Vietnam Labor Market-2009 Finish Students

8/3/2019 Vietnam Labor Market-2009 Finish Students

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VIETNAM LABOR MARKET

Instructor: Duong Manh CUONG

Faculty of Economics and Management

Hanoi University of Technology

Email: [email protected]

Tel: 091 201 0566
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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COURSE OBJECTIVES

To get information on the labor supply,demand and recent development of theVietnamese labor market

To basically understand the localregulations, policies and other relevantissues

To get a deeper understanding of some

issues based on in-class case discussions


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COURSE OUTLINE

Introduction to Vietnams contextVietnams labor market and

recent development

Regulations and policies

Other relevant issues


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DEMOGRAPHIC/SOCIAL, POLITICAL ANDECONOMIC ENVIRONMENT

Population, 86.2 mil

Population growth, 1.19%

Under-five child mortality rate 26/1000

Life expectancy, (2008 est.) total population: 70.8 years

Educational attainments of workforce

- School enrollment, primary (% gross)

- secondary

- tertiary

95%

76%

16%

Illiteracy rate (of population age 15+) 3,74 %

Percentage of people below poverty line 2008350.000 ng/ngi/thng (old criteria 200.000 ng) for rural

450.000 ng/ngi/thng (old criteria 260.000 ng) for urban

20% (14%)

by VN's standards)

July 2009, data from WB


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DEMOGRAPHIC/SOCIAL, POLITICAL AND ECONOMICENVIRONMENT (cont.)

Form of the state Socialist Republic (one-party rule)

Head of the state President Nguyen MinhTriet

Government Communist Party ofVietnam

Head of the government Prime Minister NguyenTan Dung

Major opposition parties None

Government structureresponsible for labor andsocial security issues

Ministry of Labor, Invalidsand Social Affairs(MOLISA)


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DEMOGRAPHIC/SOCIAL, POLITICAL AND ECONOMICENVIRONMENT (cont.)

Real GDP growth, annual% 2008 6.23% (GDP $84.98 bil)

Per capita income (1993), 2008 ($170), $1024 USD

GDP share of sectors, % of GDP 2008

- agriculture

- industry- services

($84.98 bil USD)

21.99

39.9138.1

Inflation rate in 2008 22.93%

Exports in 2008 62.9 Billion of US$

Imports in 2008 80.4 (Billion of US$),

Surplus -17.5 Bil USD

Source: http://www.state.gov/r/pa/ei/bgn/4130.htmMarch , 2009
http://www.state.gov/r/pa/ei/bgn/4130.htmhttp://www.state.gov/r/pa/ei/bgn/4130.htm


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Economic indicators 2001-05, 06, 07 & 08

2001-05 2006 2007 2008* Average GDP p.a. growth (%) 7.51 8.23 8.5 6.23

in which:

Agriculture 3.84 3.69 3.4 3.79

Industry 10.24 10.38 10.6 6.33

Services 6.97 8.29 8.7 7.2

Economic structure by ind. (%) 2005 2006 2007 2008

Agriculture 21.02 20.40 20 21.99

Industry & construction 40.97 41.52 41.8 39.91

Services 38.01 38.08 38.2 38.1

*: GSO data 2009


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The growth rate of GDP components(%)


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GDP and export growth rate (%)


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Vietnam FDI attraction

Year Registered capital Disbursement(USD mil.) (USD mil.)

1991 1291 329

1995 6937 2556

1997 5590 3115

2000 2838 2413

2004 4547 2852

2005 6839 3308

2006 12003 4100

2007 21400 8030

2008 60300 11500


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Joining ASEAN Signing BTA with US Joining the WTO

Export-Import growth with bilateral/multilateral agreements


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FDI commitment and disbursement(USD mil.)

-

5,000

10,000

15,000

20,000

25,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

4%

6%

8%

10%

12%

14%

16%

18%

Disbursement Registered capital FDI sector's contribution to GDP


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Merchandise export by industrial

sub-sectors (USD Mil.)

-

2,000

4,000

6,000

8,00010,000

12,000

14,000

16,000

18,000

Crude oil Primary Agricultural

resource-

intensive

Labour-

intensive

production

Capital-

intensive

production

Machinery and

technology-

intensive goods

other

2000 2005 2006 2007


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SOME HIGHLIGHTS OF VIETNAMS REFORM PROGRAM

Open economic reform

Passed Foreign Investment Law (with severalamendments in response to investor concerns)

Normalization of foreign relations with most countries,increase ODA disbursements and cooperation

Joined ASEAN, moving to conform trade regime tomeet AFTA, APEC, and WTO requirements

Join WTO by Jan, 2007

Monetary, fiscal and financial sector reform

Developed two tier banking system, broadened systemto allow private, join venture, and foreign banks

Unified exchange rates closer to the market-determined rate, and periodically adjusted

Passed organic Budget Law, simplified tax system,increased transparency and accountability

To replace turnover tax with VAT (5-10%) and replacedprofit tax with uniform enterprise tax (25%)


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SOME HIGHLIGHTS OF VIETNAMS REFORM PROGRAM (cont.)

Agricultural and non-state enterprise reform

Households replaced state cooperatives as the basic

decision making units in agricultural production The Land Law established household land use rights and

increased security of tenure for farm families

Passed Enterprise Law in 1/1/2000 allowing non-statefactories and commercial sector activities

Private firms now contribute nearly 80 percent ofmanufactured products and over 70 percent of non-oilexports

Public administration and state enterprise reform

Major changes in governments approach to managing and

regulating the economy State control and intervention greatly reduced in a number

of areas

The equitization process cut the number of state-ownedenterprises by more than half, from 3,786 to 1,546 over thepast nine years (2000-2008).

Increased managerial autonomy of SOE


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SOME HIGHLIGHTS OF VIETNAMSREFORM PROGRAM (cont.)

Social policy and organizational reform Substantially privatized health care,

education, and other social services

Real per capita spending initially fell but has

now increased to above previous peaks Revised Civil Law, Labor Law (1/1/2003)

Salary reforms: To be implemented during 2001-2009

Administrative and non-production sectorsare to be the first to undertake salaryreforms


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SOCIO ECONOMIC ACHIEVEMENTS UNDERECONOMIC REFORM (since 1986)

Per capita income growth averaged from around 3%

p.a. 1986-90, to 7% in 97-00

Inflation reduced from triple digits to single digits (fr300% in 1986 to 4 % in 2003 and 22.9% in 2008.Tight management of money supply.

FDI flows increased during recent year, esp 2007, 2008 Rising share of government spending to GDP but

budget deficits kept at around 2% of GDP

Value of exports in 1990s growing at over 25% perannum

Shift from major rice importer in the mid-1980s tosecond largest rice exporter in 1996 ($ 2.9 bil in 2008)

Health and education indicators have generallyimproved for the majority of Vietnamese

Poverty reduction remarkably


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LABOR FORCE AND HUMAN RESOURCES (CONT.)

Education: High literacy, but access to high level education still limited

(89% of population from age 10 above is literate for femaleand 94% for male) (Vietnam Living Standard Survey VLSS2002)

Primary enrolment rate was 95%, junior high schoolenrolment rate 76% and tertiary 16% (2008)

Poverty: Poverty rate decreased fast (23% of population in 1993 in

absolute poverty, down to 13% in 2000

In 2005, Vietnam introduced a new poverty assessment

standard (WB is 1 USD/head/day): 200,000 VND in incomeper head per month in rural and 260,000 VND in urbanareas.

Poverty rate was 29% in 2007 (below national poverty line)


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LABOR FORCE AND HUMAN RESOURCES (CONT.)

Labor force:

Working age: 15-60 for male, 15-55for female.

45 million conducting involved ineconomic activities in 2008, of which State sectors: 4.1 mil

Non state sector: 39.1 mil

FDI: 1.8 mil


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Employment in sectors

35

1000 persons

2006 2007 Estimated2008(*)

Total 43347,2 44171,9 45037,2

Ownership Sectors

SOEs 4007,8 3974,6 4073,3

Non state 38639,0 38657,7 39132,5

FDI 700,4 1539,6 1831,4

Economic stector

Agriculture 24122,8 23810,8 23624,8Industry and construction 8192,7 8825,3 9385,5

Service 11031,7 11535,8 12026,9(*)Nm 2008: is data at 01/4/2008


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Labour force by occupation (%)


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Unemployement rates

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2006 2007c tnh

nm 2008

Total 4,82 4,64 4,65

Red river delta 6,42 5,74 5,31

Plateau North mountainous areas 4,18 3,85 4,13Central North and Coastal Centralareas 5,50 4,95 4,73

Highland 2,38 2,11 2,49East areas 5,47 4,83 4,85

Culong Delta 4,52 4,03 4,08


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Some highlights of labor market

Fast growing supply outnumbers lessdeveloped demand (new jobs created stilllimited) serious and increasingunemployment, low productivity, low wages

Supply does not match demand in quality:qualifications, expertise of laborers stillinadequate, shortage of skilled labor

Big gap


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Trained laborers concentrate in big urbanareas, while in rural areas skilled laborersonly occupy 13% vs. 45% in urban areas

Agriculture is the sector with biggestpercentage of employment but has limitednumber of trained laborers

Industry and service sectors have high

growth rates but do not create new jobsrespectively thus new entrants still haveto look for jobs in agricultural area imbalance in sector employment allocation


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Gap between urban and rural laborers: urban

laborers have more access to social benefits

(housing, medical services), better employment

Gap between formal and informal laborers:laborers in informal sector lack capital, low

productivity, lack access to market, low income,

inability to access social benefits, social security

Labor policies not effective and well enforced. Big challenges: employment and social

benefits for laborers


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COURSE OUTLINE

Introduction to Vietnams contextVietnams labor market and

recent development

Regulations and policiesOther relevant issues


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VIETNAMS LABOR MARKET

Overview of the labor market

Supply of labor

Quantity

Quality

Demand for labor

Trends and issues


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INDICATORS OF VIETNAMS LABOR MARKET

Labor force (pers.) working pop, 2008 45.037 million

Employment by industry (%), 2008- agriculture, forestry, fishing

- industry and construction

- services

57.9 %

17.4 %

24.7 %

Informal employment (% of total) 90%, inc. householdsworking in agri sector

Official unemployment rate 2006, 2007,2008

4.82%; 4.64%;4.65%

Youth unemployment rate (%) (youth:15-24 years of age)

11,8%

Underemployment (defined as working< 40hrs a week, as % of totalemployment)

30%


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INDICATORS OF VIETNAMS LABOR MARKET (CONT.)- Labor Migration

Receivingcountries andnumber ofmigrants

How many Vietnamese migrants arethere and where do they go to?

in 2007, there were over 85.000 personsworking overseas, remitted home about1.7 billion U.S. dollars

Vietnam sent 50,980 experts and workersto work abroad in the first seven monthsof 2008

Sendingcountries and

number ofmigrants

How many foreigners are there in Vietnamand where are they from? Nearly 53000

foreigners from 42 countries. Majorsending countries are China, Taiwan,Singapore, South Korea, Japan (06/2009)

Source: Statistics office and www.vnn.vn
http://www.chinaview.cn/index.htmhttp://www.chinaview.cn/index.htm


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LABOR SUPPLY

Supply of labor : Quantitatively determined by:

Size of labor force (number of people inworking age-currently working or

unemployed)

Number of working hours people work eachday/week/year

Qualitatively determined by:

Efforts people put on each hour of work,productivity

Level of training and skills people bring towork


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LABOR SUPPLY-QUANTITATIVE

Vietnam has a large, young andgrowing labor force

Labor force participation rate: relativelyhigh in Vietnam compared with regional

countries, especially women

Estimated further 1.8 mil peopleentering labor force from 2001 to 2010

Hours of work: Before 2/10/99: 48working hours per week, after 2/10/99:40 hours in public sector


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LABOR SUPPLY-QUALITATIVE

Health conditions:

~80% of the labor force located in rural areaswhere infrastructure is underdeveloped

Total number of medical staff (persons):Doctor Physician, Nurse, Midwife

42993 47168 51112 20087

The number of doctors per 10,000 people inVietnam is 6.3. That is 15 and 6.5 times lowerthan that of the USA and Singaporerespectively.

More than half of them are in the cities andmajor provinces, 23% belongs to villages


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Labor Supply

Vietnam labor force (prs)

Year 1996 2007

Population aged 15 and above

total 47,620,139 63,305,882

urban 11,026,793 17,964,868rural 36,593,346 45,341,014

male 22,391,531 30,424,965

female 25,228,608 32,880,917

Labor force

total 36,082,273 47,144,091

urban 7,243,053 11,895,757

rural 28,839,219 35,248,334

49

Source: report on Vietnam labor market, July 2009


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Labor supply

Education structure of working age population

1993 1998 2002 2004 2006

No degree & primary school 49% 65% 51% 46% 44%

Lower secondary school 26% 23% 30% 33% 33%

Upper secondary school 14% 10% 16% 17% 19%

Junior College and above 1.8% 2.5% 3.3% 4.0% 4.2%


50


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Labor Supply

Average years of schooling of working agepopulation

1993 1998 2002 2004 2006

All sample 7.43 7.42 7.48 8.13 8.30

Male 7.83 7.85 7.78 8.47 8.61 Female 7.05 7.02 7.18 7.78 7.99

Urban 8.77 8.92 8.96 9.81

Rural 6.96 6.94 7.00 7.51

Other minorities 6.1 6.0 4.9 5.7

Kinh & Chinese 7.6 7.6 7.9 8.5


51


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LABOR SUPPLY-QUALITATIVE (cont.)

Health conditions (cont): Health care establishment is considerably poor

providing inadequate services to community,especially in the highland and remote areas

Insufficient government investment in healthcare services: 1% of GDP in 90s, and 5.3% in2001-2006; 1456 bill VND in 2006

Low expertise of medical treatment

Increasing pollution impacts

Source: Vietnam Development report 2007: aiming high by World Bank


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Education conditions: Traditional heritage: hard working culture,willingness to overcome difficulties, creativeness,adaptability, quick learning ability

Comparatively high enrolment rate Seven agro-ecological zones: Red River delta is

the leader in education level, followed by NorthCentral, Northern Uplands, Southeast, CentralHighlands and the lowest is Mekong River Delta.


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Education conditions (cont.)

Difference between urban and rural areas: higher educationlevel in urban and the gap tends to increase gradually

Womens education level is nearly equal to mens.

Unreasonable educational distribution: the ratios ofuniversity/college per vocational and technical worker has

been sharply increased Gap (VN lacks skilled workers)Year c/u per vocational per technical

1979 1/ 2.2 /7.1

1997 1/ 1.5/1.7

2007 1/1/32007 1/4/10 (Malaysia)

Only 27% vocational and technical worker (2007)


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Labor supply

Education structure of working age population

1993 1998 2002 2004 2006

No degree & primary school 49% 65% 51% 46% 44%

Lower secondary school 26% 23% 30% 33% 33%

Upper secondary school 14% 10% 16% 17% 19%

Junior College and above 1.8% 2.5% 3.3% 4.0% 4.2%

Unskilled workers ratio is high

Proportion of high skill workers is low

Vietnam has abundant workforce, still low skill

Source: report on Vietnam labor market, July 2009 55


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Labor Supply

Proportion of workers with skills

Year 1996 2002 2003 2004 2005

Total 11.4 8.0 8.4 9.2 10.0

Vocational training 9.1 3.9 4.1 4.2 4.7

College and above 2.3 4.1 4.4 4.9 5.3

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More vocational training for skilled workers are needed Vocational training program has been lauched by thegovernment


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Labor Supply

57


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EDUCATION-A COMPARISON

Country College/university graduatesper 1000 heads

Vietnam 11

South Korea 52

Singapore 16

Italia 21

Japan 70

Finland ?


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Training (cont.)

Types of training: Long term training (more than 36 months):

0.08%

Most of vocational training is short term: 1-3 month training: 41.64%

Under 12 months: 80%

People prefer short term training because: Response quickly to the increasing labor demand in

booming industries

Affordable for participants as well as their families (even fee waive, and recruit later)

Long term training attracted more interest fromthe Gov and foreign organizations


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Training (cont.)

Employment after training:

60% graduates found jobs throughrelatives or relationships

15.7% actively looked for jobs 7.5% got job through employment

service agencies

1/10 graduates are self employed(running

their own business given the knowledgegained from the training)

Family relations tend to play the major rolein finding jobs

LABOR DEMAND


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LABOR DEMAND

Overview of employment:

Most of the employment is created in agriculture

More new jobs are created in Industrial andservice sector


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LABOR DEMAND

Patterns of employment in sectors: Private sector: risky jobs with relatively low

wages, unfavorable working conditions andless chance for training and development.Lack: technical staff

Public sector: long term and not pressuringjobs, average wages, benefits, training anddevelopment. Problem of brain drain toforeign invested sector

In foreign invested sector: higher wages,better working conditions, but high pressure,riskier than in public sector. Lack: skilledworkers and managers


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Industrial/Sector Structure The labor force used is still primarily rural and agricultural

(livestock, aquaculture, and forestry)

Reduction of share of labor employed in agriculture recentlyand increase in industry, services

Urban:

A very large movement of people out of agriculture intosales and services

Service and industry account for more than 70% of laborforce

Rural: 80% of people involved in agriculture, although seenslight reduction

Demand for technicians and highly skilled workers are high,especially for the export processing zones (EPZs):

Job opening for well trained workers are available at manyservice centers and head hunting companies.

Head hunting FIEs offer high salaries to talented studentsduring their study at the universities

E l t t t i th i d


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Employment structure in the period1990-2007

Source : the 2001-2005 labour and employment statistics , MOLISA.

OWNERSHIP


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OWNERSHIP Both labor in the State and non-state sectors have grown

rapidly (by 10.2% and 9.2% p.a. respectively)

State sector dwarfs the private sector but much less laborintensive, mainly in import substituting industries

Most of private companies operate in labor-intensive sectors(textile, garment or primary processing), highly exportoriented

Workers employed by private manufacturers are at loweducation levels

Share of C/U level in administrative areas is higher than thatin productive sector (67.3% vs. 32.7%), Thailand: 6/4,Japan: 6.5/3.5

Foreign Invested Enterprises (FIEs):

Highest growth rate of GDP among sectors

Capital intensive (oil related production, heavy industry orreal estate)

LABOR EXPORT


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LABOR EXPORT

90,000 workers were exported to about 40

countries at regions in 1990s (compared to300,000 during 1980s)

85,000 in 2007

Higher quality requirement makes Vietnamlabor less attractive only one third of annual

target were achieved High brokering fee and lack of support from

the companies who arranged the contracts forlaborers

50% of total of Vietnam nationals workingabroad are in East Asia, and Middle East(Taiwan, South Korea, Malaysia, ..)


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Number of Vietnamese workers workingabroad in labour contracts with definite term

2001 2002 2003 2004 2005

Total 36.168 46.122 75.700 67.447 70.590

South Korea 3.910 1.190 4.226 4.779 3.850

Japan 3.249 2.202 2.264 2.752 2.500

Malaysia 23 19.965 39.624 14.567 19.500

Taipei 7.782 13.191 27.981 37.144 20.750

Others 21.204 9.574 1.605 8.205 10.900

Source: Ministry of Labour Invalids and Social affairs (MOLISA).

Persons

L b k t t d


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Labor market trends

Unemployment Underemployment

Wage employment

Wage trends

Child Labor

Women labor

Integration


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Unemployment rate in 2008

74Source: GSO data 2009

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007S b

2008

Total 5.88 6.01 6.85 6.74 6.42 6.28 6.01 5.78 5.60 5.31 4.82 4.64 4.65

AREAS

Red river delta 7.57 7.56 8.25 8.00 7.34 7.07 6.64 6.38 6.03 5.61 6.42 5.74 5.35

Northeast6.42

6.34 6.60 6.95 6.49 6.73 6.10 5.93 5.41 5.07 4.18 3.85 4.17

Northwest 4.73 5.92 5.87 6.02 5.62 5.11 5.19North central 6.96 6.68 7.26 7.15 6.87 6.72 5.82 5.45 5.56 5.20 5.50 4.95 4.77

Coastal central 5.57 5.42 6.67 6.55 6.31 6.16 5.50 5.46

Highland 4.24 4.99 5.88 5.40 5.16 5.55 4.90 4.39 4.53 4.23 2.38 2.11 2.51

Souteast 5.43 5.89 6.44 6.33 6.16 5.92 6.30 6.08 5.92 5.62 5.47 4.83 4.89

Cuulong river delta 4.73 4.72 6.35 6.40 6.15 6.08 5.50 5.26 5.03 4.87 4.52 4.03 4.12

BIG CITIES

Hanoi 7.71 8.56 9.09 8.96 7.95 7.39 7.08 6.84

Danang 5.53 5.42 6.35 6.04 5.95 5.54 5.30 5.16

HCMC 5.68 6.13 6.76 6.88 6.48 6.04 6.73 6.58

Dong Nai 4.61 4.03 5.52 5.65 4.75 5.14 5.27 4.86

UNEMPLOYMENT (cont)


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UNEMPLOYMENT (cont)

Different types of unemployment:

Active visible unemployment: unemployed activelyseeking jobs (2.97% of the countrys labor force ofworking age, rural areas: 2.2%, urban: 6.01%)

Passive visible unemployment: unemployed who arenot actively seeking jobs even though they are able towork (low education people, females..)

Visible underemployment: employment under 40hours/week (rural areas: 25.47%, urban: 7.02%)

Invisible underemployment: people working with

nearly normal hours but their jobs are not the right onesthey want

Hidden unemployment: over crowded labor in relationto land, equipment, capital


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UNEMPLOYMENT (cont) Reasons for increase in unemployment:

High growth of labor force while lack of labor-intensive investment

Vietnamese guest workers (about 200,000 workers),students and illegal immigrant returning from theSoviet Union, Western Europe, Germany..

Repatriation of boat people in 90s Downsizing the military as part of its reform and

modernization program

Average irrigated land per laborer is low (laborsurplus in agriculture) (0.36 ha in 1986 and 0.3 ha in2003, regional average: 0.8ha)

The current education system is facing difficulties inmeeting domestic demand for education andtraining, especially in the field of technicians andskilled workers

UNEMPLOYMENT (cont)


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UNEMPLOYMENT (cont)

Reasons for increase in unemployment (cont)

Employees laid out of SOEs due to the reform (about 20%

out of the sector)

Lacking (though increasing) in the number of job agencies

Country economic slowdown (labor export, FDI decreasingand downsizing, relatively higher labor cost, decreasingdemand for imports from partner countries, lack ofcompetitiveness)

Reduction in export capacity due to lack ofcompetitiveness

Decreasing in number of foreign direct investmentprojects

Withdrawal or downsizing of foreign investedenterprises due to unattractive investment environment


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UNDER-EMPLOYMENT

Definition: working less than 40 hr/weekfor all jobs

Highest rate of underemployment was

found in agriculture, primarily among theyounger and the elderly groups

Serious underemployment is high at11.56% of employed work force

UNDER EMPLOYMENT


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UNDER-EMPLOYMENT

Region Rural (%) Urban(%) Total(%)

N. Uplands 7.68 9.6 7.9

Red River Delta 13.8 10.85 13.32

N. Central Coast 10.09 8.41 9.91

S.Central Coast 7.41 5.89 7.03

C. Highlands 5.38 5.38

Southeast 16.03 7.97 11.97

Mekong delta 17.46 13.66 16.78

Total 12.06 9.54 11.56

Highest rate of underemployment is in Red River delta and MekongDelta

Central Highlands, South Central, and Northern Mountains have lowestlevels of underemployment

Source: VLSS


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WAGE EMPLOYMENT

The private sector has increased itsshare of wage employment fastest

Private sector is stronger in the South

than other regions

A shift from agriculture to other sectors

Services and industries absorb the most

labor


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WAGE TRENDS

True wages might be underestimateddue to an attitude of hiding,irregular various incomes, over

report of working hours Annual increase by 9% (92-07),

higher in the North and urban areas

More correlation between wage andeducational level reflects thedevelopment of labor market.

Average monthly wage and wage


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Average monthly wage and wagegrowth rate for period of 2003-2005

2003 2004 2005

Average

Wage(000VND)

Per cent of

increase

Average

Wage(000VND)

Per cent

ofincrease

Average

Wage(000VND)

Per cent of

increase

SOEs 1,617 23.5 1,780 10,1 1,995 12.0

Private

firms 1,046 14.2 1,150 9.9 1,265 11

FDI firms 1,774 -6.5 1,935 9.1 2,110 9,0

Source: Surveys on Employment and wage in enterprises in 2005 and 2006 by ILSSA andMOLISA.

WOMEN LABOR


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WOMEN LABOR

An improvement:

Increase 8% of share in NA 2% among PCs at various levels

Provide loans to 6 million of women

The State ensures the right to equality of

women with men in all domains of work Adopt policies of encouraging the labor users

to create conditions for women laborers tohave regular jobs

Help the women laborers to effectivelydevelop their professional capacities andharmoniously combine work and family life

Tax favorable for the enterprises using mostwomen


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WOMEN LABOR (cont.)

The labor user is not allowed to use female labor for

heavy or dangerous jobs or jobs which necessitatecontact with dangerous substances having harmfuleffects on the reproductive and child bearingfunction of the women laborers

The labor users must not use women laborers atwhatever age for permanent work in the mines orrequiring constant immersion in water

Discrimination (illegal) terms against women labor:

Not recruit women Force the women laborers to agree not to marry

in several years of employment

CHILD LABOR


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CHILD LABOR

Broad definition of child labor: reportedto work in the past 12 months in wagework, farming or self-employed non-farm activities of the household

Age range between 6-14

Not significantly different between boysand girls

Child labor reduced from 4.9 mil inearly 90s to 3.6 mil in late 90s.


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CHILD LABOR (cont.)

Rural children are about three timesas likely to work as urban children

90% of child labor work in agriculture,mostly in rural areas

Large jump in child labor force at age8 (rural), 12, 16, 17 (urban)

Share of children with wage work

increased sharply during last decade(13% to 27%)


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Impact of WTO participation on Market Labor

Opportunities: Positive impact in economic terms GDP growth

A no of sectors/industries have benefits thanks toliberalization, esp. for export oriented industries whichare labor intensive, trading activities

More opportunities for employment and income forlaborers (reasoning: positive correlation betweenemployment and openness of economy higher demandfor laborers, more new enterprises).

Labor structure in sectors shift from agriculture to

industry and services . Also, with WTO member:increase FDI, promote private sector, thus a shift fromstate owned enterprises to FIEs and private sectorenterprises.


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Challenges: Increasing gap among laborers: skilled

workers will have higher pay, better benefits,unskilled workers more difficult to get jobs.

Especially context of VN: capability of VNlaborers fall far short of internationalstandards/demands (lack of expertise, labordisciplines, team work, foreign languages)

Non-formal sector may increase in scope.

Non-formal sector: not assure social security,benefits for laborers (lack ofregulation/monitoring of government)


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Unemployment challenge: agriculture sector(60% of laborers) very backward,uncompetitive thus with liberalization,agricultural imports can affect domesticproducts, and employment in the sector.

Other protected industries also negativelyaffected. Some industries/enterprises have to

restructure to improve competitiveness thusmay lay off laborers

Demands for expertise, skills of laborers willincrease Stronger movement of laborers to overseas

countries brain drain


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Conclusion

Labor supply is reaching peak structureand the transition of the economy hascreated employment pressures

Meanwhile maintained a stabledevelopment, the policies and regulationsneed to ensure high and sustainablegrowth in terms of solving employment

issues Education innovation is the most important

measure to gain long term benefits


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Legal framework: labor

policy

THE GOVERNMENT AND THE LABOR MARKET


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Institutions: MOLISA (Ministry of Labor, Invalids and SocialAffairs) is responsible for regulating the labor market,

followed by provincial Departments of Labor, Invalids andSocial Affairs

Labor Code:

Came into effect on Jan 1, 1995, amended Apr 2, 2002and effective 1/1/2003, 198 articles

Applying to all employees working for individuals ororganizations operating in Vietnam

Setting out generally the rights and obligations for bothemployers and employees, labor standards

Various instruments of the Code: Decrees, Circulars,Decisions

National Employment Program by Government Policy of Education and Training: socialization, quality

improvement

Reform continued: SOE reform, SMEs promotion, integrationto the region and world economy



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Employment:

Employees have right to work for any employer, and to

either contact the employer directly or recruit through anemployment introduction organization (A 16)

Employers are asked to retrain full time employees wholose their jobs due to structural or technological transfer.In case the employees are laid off, severance allowancerate is: one months salary for every year of service. Lay-

offs must be reported to the local Department of Labor (A17)

Highly skilled employees are entitled to hold multiple jobsthrough integrating labor contracts with many employers,provided they are all notified (A 129)

Working conditions: Working hours: Max 8 hours/day or 48 hours/week (A68), Max extra time: 4 hours/day or 200 hours/year

Training: businesses are responsible to upgradeprofessional skills of employees


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WAGE SETTING Wages: negotiated between employer and

employee, no less than minimum wages (A 55) Definition of minimum wages (A56)

The rate intended for the laborer doing thesimplest work in normal working conditions

Meet basic needs and to permit savings tofinance some accumulation of human orphysical capital

Periodically adjusted for changes in livingexpenses

Minimum wages may differ, depending on thegeographical region and the type of industry.

MINIMUM WAGES


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MINIMUM WAGES

Minimum wages vary between Domestic andforeign investment firms. (USD14 vs. 35-45)

For SOEs: there are 26 wage ranges and 21wage grades with the deferential relationshipbetween minimum : average: maximum as

much as in 1:1.82:7.06 times. FIEs can apply their own wage scales and

brackets but cannot be lower than that appliedfor domestic ones


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MINIMUM WAGES (cont.)

Reasoning: high effective MW tendto reduce employment because: Increase production costs, hurt export

Deter export-oriented foreigninvestment

Capital-intensive replacement

Realities: how do the MW levelsaffect state owned, private andforeign sectors in VN?

MINIMUM WAGES-DOMESTIC FIRMS


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MINIMUM WAGES DOMESTIC FIRMS

MW represents roughly one forth ofaverage and one third of rural wages

Workers with no diploma earn onaverage more than 3 times the MW

The MW is unlikely to present anyobstacles to the development of theexport-oriented domestic private

sector


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MINIMUM WAGES-FIEs

No effect of capital replacementinvestment among FIEs

Low labor cost advantage:

Other countries policies to attract foreigninvestment

Foreign investors can shift part of theirproduction to more competitive countries

easily Labor costs are not the most concern of

FIEs

SALARY REFORM


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SALARY REFORM

Cut state budget subsidy for wide range of

administrative and non-production sectors The government could save 20% of annual

expenditures

MW increased from VND144,000/month in 1999,

450,000 in Oct 2006, and now 650,000, andexpected 800,000 in 1/1/2010

MW rate adjustment implies a general increase inall incomes and expenditures

Allow production enterprises more freedom in

setting their own MW as determined by productivityperformance within the enterprise

To ensure sufficient income for a civil servant tosupport himself and a child of school age

To fight corruption

Monthly average income per capita at current


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Monthly average income per capita at currentprices by residence and by region

Thous. dongs1999 2002 2004 2006

WHOLE COUNTRY 295 356 484 636By residence

Urban 517 622 815 1058Rural 225 275 378 506

By regionRed River Delta 280 353 488 653North East 210 269 380 511North West 197 266 373North Central Coast 212 235 317 418South Central Coast 253 306 415 551Central Highlands 345 244 390 522South East 528 620 833 1065Mekong River Delta 342 371 471 628

100

N i


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New income taxesEffective from 1st January 2009

RangeTaxable income /year

(Million- VND)Taxable income /month

(Million-VND)PIT rate

(%)

1 Income


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Foreign employees working in VN

FIE can recruit directly Vietnamese employeesor through an employment service agency(previously: could not directly recruit)

Work permits required by foreigners workingfor a full 3 months or more

Total of foreigners not over 3 % of the totalemployment in a company, and not more than50 persons.

Work permits: not exceeding 3 years, butcould be extended.

TERMINATION


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TERMINATION Employment can be unilaterally terminated:

Natural disaster forcing the employer to scaledown production

The business terminates its operation

When terminating contract with a regular worker

(working 12 months or more), employer has topay severance allowance of half of a monthssalary for each year of employment

Most private sector companies hire workers on

very short term contracts (most full time workersin the private foot-ware, garment and foodprocessing sectors are in the 6-month to 1-yearcontract)

LABOR DISPUTES


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LABOR DISPUTES

Labor dispute about rights and benefitsrelating to employment, wages, incomes,and other labor conditions; include anindividual labor dispute between an

employee and an employer, and acollective labor dispute between a laborcollective and an employer.

Be resolved based on principles: (1) direct

negotiation and conciliation, (2)conciliation and arbitration, (3) Tradeunion participate in process

LABOR DISPUTES


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LABOR DISPUTES

On the rise?

Main reasons: Employers do not follow the Labor Code

Laborers do not clearly understand theregulations

Lack of Trade Union presence To solve problems:

The employer

The employee

The MOLISA officials: Labor Code should be mademore familiar to both employers and employees.Trade union offices be established. Governmentincrease inspections of labor issues and requireemployers to seriously comply with the Labor

Code

LABOR DISPUTES COLLECTIVE


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Laborer groupDisputes

Direct negotiationLabor User

Labor reconciliation council

Provincial labor arbitration council

Peoples court

LABOR DISPUTES INDIVIDUAL


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LABOR DISPUTESINDIVIDUAL

Individual laborerDisputes

Direct negotiationLabor User

Labor reconciliation council

District Peoples Court

St ik


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Strikes Strikes:

Laborers have the right to go on strike

Article 174: strikes are forbidden atbusinesses of public service or businessessential to the national economy or nationalsecurity an defense

Article 175: strikes that are judged toconstitute a serious danger to the nationaleconomy or to public safety may be

postponed or ceased by direct order of thePrime Minister.

Peoples Court decides which strike is lawful ornot.

St ik


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Strikes In 2007, at least 541 labor strikes were held across the

country, mostly at foreign-invested factories and involvingan estimated 350,000 workers.

650 strikes in the first 8 month 2008, 80% from FDI SouthKorea and Taiwan.

More than 20,000 Vietnamese workers went on strikedemanding a 20% increase to their US$59 monthly salariesat a Taiwanese-owned factory (Nike shoes) in 2008.

There have been more than 1,000 labor strikes in thesouthern commercial city since 1998, mostly at foreign-

invested companies.

110

SOCIAL SECURITY


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Social security legislation:

- 1961: first social security system, covering 600,000-700,000people (out of a population of 17 million at that time), inNorth Vietnam only.

- Until 1995, the Ministry of Labor, Invalids and Social Affairs(MOLISA) and the Vietnam General Confederation of Labor(VGCL) administered social security issues. Funds came

mainly from the state Budget

- 1995: Foundation of Vietnam Social Securityorganization(managed by the MOLISA):social security fund foremployees from various sectors, independent of the statebudget.

- Social security to take care events of illness, death,retirement, pregnancy, work-related accidents, occupationaldisease, unemployment.

Separate provisions for female


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p pemployees

Ensure the equality of women as for men(recruitment, wage, wage increases..)

Assist women to harmonize family and workduties

Preferential treatment, tax reduction forenterprises employing high no. of womenlaborers textile/garment

Employer prohibited to dismiss women workersfor reasons of marriage, pregnancy, maternal

leave Maternity leave: 4 months (with full salary

payment)

Maternity allowances: 1 month of salary

Separate provisions for junior


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p p jworkers

Junior workers: under 18 years old

Employment of under 15-year children:prohibited except in certain cases, in which caseneed parents/guardian approval

Prohibit to employ junior workers in heavy ordangerous work as stipulated in list issued byMOLISA

Normal working hours: not exceed 7 hours perday, 42 hours per week

SOCIAL SECURITY (cont)


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SOCIAL SECURITY (cont) Compulsory and voluntary social security

Compulsory for employees with indefinitecontracts or definite contracts of 3 monthsor more

Voluntary for employees with definitecontracts less than 3 months or seasonal

basis Criteria for pension: 60 (men), 55(women)

years of age, and paid social insurancecontribution for 20 years+. Lower rate ifsatisfies either of criteria.

On maternity leave, entitled to allowance of100% of salary and additional allowance of 1months salary



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Source of funds: contribution ratesare 15% of total wages funds for theemployer and 5% of the salary for

the employee, assistance from theState with additional sources, profitsfrom the funds. MW, not actual

wages be referred for Social Securitycontribution.



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SOC S CU (co t) Coverage:

- Compulsory for employees of state sector, ofstate owned enterprises, private enterprises,international organizations, enterprises with FDI,and EPZs.

- Coverage rate is very low, mostly focused in

state sector and few participate in voluntaryscheme. Pension coverage almost universal instate sector (91% civil servants, 93% of SOEemployees, in 2003).

Active contributions: 86% from state sector, only14% from private sector. (the law sanction is nothigh enough to change the firms s behavior).Excluded are especially people who live in rural

areas and workers in the informal sector.

TRADE UNION


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(A7) The laboring people have the right to found, joinand work for the trade union according the trade

union law in order to protect their rights and lawfulinterests

(A153) Six months at the latest after a newly createdbusiness becomes operational for newly created

businesses, the provincial federation of trade unionsmust set up a provisional trade union organization atthe business to represent and protect the rights andinterests of the laborers and the collective of laborers

(A154) The employer must not prejudice an employee

because he has formed, joined, or participated in theactivities of a trade union organization. The employermust not apply economic pressures or othermeasures to interfere with the organization andactivities of trade unions.


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Thanks for your attentions!

Vietnam Labor Market-2009 Finish Students

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Transcript of Vietnam Labor Market-2009 Finish Students