedures and create favorable conditions for converting business households into enterprises; have a mechanism to support enterprises in tax collection, payment and refund to improve the effectiveness of support for enterprises converted from business households.
Fifth, it is necessary to encourage enterprises and employers to participate in the process of innovation and quality improvement of training and vocational education.
In particular, the training content should be associated with practice, training according to job position, according to the needs of the labor market, and businesses also participate in the training program and supervise the training process.
Sixth, it is required to increase the accessibility of sponsoring services for workers.
Specifically, sponsoring access to social insurance, health insurance and unemployment insurance to ensure the life of employees. In particular, it is necessary to strengthen the role and activities of Vietnam Trade Unions as well as professional associations to develop members, to connect, share and exchange information among employees in the same field, for the improvement in protecting workers’ rights. At the same time, relevant agencies need to develop a mechanism to provide information and legal advice services to employees when necessary; diversify social security service packages, provide employees with forms, modes, levels of contributions and entitlements; simplify administrative procedures and develop a mechanism to provide necessary administrative and legal support to employees participating in voluntary welfare programs. This is also the requirement and task set by the Government’s labor market development support program through 2030.
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Receipt date: 17-2-2022; Review date: 21-2-2022; Date of approval for posting: 22-2-2022.
(1), (2) General Statistics Office: Press release on labor and employment situation in the fourth quarter and the full year of 2021, www.gso.gov.vn, December 29, 2021.
(3) National Assembly: Resolution No. 31/2021/QH15 on the Economic Restructuring Plan for the 2021-2025 period, https://quochoi.vn/, November 12, 2021.
(4) Central Institute for Economic Management (CIEM): Workshop on Labor market development to promote economic restructuring in Vietnam, Hanoi, April 26, 2021.
(5), (6) Vietnam Chamber of Commerce and Industry’s Hồ Chí Minh City Office: Changes in labor structure (excerpt from the Population and Labor Survey Result in 2015 - 2019 by General Statistics Office), https://vcci-hcm.org.vn/, 6-12-2020.
(7)Prime Minister: Decision No. 176/QD-TTg n promulgating the labor market development support program through 2030, Hanoi, February 5, 2021.
(8) General Statistics Office: Press release on labor and employment situation in the third quarter and nine months of 2021, https://www.gso.gov.vn.
MA. NGO DUY HIEU
Vice President of Vietnam General Confederation of Labor
Dr. NHAC PHAN LINH
Institute for Workers and Trade Unions
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