VIETNAM’S FUTURE JOBS LEVERAGING MEGA-TRENDS FOR GREATER PROSPERITY MAIN REPORT Wendy Cunningham Obert Pimhidzai VIETNAM’S FUTURE JOBS LEVERAGING MEGA-TRENDS FOR GREATER PROSPERITY MAIN REPORT Wendy Cunningham, Obert Pimhidzai with Claire Hollweg, Gabriel Demombynes, Mary Hallward-Driemeier, Mauro Testaverde, Michael Crawford, Elizaveta Perova, Nga Thi Nguyen, Obert Pimhidzai, Reyes Aterido, Sergiy Zorya, Steven Jaffee PREFACE Jobs have been a fundamental part of Vietnam’s rapid transformation to a modern, globally integrated, middle-income country. Doi Moi – the economic reform program that was launched in 1986 - not only changed Vietnam’s economic structure, but it also had deep implications for jobs, and these jobs were themselves a key input to the economic reform process. In 1986, most workers were engaged in agricultural production, with a small share laboring in state-owned enterprises. Today, less than half of jobs are in agriculture and a heterogeneous private-sector driven jobs sector has grown up. Job quality has not evolved as quickly, with the majority of jobs still being low productivity, low-paid, and lacking social benefits or worker protection. The world is on the cusp of new opportunities that could further shift Vietnam’s jobs picture. The rise of the Asian consumer class especially in China, a shift toward knowledge economies, new trade partners and patterns, automation in the workplace, and aging all threaten Vietnam’s current jobs structure. They also offer opportunities. At the invitation of the Government of Vietnam, the World Bank produced the report “Vietnam’s Future Jobs: Leveraging Mega-trends for Greater Prosperity” to explore the new challenges and opportunities facing Vietnam and to share policy reforms that could be a catalyst for more – and better – jobs. This work is aligned with the World Bank Group’s FY18-22 Country Partnership Framework, which emphasizes inclusive growth and investment in people and knowledge and highlights the importance of jobs for continued economic growth and poverty reduction. The report “Vietnam’s Future Jobs: Leveraging Mega-trends for Greater Prosperity” builds on “Vietnam 2035: Toward Prosperity, Creativity, Equity, and Democracy” a publication developed as a partnership between the Government of Vietnam and the World Bank Group, which lays out a long-term vision for Vietnam’s growth and development. “Vietnam 2035: Toward Prosperity, Creativity, Equity, and Democracy”, together with a series of studies that the World Bank has prepared covering topics of agricultural and rural development, private sector development, and skills development, present pieces of the jobs story. This study is the first that pulls together the viewpoints of specialists in poverty, macroeconomics, trade, private sector development, gender, education, and labor—thereby painting a unified and comprehensive jobs picture. The report identifies three reform areas that will be particularly important to capture the jobs-related opportunities offered by a changing economic and social context. First, create more jobs in specific segments of the modern sector, namely via Vietnam’s small and medium enterprises, agro-industry, and value chains. Second, enhance the quality of jobs in the traditional sectors. Family farming and household enterprises will be a part of the jobs landscape for many decades and much can be done to increase the quality of these jobs. Third, connect qualified workers to the right jobs. This will require overhauling the education and training sectors to meet the 21st century, as well as a range of other support for workers to shift jobs and skills as economic and social context change ever more rapidly. We hope that “Vietnam’s Future Jobs: Leveraging Mega-trends for Greater Prosperity” serves to inspire and connect policymakers, the private sector, and development partners to pursue the multi-faceted jobs challenge in the context of a changing world towards further prosperity and equity for Vietnam. Ousmane Dione World Bank Country Director for Vietnam III ACKNOWLEDGEMENTS The Overview and Main Report were written by a World Bank team led by Dr. Wendy Cunningham. The team included Claire Hollweg, Gabriel Demombynes, Mary Hallward-Driemeier, Mauro Testaverde, Michael Crawford, Elizaveta Perova, Nga Thi Nguyen, Obert Pimhidzai, Reyes Aterido, Sergiy Zorya, and Steven Jaffee. Additional background papers were prepared by Bilal Kahn, Van Nguyen, Viet Nguyen, Dino Merotto, Stacey Frederick, as well as Nguyen Do Anh Tuan, Truong Thi Thu Trang, Nguyen Le Hoa, and Nguyen Thi Thuy from Vietnam’s Institute for Policy and Strategy for Agriculture and Rural Development (IPSARD). Excellent administrative support was provided by Nga Thi Phuong Bui, Van Cam Nguyen, and Corinne Bernaldez and research assistance by Roxana Marinelli, Linh Hoang Vu and Anita Nyajur. Dr. Gary Fields provided constant critical review and guidance to the team throughout the process. The book was prepared under the guidance of Victoria Kwakwa, Vice President for East Asia and Pacific; Ousmane Dione, Country Director for Vietnam; and Jehan Arulpragasm and Philip O’Keefe, social protection Sector Managers at the World Bank. The preparation benefitted from detailed peer review guidance provided by Christian Bodewig, Luc Christiaensen, Daria Taglioni, Brian Mtonya, Yoonyoung Cho, and Jennifer Keller as well as Achim Fock, Cia Sjetnan, Sebastian Eckardt, Michel Welmond, Keiko Inoue, Nga Nguyet Nguyen, Dung Viet Do, Dung Thi Tuyet, Mai Thi Hong Bo, Ngan Hong Nguyen, Vuong Hai Hoang and many colleagues at the World Bank who provided insights, suggestions, and improvements to the report process and the final document. The team wishes to thank the participants in numerous consultation meetings with the Ministries of Labor, Invalids, and Social Affairs; Agriculture and Rural Development; Industry and Trade; Planning and Investment; and Education and Training as well as the Vietnam Chamber of Commerce, and international development partners. The team is deeply grateful to Dr. Nguyen Thang and team at the Centre for Analysis and Forecasting (CAF) at the Vietnam Academy of Social Sciences for their constant guidance and support throughout the process, and to the participants of the technical sessions that CAF hosted to debate specific topics of the report. Dr. Dang Kim Son’s detailed insights were particularly valuable. The team also benefitted from the discussions, comments, and ideas shared by Vietnamese youth, jobseekers, and Facebook users who participated in our live chats and discussion boards. IV TABLE OF CONTENTS Preface  II AcknowledgementsIV Abbreviations and AcronymsXII Executive Summary XIII What Will Vietnam’s Future Jobs Look Like? XIII How to Make Future Jobs Better and More Inclusive? XV Introduction1 Chapter 1 - Vietnam’s labor market today and in the future 5 From past to present - the evolution of jobs in Vietnam 5 Jobs Today: Better jobs created, but low-quality jobs still dominate  8 Jobs Today: Some segments of the workforce left behind 12 Jobs in the Future 16 Megatrends will reshape Vietnam’s economy and Future Jobs 18 Summary26 Chapter 2 - Shaping Vietnam’s agriculture and food system to deliver jobs  29 Agricultural Jobs and the Jobs Portfolio of Rural Households in Vietnam  34 Re-Measurement of Agricultural Labor Productivity in Vietnam  41 Jobs in Food Processing Industry in Vietnam: A First Look  46 Policy Options for Supporting Vietnam’s Agriculture and Food System to Deliver Jobs  52 Annex  58 Chapter 3 - Enterprise dynamics and job flows  63 Doi Moi and the Evolution of Firm Ownership Types  65 Where do wage workers work?  66 What are the patterns of job creation and which types of firms are creating jobs?  73 The relationship between productivity and employment  77 Minimum wages  80 How about female employment?  81 Policy Recommendations  83 Chapter 4 - Workers & jobs: current trends and emerging opportunities  93 Labor Supply: Today’s labor force  93 Demographics: Fewer potential workers and less potential work time  96 Skill-Up or Lose Out  97 V Transitioning up the jobs ladder  106 Policy for More, Better, and Better-Matched Workers  109 Moderating the Impacts of the Demographic Shifts on the Labor Market  109 Rethinking the Skills Development Process  111 Policy and User-Friendly Information for Good Decision-making  118 Chapter 5 - The pathway to future jobs  123 What Will Vietnam’s Future Jobs Look Like?  123 How to Make Future Jobs Better and More Inclusive?  124 Reform Area I: Creating More Good Jobs in the Modern Sector  125 Reform Area II: Enhancing the quality of jobs in the traditional sectors  128 Reform Area III: Connecting Qualified Workers to the Right Jobs  129 Trade-offs and Institutional Considerations  131 Summary of Policy Directions  134 References  136 VI TA B L E O F CO N T E N T S TABLE OF FIGURES Figure 1.1: Distribution Of 15-64 Years Old Workers by Sector, 2005-2015  6 Figure 1.2: Growth in Number and Share of Wage Workers, 2009-2015  6 Figure 1.3: Composition of Jobs in Rural and Urban Areas, 2009-2015  6 Figure 1.4: Growth in Jobs Supported by the Export Sector, 1989 – 2012  6 Figure 1.5: Decomposition of Growth in Per Capita Value Added, 1990-2013 and 2013-2035  7 Figure 1.6: Productivity Change Decomposition. Annual Contribution to Per Capita Value Added Growth by Major Sector 7 Figure 1.7: Distribution of Jobs by Employer and Contract Status (2015) 9 Figure 1.8: Occupational Distribution by Employment Type, 2015  9 Figure 1.9: Mean Monthly Wage Earnings by Occupation, (‘000 dong)  9 Figure B.1: Employment Types by Education for Ages 15-64, 2015  11 Figure 1.10: Employment Profile by Education, 2014 13 Figure 1.11: Employment Profile by Age, 2014  13 Figure 1.12: Share of Women in Each Sector  13 Figure 1.13: Gender and ethnicity wage gap, relative to men and Hoa/Kinh ethnicities, 2011-2014 13 Figure 1.14: Employment Profile of 25-34 Years Old Workers by Year  15 Figure 1.15: Occupation Profile of 25-34 Years Old Workers by Year  15 Figure 1.16: Growth in Employment by Occupation- 2013-2015  17 Figure 1.17: Share of Developing Asia Households in Each Consumption per Capita Category, 2002-2015  18 Figure 1.18: Share of Developing Asia Households in Each Consumption per Capita Category, projections 2015-2030 18 Figure 1.19: Daily Consumption of Selected Food Groups in East and Southeast Asia, 2009 (actual) and 2030 (projected) 19 Figure 1.20: Schematic Presentation of Job Quality and Value Chain Stages  24 Figure 1.21: Share of the population by age, annual, 1950-2050  24 Figure 1.22: Vietnam Dependency Ratio, by youth and older adults, 2015-2050  24 Figure 2.1: Vietnam moved from an agro-based to transition economy during the last 30 years  31 Figure 2.2: Sectorial GDP per worker in Vietnam, 2005-2014  32 Figure 2.3: Agricultural labor productivity in Vietnam and selected countries, 1986-2014  33 Figure 2.4: Sources of income of rural households in Vietnam, 2010-2014  36 Figure 2.5: Agriculture’s contribution to rural household income by region, 2002-2012  36 Figure 2.6: Job portfolio of rural households by region, 2014  37 Figure 2.7: Distribution of employed population by sector and socio-economic regions, 2014  37 Figure 2.8: Source of per capita income of poor households, 2010-2014  38 Figure 2.9: Source of per capita income of non-poor households, 2010-2014  38 Figure 2.10: Source of per capita income of ethnic minority households, 2010-2014  39 Figure 2.11: Source of per capita income of Kinh majority households, 2010-2014  39 VII V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Figure 2.12: Progression and distribution of jobs in a food system as the countries develop  47 Figure 2.13: Changes in employment by income and manufacturing industry, 1963-2007  48 Figure 2.14: Prioritization of food system’s segments for investment attractiveness in Vietnam  50 Figure 2.15: Education level of rural versus urban population, Vietnam  52 Figure 2.16: Formal training of Vietnam’s labor force by ethnicity  52 Figure 2.17: Composition of food calories in Vietnam, 2009 (actual) and 2030 (projected)  56 Figure 3.1: Firm Distribution by Size  66 Figure 3.2: Employment Share by Firm Size  66 Figure 3.3: Distribution of Firms by Ownership  67 Figure 3.4: Employment Share by Ownership Type  67 Figure 3.5: Employment Share by Ownership (2004)  68 Figure 3.6: Employment Share by Ownership (2014)  68 Figure 3.7: Total Employment Accounted for By Largest Firm  68 Figure 3.8: Total Revenue Accounted for By Largest Firm  68 Figure 3.9: Share of Employment by Top 1% Largest Firms  69 Figure 3.10: Market Concentration, Sales, 2004-2014  70 Figure 3.11: Market Concentration, Employment, 2004-2014  70 Figure 3.12: Distribution of Firms by Age  73 Figure 3.13: Employment Share by Age  73 Figure 3.14: Distribution of Firms by Region  73 Figure 3.15: Employment Share by Region  73 Figure 3.16: Job creation and destruction  74 Figure 3.17: Job creation and destruction by incumbents, new firms (entry) and exiting firms  74 Figure 3.18: Net Job Creation  74 Figure 3.19: Net Job Creation by Ownership  75 Figure 3.20: Life Cycle of a Firm  76 Figure 3.21: Life Cycle of a Firm, Average Employment  76 Figure 3.22: Value Added per Worker by Size  77 Figure 3.23: Value Added per Worker by Ownership and Export Status  77 Figure 3.24: Output per worker and correlation between firm productivity and firm size, All Sectors 78 Figure 3.25: Capital-labor ratio, by ownership  79 Figure 3.26: Total factor productivity and employment growth  79 Figure 3.27: Distribution of Firms Paying Wages below Minimum Wage  80 Figure 3.28: Minimum Wage Compliance by Region  81 Figure 3.29: Female Employment  82 Figure 3.30: Share of Female Employment  82 Figure 3.31: Logistics Performance Index, 2016  87 Figure 3.32: Automation is spreading – but unevenly across sub-sectors  89 Figure 3.33: Technology Readiness Index, 2016  89 Figure 4.1: Labor force participation rate, global, 2015  94 VIII TA B L E O F CO N T E N T S Figure 4.2: Female labor force participation, global, 2015 94 Figure B.1: Time use by age, males  95 Figure B.2: Time use by age, females  95 Figure 4.3: Size of the working age population, ‘000s, 2000-2065  96 Figure 4.4: Vietnam Dependency Ratio, by youth and older adults, 2015-2050  96 Figure B.3: Net Enrollment Rate, Difference from Kinh average, by level of education (2014)  99 Figure 4.5: Highest level of education of the labor force, 2014 (% of total)  100 Figure 4.6: Literacy Proficiency Scores of the Labor Force  100 Figure 4.7: Gender Gaps in Field of Study in Post-Secondary Education  101 Figure 4.8: Rates of Return to the Level of Education, Private Sector, 2014  101 Figure 4.9: Employer’s View of the Importance of Job-Related Skills for Blue- and White-Collar Workers  104 Figure 4.10: % of firms that state that it is difficult or very difficult to find each skill, when hiring  105 Figure 4.11: Share of the working age population (age 16-65) who were in each Work Type in 2012 (x-axis) and 2014 (bar) 106 Figure 4.12: Job Search Methodologies, by Age  108 Figure 4.13: Problems firms encounter when hiring  108 Figure 4.14: Percentage of Wage Workers in Different Occupations Who Report Having to Learn New things, by Frequency 113 Figure B.4: Organizations gathering industry input to inform training programs in Australia 116 Figure 5.1: Policy for Better and More Inclusive Jobs  125 IX V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T TABLE OF TABLES Table ES.1: Detailed Policy Recommendations  XVII Table 1.1: Job “Quality” by Job Sector, 2015  10 Table 1.2: Worker Transition between Employer Types, 2012-2014  15 Table 2.1: Annual growth in agricultural value added in selected Asian countries, 1991-2016  29 Table 2.2: Composition of agriculture and agricultural growth by Vietnam’s region  31 Table 2.3: Agricultural land and labor productivity, selected countries, 2000-2014  33 Table 2.4: Vietnam’s agricultural labor force by activity, 2012  35 Table 2.5: Role of agriculture in rural areas of Vietnam, 2006-2016  35 Table 2.6: Selected labor indicators for Vietnam’s ethnic minority, 2014-2015  38 Table 2.7: Jobs of rural households by region and ethnicity, 2014 (%)  40 Table 2.8: Jobs portfolio of rural people by gender, 2014  40 Table 2.9: Vietnam’s households receiving income from and specialized in agriculture  42 Table 2.10: Estimates of per-day-worked agricultural labor productivity by sub-sector  42 Table 2.11: Comparison of annual and per-hour-work adjusted labor productivity, 2014 43 Table 2.12: Estimated wages by sector, 2014  43 Table 2.13: Estimates of the per-day-worked agricultural labor productivity in Vietnam by commodity for ‘specialized’ households  44 Table 2.14: Labor input and productivity from the field data by commodity, 2016-2017  45 Table 2.15: Estimates of the size of Vietnam’s agro-food system, 2014  48 Table 2.16: Employment and labor productivity in food processing industry of Vietnam, 2012  49 Table 2.17: Job creation’s capacity of different segments of food system  50 Table 2.18: Skills by employment, Vietnam  51 Table 2.19: Spectrum of action areas and options in the food system to deliver more jobs  52 Table 2.20: Labor input, productivity, and land use by commodity, 2016-2017  55 Table 2.21: Daily consumption of selected food groups in East and Southeast Asia, 2009 (actual) and 2030 (projected)  55 Table 2.22: Vietnam’s labor productivity by sector and subsector, 2005-2015  58 Table 2.23: The detailed estimates of the labor productivity by sector, Vietnam, 2014, households earning any amount of income from agriculture  58 Table 2.24: The detailed estimates of the labor productivity by sector, Vietnam, 2014, specialized households earning 70 percent and more of total income from agriculture 59 Table 2.25: The detailed estimates of the labor productivity by commodity, Vietnam, 2014, specialized households earning 70 percent and more of total income from agriculture 59 Table 2.26: Labor intensity and productivity from the field data, Vietnam, 2016-2017  59 Table 2.27: Estimates of labor productivity in different sub-sectors of the economy, Vietnam  60 X TA B L E O F CO N T E N T S Table 2.28: Potential occupational growth and related skill sets in selected food value chains in Vietnam 61 Table 3.1: Market Concentration (10 Top Sectors)  70 Table 3.2: Transition Matrix  76 Table 4.1: Distribution of the working age population (WAP, age 15-64), labor force (WAP who are working or unemployed), and labor force participation rates by demographic/geographic characteristics, 2015 94 Table 4.2: Employee and Wage Profile for the Apparel Value Chain  98 Table 4.3: Most important Skills in the largest 10 occupations (at the 3-digit level) by employment size, 2014 103 Table 4.4: Worker transition between work types, 2012-2014, age 16-24 107 TABLE OF BOXES Box 1.1: Vietnam’s public sector crowding out private sector employees? 11 Box 1.2: Rise of the sewbots? Maybe not for a while… 22 Box 1.3: Five Factors Influencing the Pace and Extent of Automation of the Work Place 23 Box 1.4: Measuring Total Work 25 Box 1.5: Climate change and jobs 26 Box 3.1: Introducing the Vietnam Enterprise Census 2004-2014 64 Box 3.2: Jobs in apparel and skills for upgrading 72 Box 4.1: Measuring Women’s Work 95 Box 4.2: Left Behind, But Glimmers of Breakthrough 99 Box 4.3: A Room of One’s (Aged) Own 110 Box 4.4: New Schools for Vietnam? Importing Colombia’s Escuela Nueva, with Great Success 112 Box 4.5: Extension Services – for Managers 114 Box 4.6: Australian Industry and Skills Council – Guiding the Education and Training Sector 116 Box 5.1: Next Generation FDI Strategy 126 MAPS Map 1: Labor productivity 16 Map 2: Average wage per worker 16 Map 3: Access to markets 16 XI ABBREVIATIONS AND ACRONYMS AISC The Australian Industry and Skills Committee ASEAN Association of Southeast Asian Nations BPO Business process outsourcing CMT Cut, make trim ESC Employment Service Center FAO Food and Agriculture Organization FDI Foreign direct investment GDP Gross Domestic Product GSO Government Statistics Office GVCs Global value chains HACCP Hazard Analysis and Critical Control Points ICT Information technology and communications IFC International Finance Corporation IPSARD Institute of Policy and Strategy for Agriculture and Rural Development IRC Industry Reference Committees LFS Labor Force Survey LMIS Labor Market Information System LTC Long-term care MARD Ministry of Agriculture and Rural Development MNCs Multi-national corporations MOET Ministry of Education and Training MOLISA Ministry of Labor, Invalids, and Social Affairs MPI Ministry of Planning and Investment M&E Monitoring and evaluation OECD Organisation for Economic Cooperation and Development PISA Programme for International Student Assessment R&D Research and development SMEs Small and medium enterprises SOEs State-owned enterprises SSO Service Skills Organizations STEM Science, technology, engineering and mathematics STEP Skills Toward Employability and Productivity survey TFP Total factor productivity UNIDO United Nations Industrial Development Organization VARHS Vietnam Agriculture and Rural Household Survey VET Vocational education and training VHLSS Vietnam Household Living Standards Survey VNSCO Vietnam Standard Classification of Occupations WDI World Development Indicators, World Bank WTO World Trade Organization CURRENCY EQUIVALENTS (Exchange Rate Effective January 25, 2018) Currency Unit = Vietnam Dong (VND) US$ 1 = VND 22,710.75581 XII EXECUTIVE SUMMARY Vietnam’s 50 million jobs are a cornerstone of The policy challenge is to capture the mega- its economic success. The transformation toward trends so that Vietnam’s jobs of the future are services and manufacturing, and impressive labor higher value-added, more productive, better productivity and wage growth led to plunging paid and provide better opportunities to poverty rates and globally enviable economic workers. As history shows us, economic growth is growth over the last decades. Employment rates not enough to transform the jobs picture. Instead, are high and unemployment rates are low by a proactive set of policies is needed. This report global standards. identifies a narrow set of reforms areas for firms, farms, and workers that should be the focus of The jobs challenge is to create more high policy to improve job quality in Vietnam. It is not quality and inclusive jobs. Shiny foreign intended to be prescriptive, but instead to narrow factories paying above the minimum wage down a complex challenge into a few actionable and offering social benefits typify, at best, priority areas. only 2.1 million jobs. And registered domestic firms provide no more than 6 million jobs. What Will Vietnam’s Future Jobs Meanwhile, 38 million Vietnamese jobs are Look Like? in family farming, household enterprises, If Vietnam continues to focus its efforts on or uncontracted labor. These traditional jobs attracting foreign direct investment in low- tend to be characterized by low productivity, skilled assembly jobs, its future jobs will look low profits, meager earnings, and few worker a lot like today’s jobs. If the current rate of protections. While they have been a path out transformation from family farms and enterprises of poverty, they will not provide the means to to jobs that are covered by labor contracts reach the middle-class status that Vietnam’s continues for the next 20 years, contracted wage citizens aspire to. Ethnic minorities, women, and jobs would increase from 24 percent of jobs to 43 unskilled workers cluster in these jobs. percent by 2040. These jobs would continue to be in low value-added activities, with related low Transformational mega-trends may either create per-unit profit and minimum wage-level jobs with better job opportunities or threaten the quality limited opportunities for worker advancement. of Vietnam’s jobs. Shifting trade and consumption Family farming and household enterprise jobs patterns will affect what Vietnam can export and would still account for more than half of all jobs in in which value chains it can, or cannot, continue Vietnam in 2040. to be engaged. The rise of the global knowledge economy may provide new high-value jobs but will Mega-trends could disrupt the future jobs require a different skill set and export model than picture, improving job quality in some sectors Vietnam currently uses. An aging population will while expanding poor quality jobs in others. Or, demand care services from a shrinking working current constraints may limit Vietnam’s ability to age population. Automation will replace jobs if capitalize on these new opportunities. Specifically: workers are not equipped to use technology to their benefit. Together, these factors portend a More jobs will be associated with local, regional, tilt toward higher quality jobs, but only if firms, and global value chains because of the growing farms, and workers are prepared to take on these consumer class both in Vietnam and the region, new opportunities. XIII V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T increasing urbanization, the emergence of agricultural product exports to higher value regional value chains, and Vietnam’s reputation regional markets. as a solid link in global value chains. This may come about because current jobs become linked The household enterprise sector will persist. to value chains (for example, family farms selling With urbanization, helped by the relaxation of to retailers) or through the creation of new jobs restrictions on internal migration (ho khau) in response to new markets. The low skill-level and increasing demand for services by urban of the workforce and the emergence of regional consumers, the household enterprise sector is competitors may hinder Vietnam’s movement into likely to grow. Jobs quality will likely remain more lucrative value chains or higher value jobs low quality if household enterprises continue to within value chains. operate at the margins of the formal economy. Small- and medium-sized Vietnamese-owned Automation will slowly begin to change the tasks firms will continue to create good jobs, though in some jobs and (even more slowly) displace possibly less successfully than today. Even though jobs. At first, technology will free up labor, many of today’s economic policies favor foreign allowing low-skilled workers to produce higher- investors and state-owned enterprises (SOEs), value products. As educated new labor force small- and medium-sized domestically owned entrants continue to raise the skill levels of the firms were the largest source of new contracted workforce, disruptions will be delayed. However, wage jobs in the past decade, expanding by in the longer term, as labor costs increase while the more than 5 percent. If foreign firms continue to cost of technology decreases, machines will start operate in enclaves with little connection to the to replacing humans, thus reducing the number of broader economy, and as Vietnam moves into available jobs. more sophisticated segments of value chains, job creation by domestic firms could be further The limited skill level of Vietnam’s workforce constrained. will hinder the emergence of good jobs. Today’s young people have a strong foundational set of Job quality in the modern sector will improve skills, but the workforce as a whole has low levels if Vietnam shifts toward higher value-added of education and severe skill gaps. The growth of production activities. Contracted wage jobs knowledge-intensive exports, the service industry, are more productive and pay better than and automation will be hindered by a labor force traditional, uncontracted jobs. However most that lacks a range of sophisticated skills and the of Vietnam’s modern jobs are in low value- means to upgrade their skills over their lifetimes. added manufacturing. The global shift toward knowledge-intensive production processes and Job search will need to be done more often. complex value chains, can be an opportunity to The expansion of modern firms will provide create high quality, modern jobs in Vietnam. job opportunities that are less dependent on personal connections. Job turnover will become Rural jobs will continue to become more diverse, more frequent as a result of both the structural with the development of rural manufacturing and transformation of the economy and fluctuations in services. Already, 4 of every 5 rural household firm size. This increase in turnover will be offset derives at least some of their income from off-farm by technology-enhanced job search. But more activities. Increasing mechanization will reduce marginal populations will be left behind. the agricultural workforce who will take up off- farm jobs. This transformation could lead to better Future jobs will be more inclusive for some, but jobs if driven by the development of food chains more of a challenge for others. to serve increasingly affluent urban Vietnamese Young people are already benefitting from consumers and the continued expansion of the onset of these mega-trends. Although XIV EXECUTIVE SUMMARY youth have higher unemployment rates than Reform Area 1: Creating More Good Jobs the national average, working youth tend in the Modern Sector to be in better jobs than older workers; the Jobs-friendly segments of the modern sector can share of youth working in wage jobs in the be a significant source of new good jobs. The private domestic and foreign sectors is higher best jobs, defined by higher labor productivity than their share of the working population. and wages and social benefits, are largely in the However, a substantial number of less skilled modern sector. They are also inclusive of women youth employed in low-quality wage jobs is and youth. These are the fastest growing jobs in likely to persist. Vietnam today and, if Vietnam prepares for the opportunities brought through the mega-trends, Women may benefit from the expansion of they have potential to grow, in quantity and export-oriented jobs and the emergence of a quality, even more. Thus, the policy challenge is care economy to provide services to an aging to foster the creation and growth of enterprises population. On the other hand, the aging of that are conducive to job creation, create high the population may impose time demands on value jobs, and position Vietnam for even more as women that push them into worse jobs or out the mega-trends are realized. Three policy areas of the labor market entirely. are proposed: (i) lower the barriers to growth of domestic Aging workers who did not benefit from the small and medium enterprises. good education system that Vietnam has today (ii) encourage enterprises to move into are likely to struggle as jobs become more knowledge-intensive segments of regional skills-biased. and global value chains. (iii) facilitate the development of Vietnam’s agro- Ethnic minorities may not be able to take food system. advantage of the emerging new jobs because of their location in remote communities and the Reform Area 2: Enhancing the Quality limited existence of service and manufacturing of Jobs in the Traditional Sectors jobs in their home villages. Jobs in family farming (and related primary production) and household enterprises can be How to Make Future Jobs Better and improved by integrating them into the broader More Inclusive? economy. These jobs will be a significant part of Vietnam can make its future jobs better and the economy for many years so they cannot be more inclusive if firms, farms, and workers ignored. They are overwhelmingly the source of seize opportunities and find ways to minimize employment for ethnic minorities, older workers, downside risk of these future trends. This would and the less educated, thereby being intricately entail complementing efforts to attract higher linked to poverty reduction. Two policy areas value-added foreign direct investment with new are proposed: efforts to foster an innovative, dynamic domestic (i) Encourage the agricultural sector to diversify firm sector; incorporate largely excluded economic into high value-added crops and local value sectors and people into the economy; and generate chains. a lean and smart labor force to create and work (ii) Facilitate business links between household in higher value-added jobs. Eight policy focus enterprises and SMEs. areas and multiple policy directions that define the “how to”, underlie these reform areas. While the Reform Area 3: Connecting Qualified policies may look familiar, they have been selected Workers to the Right Jobs out of a long list of sectoral policies; these eight Workers need different skills and a range of other focus areas offer the best chance for better and supports to effectively engage in today’s jobs and more inclusive jobs. to be ready for the demands of tomorrow’s jobs. XV V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T While Vietnam’s youth are globally recognized This report argues that greater gains are possible for secondary school test scores that rival those through a deliberate jobs strategy that focuses on of European students, most of Vietnam’s labor our eight policy reform areas. This will require force has, at best, incomplete secondary school defining targets for future jobs and monitoring and limited skills. The skills shortages observed progress toward them; engaging, and holding today will be exacerbated as mega-trends begin accountable, a range of government and private to affect the jobs pictures. Even workers with the sector actors; and leadership by a coordinating right skills do not have sufficient information body to champion the jobs issue and guide the about job openings, employers do not have good many actors toward a shared future jobs vision. information about worker quality, social norms limit job options, and income constraints prevent The future for Vietnam’s jobs is bright if Vietnam skill upgrading or moving to more appropriate begins to prepare today for this future. The jobs. Three policy areas are proposed: country can continue on its current path, which (i) build skills for XXIst century jobs through will yield job increases, but these will diminish as radical reforms to the education and training global trends erode some of Vietnam’s comparative system, advantage as certain groups are left further behind. (ii) generate and provide information to fit the The government could reform on the margin in an right workers into the right jobs, effort to keep up with changing global trends, but (iii) provide auxiliary services to facilitate labor this will become difficult as the global economy participation and labor mobility. becomes increasingly crowded by new entrants. Or Vietnam could make some big investments now A Coordinated Strategy for Better Jobs – in its domestic firms and farms, its labor force, A jobs strategy would visualize jobs goals regional and global trade networks, and even in and coordinate multi-sectoral action to reach integrating its own economy. These investments those job goals. The current jobs strategy - that would enable Vietnam to leap forward to higher better jobs will emerge from solid economic and economic status and would yield better and more sectoral development strategies – has had success. inclusive jobs for all its citizens. XVI EXECUTIVE SUMMARY Table ES.1: Detailed Policy Recommendations Policy Reform areas Selected Policy Actions Short-term (within the Medium-term (in future Long-term goal current five-year plan) five-year plans) (by 2035) Lower the barriers to Put together a task force to Investments in logistics, Job growth in growth of domestic develop an action plan to finance, marketing, and domestic SMEs small and medium level the playing field for other professional services exceeds 5 percent enterprises. private domestic firms vis- to support manufacturing per decade, à-vis SOEs and foreign firms. expansion. underpinned by The plan should be designed strong links between to build the political will to Establish structures to a dynamic private implement the necessary enable effective dialogue sector and MNCs. reforms to make this between large public sector happen. firms and SMEs within specific sectors to link SMEs Give relevant information with larger firms, especially on quality standards to local MNCs or exporters. suppliers with the potential to provide services or goods to MNCs. Also, expand the accreditation system on quality standards into key sectors with the potential to expand exports Creating Encouraging Streamline the regulatory Broaden the Law on More and higher More Good enterprises to move environment for logistics High Technologies to value-added jobs in Jobs in the into knowledge- and upgrade domestic encompass a broader range the exports sector Modern intensive segments in infrastructure to foster the of knowledge-intensive, through doubling Sector regional and global creation of logistics services exportable services. services as a share value chains companies. of total exports and Lift all remaining formal shifting toward Support linkages between restrictions on service trades commercial services exporting firms and firms such as foreign equity export industries. producing domestic inputs. limitations and caps. Facilitating the Upgrade food market Provide incentives for the Better paid and safer development of the infrastructure (such as food industry to encourage jobs in agro-food agro-food system wholesale and urban wet them to invest in provincial processing. markets) through public or cities that are closer to the PPP investments. agricultural production Strengthen public food base and areas with safety measures and support underemployment. the adoption by private companies of HAACP, Support labeling, certifying, traceability, and other and other control systems food system management that will make it possible processes. to rebrand Vietnamese agriculture as a sustainable source of global and regional supply. Encouraging the Adopt policies and Support the development More well-paid agricultural sector programs to accelerate shifts of a broad range of private and safer jobs in in to diversify into high in agricultural land use, technical, advisory, financial, primary agriculture value-added crops especially from mono-crop and other demand-led and less seasonal Improving rice to mixed farming or services for Vietnamese variability in these the Quality high-value crop production. agriculture, including job opportunities. of Existing Strengthen existing agro-entrepreneurship. More entrepreneurial Jobs in the cooperatives to realize youths staying in Traditional economies of scale among Support the agriculture. Sectors small and medium-sized professionalization of farmer farms. cooperatives and their provision of a broader range of commercial services. XVII V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Table ES.1: Detailed Policy Recommendations (cont) Policy Reform areas Selected Policy Actions Short-term (within the Medium-term (in future Long-term goal current five-year plan) five-year plans) (by 2035) Facilitating business Provide SMEs with Open one-stop (virtual) More well-paid links between information on industry shops where household and safer jobs in in household enterprises standards, quality standards, enterprises can go for primary agriculture and SMEs and the importance of registration, information, and less seasonal timely delivery as well as and technical assistance. variability in these job Improving credit options. Provide extension services opportunities. the Quality to the most promising More entrepreneurial of Existing Introduce market-based household enterprises. youths staying in Jobs in the and community-based agriculture. Traditional information campaigns and Sectors registration platforms. (cont) Encourage development and adoption of technology to link household enterprises with the larger economy. Building worker Develop a plan with financial Define a new role for MOET A demand-driven, skills for today’s incentives to encourage the and MOLISA in overseeing flexible, market-based and tomorrow’s private sector to provide, M&E and providing financial skills development jobs through guide, and advocate for incentives to the private system radical reforms to a more appropriate skills sector to encourage the the education and development sector. delivery of demand-driven training systems. education and training Integrate a broader range services. of skills into the primary, secondary, and tertiary Develop a system of curricula. continuous learning through demand-driven short courses and skills upgrading for adults. Providing the Design, produce, and Design and implement a Comprehensive and information needed disseminate labor market Labor Market Information widely accessible Connecting to place the right information tailored to System (LMIS) for systematic LMIS. Qualified workers into the right different users. data analysis and managing Workers to jobs dissemination platforms. A private sector- the Right Assess the current job driven job search Jobs search system, including Design a job search system that is widely the effectiveness of the assistance strategy that accessible, with Employment Support includes private sector public sector support Centers. services supplemented by targeted to excluded public Employment Support groups. Centers with an expanded remit to serve the needs of vulnerable populations. Providing auxiliary Develop a plan for a long- Allocate financing to Fewer barriers to services to facilitate term care system for the incentivize the creation of effective preparation labor force aging population. markets for long-term care. for and integration participation and into the labor market. mobility Design and implement a Finance individual learning voluntary component of the and job transfer accounts to unemployment insurance facilitate labor mobility over program for workers without a worker’s career. contracts. XVIII INTRODUCTION Good and inclusive jobs have been, and out of agriculture has been primarily toward will continue to be, a crucial component uncont rac ted wage lab or or hous ehold of Vietnam’s economic and social success. enter pr is es, b ot h charac ter ize d as low Vietnam’s strategy of a market-based economy productivity, low-paid, and lacking social with a socialist orientation has served it well over benefits or worker protection. While today’s the past three decades.1 The rapid embrace of 50 million jobs may have lifted families out of markets and integration into the global economy poverty and generated high GDP growth rates, resulted in annual GDP per capita growth rates they are not of sufficient quality to compete with of 5.5 percent between 1990 and 2015, globally modern industry or to provide the means to live second only to China’s growth rates in the same the middle-class lives that Vietnam’s citizens period.2 On the social side, extreme poverty was aspire to. Further, good jobs are passing by some nearly eliminated and poverty rates plunged from segments of Vietnam’s population, threatening a 60 percent to 13 over a generation while a middle further marginalization of some groups. class began to emerge.3 The current jobs strategy - that better jobs This economic and social transformation was will emerge from solid economic and sectoral accompanied by an evolution of Vietnam’s jobs development strategies –will continue to slowly structure. While jobs – defined as an activity that transform the jobs picture. Vietnam’s high GDP results in income or in-kind benefits and does not growth rates, high levels of labor productivity, violate human rights – were characterized almost and fully employed labor force suggests that the entirely by family farming, collectives, and state- Doi Moi strategy still has much to offer Vietnam owned enterprises (SOEs) in 1986, under Doi and its people. The current economic activity Moi employment shifted towards manufacturing characterized by low value-added export-oriented and services in household enterprises outside assembly jobs in enclaves with little connection to agriculture, and private domestic and foreign- the broader economy is likely to continue to grow. owned firms. In 1989, 71 percent of employed If we assume that the transformation from family Vietnamese worked primarily in agriculture, farms and enterprises to jobs that are covered by fishing, or forestry, and private employment was social benefits continues at the same rate over the almost non-existent. Today agriculture, fishing, next 20 years as during the period 2008 to 2015, and forestry accounts for 46 percent of jobs, and 1 then about two out of every five jobs (43 percent) in 10 Vietnamese workers—about 5 million—hold will be wage jobs in the modern sector by 2040. a formal sector wage job with a privately-owned Vietnamese firm. But emerging opportunities in regional and global markets can offer greater rewards. The But job quality has not evolved as quickly, world is on the cusp of new opportunities that even as aspirations are soaring. The shift could further shift Vietnam’s jobs picture. The 1 Doi Moi launched Vietnam’s move toward a market-economy structure through the removal of a multitude of distortions imposed under central planning (multiple price controls, production quotas, collectivized agriculture, trade and investment restrictions, and a ban on formal private enterprise). Most of these restrictions were lifted in the initial phases of Doi Moi, and systems that were friendlier to the market and private sector were in place by the early 1990s. 2 World Bank and MPI 2016 3 World Bank 2016b 1 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T rise of the Asian consumer class especially in and regions. Using the Vietnam Household and China, a shift toward knowledge economies, new Living Standards Survey (2010-2014), the chapter trade partners and patterns, automation in the discusses labor market transitions, regional workplace, and aging all threaten Vietnam’s current disparities in job quality and why jobs today are jobs structure. They also offer opportunities. leaving some segments of the labor force behind. It also introduces five emerging trends that will To capitalize on these new trends, and transform have a substantial impact on jobs now and in the jobs to meet Vietnam’s aspirations for middle- future. It concludes by envisioning a jobs future class status, Vietnam will need to develop and if Vietnam does, or does not, embrace these new implement a deliberate strategy to generate trends. better and inclusive jobs. As noted, economic growth is not enough. Instead, a proactive set Chapter 2 takes a closer look at jobs in the of policies can foster an innovative, dynamic agriculture sector, Vietnam’s largest job-creating domestic firm sector, generate a lean and smart sector and the one with the greatest potential labor force to create and work in higher value- for job expansion. The chapter begins with a added functions, and incorporate largely excluded stocktaking of the role of agriculture in income and economic sectors and people into the economy. employment generation over time and discusses This strategy is likely to both fuel economic the composition of agriculture and agricultural development and result in the creation of better growth by region, showing that primary agriculture and more inclusive jobs for both men and women. remains the largest employer in Vietnam. It uses a new methodology, as well as newly collected This Report data, to estimate labor productivity in agriculture, Vietnam’s Future Jobs: Leveraging Mega-trends finding that agricultural productivity is on par for Greater Prosperity report lays out a policy with, or surpasses, labor productivity in low- agenda for better and more inclusive jobs in skilled services and manufacturing. The chapter Vietnam. The purpose of the report is to identify explores agro-value chains and identifies those the challenges and new opportunities for better that are both investor- and jobs-friendly. The and inclusive jobs in Vietnam and to share policy chapter concludes by identifying different areas reforms that could be a catalyst to create these of improvement to ensure competitiveness of jobs. The inherently cross-cutting nature of jobs agricultural jobs and future creation of better requires a multi-sectoral approach to the issue, jobs, notably, adopting measures to accelerate the drawing from macroeconomics, agriculture and movement of labor from less productive primary rural development, private sector development, agriculture to more productive cultivation, labor and employment, trade policy, gender, industry and services, particularly in food system education and training, and demographics, as value chains and the food processing industry. well as the linkages among these topics. Moreover, looking at jobs policy through different lens makes Chapter 3 explores enterprise dynamics to it possible to identify both synergies and trade-offs better understand productivity and employment in expanding job opportunities. growth. This chapter uses data from the Vietnam Enterprise Census of registered enterprises This report has five chapters. Chapter 1 presents from 2004‐2014 to explore a number of firm a picture of Vietnam’s labor market today and in characteristic and performance variables in the the future. It begins with an overview of Vietnam’s formal private sector and SOEs. The analysis labor market evolution over the past two decades looks at the typology and evolution of firms, and presents a comprehensive overview of employment and market concentration by firm Vietnam’s current jobs structure, looking at job size and ownership type, spatial concentration of quality and wages, distribution of employment firm activity as well as patterns of job creation to across occupations, employers, contract status determine which types of firms are creating jobs. 2 INTRODUCTION An analysis of labor and productivity identifies improving the job-matching process to connect employment expansion potential by firm type and the workers to the right jobs. emphasizes the experience of private domestic firms in increasing productivity and employment Chapter 5 provides a pathway to future jobs in over time. Of particular interest, is the trade- Vietnam. It provides an integrated picture of off between firm productivity and firm growth future jobs based on the findings of the previous (measured by workforce size). Finally, the chapter chapters, and identifies a proactive jobs strategy provides a set of recommendations to encourage with three pillars: i) creating more good jobs in private enterprise job creation potential. the modern sector; ii) improving the quality of existing jobs in the traditional sectors; and iii) Chapter 4 approaches the jobs question from connecting qualified workers to the right jobs. the worker perspective, providing an in-depth Lastly, it provides a framework to link short, analysis of the supply-side of job creation. The medium and long-term objectives to this specific chapter assesses certain aspects of Vietnam’s and comprehensive set of policy actions. human capital stock and identifies the skills workers have today as well as those needed for The report conclude that Vietnam’s jobs are at a future jobs. It starts by presenting an overview cross-roads. Vietnam can continue its current path of the labor force, including the number of and reap jobs rewards from the current system, potential workers, those who are working and but this will diminish as global trends erode some their overall profile. The following section of Vietnam’s comparative advantage and certain explores demographic trends and implications for, groups remain left behind. It can reform on the particularly, women’s work. This is followed by an margin in an effort to keep up with changing analysis of the skills of the labor force, those that global trends, though this will be difficult as the cut across the largest occupations today and those global economy becomes increasingly crowded they will need in order to address the challenges by new entrants. Or Vietnam can make some big of today’s jobs and tomorrow’s emerging jobs. investments now – in its domestic firms, its labor The analysis concludes that the current education force, regional and global trade networks, and even and skills system will generate an acute shortage in integrating its own economy – to leap forward among those skills needed to pull Vietnam into to higher economic status and better jobs for all its higher valued‐added jobs. The final section citizens regardless of age, gender, or ethnicity. lays out the importance of, and challenges in, 3 CHAPTER 1 - VIETNAM’S LABOR MARKET 4 TODAY AND IN THE FUTURE Vietnam is a success story in its sustained high current state of jobs in terms of their quality. It and very inclusive economic growth in the past then presents trends, both domestic and global, two decades. Extreme poverty, measured at the that will affect the creation of better quality jobs international 2011 PPP $1.90 per day per person, in future, to map out what the job market could is almost eliminated, and less that 10 percent of look like in future and highlight the challenges the population lives in poverty, relative to both the and opportunities that policy makers in Vietnam national poverty line and the lower middle income would need to address or embrace to create better international poverty lines. The country’s success jobs in the future. in uplifting its population out of poverty is largely attributable its pursuit of labor intensive growth that created many jobs.5 Even in recent years, From past to present - the evolution evidence suggests that continued growth in labor of jobs in Vietnam incomes contributed to more than 90 percent of Major shifts in structure and type of jobs the reduction in poverty since 2010, with growth in wage incomes accounting for more than half Vietnam’s economy grew and significantly of poverty reduction in the country6. Because of transformed over the past two decades, leading this success, a large consumer class has emerged. to a substantial shift in what people do for a More than 70 percent of the population are now living. This was manifested in the changing classified as economically secure, having enough composition of the labor market, characterized incomes to meet their daily costs of living, have by a declining share of jobs in agriculture and savings to absorb income shocks and still have an increasing number of people working for pay remaining income for discretionary spending. (wage jobs). As of 2015, 46 percent of the working Their aspirations have changed from toiling to age population, i.e., those between 15 and 64 years put food on the table to dreaming of joining the old, worked in agriculture, compared to 80 percent global middle class. Fulfilling these aspirations in 1986. In recent years, the share of workers in requires not just creating jobs, but creating better wage jobs rose to 41 percent in 2015 from 33 quality jobs. percent in 2009 when the earliest comparable data is available. Since 2009, 6.5 million more people This chapter lays out the agenda for better jobs found jobs outside agriculture (Figure 1.1) and in Vietnam. Its starts with an overview of how 4.7 million more people had a wage job by 2015 the labor market has evolved to highlight where (Figure 1.2). The record Vietnam had in creating and what types jobs were created and assess the jobs was remarkable and continues today. 4 This chapter was prepared by Obert Pimhidzai (Economist, Poverty and Equity GP). 5 World Bank 2016. 6 World Bank, (forthcoming). Vietnam Poverty and Shared Prosperity Update Report 5 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T FIGURE 1.1: Distribution Of 15-64 Years Old FIGURE 1.2: Growth in Number and Share of Workers by Sector, 2005-2015 Wage Workers, 2009-2015 Source: GSO, 2016 Source: Calculations from GSO, 2016 Manufacturing led the way. Jobs in the sector sector in total, have created just as many jobs as increased the most, adding 1.6 million jobs the manufacturing sector, consistent with the high between 2009 and 2015 implying an average growth in value added in the sector between 2009 growth rate of 3.8 percent per year. The non- and 2015. trade services sector (1.6 million jobs), wholesale and retail (1.6 million jobs) and construction Exports are a strong source of jobs and wages (0.8 million) are the other most important in Vietnam. The country successfully integrated contributors to job creation in Vietnam (Figure into the global economy, and today is one of 1.3). The fastest growth rate in jobs though, was the most open economies to trade in the world. in the accommodation and food services which The export sector became an important engine grew at an annual average of 7.6 percent and of economic growth, job creation and poverty added close to 900 thousand jobs. The services alleviation. 7 It was only responsible for 4.5 FIGURE 1.3: Composition of Jobs in Rural FIGURE 1.4: Growth in Jobs Supported by and Urban Areas, 2009-2015 the Export Sector, 1989 – 2012 Source: Authors estimates from LFS 2009, 2015 Source: World Bank Staff estimates 7 For example, the boom in exports to the United States following the US–Vietnam Bilateral Trade Agreement of 2001 was particularly beneficial to wages of unskilled workers, reduced the skill premium, and was a key driver of poverty reduction in Vietnam because it was concentrated in unskilled, labor-intensive manufacturing sectors, most notably textiles (Fukase 2013, McCaig 2011). 6 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E million jobs in 1989, mostly in agriculture, services and accommodation and food services. forestry and fisheries. By 2012, domestic and Rural jobs in non-farm enterprises have expanded, foreign owned producers for exports in Vietnam accounting for 15 million jobs in 2015, and directly employed 9.9 million people, primarily responsible for adding 1.5 million jobs since in the manufacturing sector (Figure 1.4). More 2009. As recent studies on the sector show, many than 20.5 million jobs are attributable to the of these enterprises produce for the domestic export sector when indirect employment in economy, buying and selling from each other and jobs that produce inputs for exported products to local consumers. This segment will remain an are included. A large share of these indirect important source of jobs in future. jobs is in the low-scale agriculture sector. In addition, Vietnam successfully integrated into Increasing labor productivity, a major several global value chains (GVCs), most notably contributor to growth automotive, apparel, information technology and communications (ICT), and agri-food. The top Labor productivity – defined as output per five global value chains account for 28 percent worker – increased, and is the prime driver of export earnings and 43 percent of export of economic growth (Figure 1.5). It increased jobs, primarily in manufacturing.8 Employment at an average of 4.4 percent annually between growth in Vietnam is thus partly an outcome of 1990-2013 and began to slow down in 2014- Vietnam’s pursuit of exported led growth. 2015. However, there are indications that it is picking up again. The increase in average labor The contribution of the domestic sector can productivity contributed to more than 85 percent however not be discounted. Vietnam has 50 of the growth in value added in the 1990s and 69 million workers. Taking aside the 20 million percent between 2000 and 2013 for example. Thus, supported by the export sector leaves 30 million the shifts in the labor market were characterized workers still producing for the domestic economy. by workers engaging in higher value-added jobs, Other sectors focused on domestic demand are representing an improvement in the quality of growing fast too as evidenced by the significant jobs. The productivity-driven economic growth is addition of jobs in wholesale and trade, non-trade expected to continue for at least the next 20 years. FIGURE 1.5: Decomposition of Growth in F I G U R E 1 . 6 : Pr o d u c t i v i t y C h a n g e Per Capita Value Added, 1990-2013 and Decomposition. Annual Contribution to Per 2013-2035 Capita Value Added Growth by Major Sector Source: Authors estimates from LFS 2009, 2015 Source: World Bank Staff estimates 8 Hollweg 2017. 7 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Labor productivity growth is now being driven Two of three jobs are in farm or non-farm by inter-sectoral shifts in labor as opposed to household enterprises. Of the 50 million or so the 1990s when intra-sectoral improvements workers in Vietnam, nearly 20 million people or contributed the most. The labor productivity 39 percent of all workers, declare work on farms growth during 1990-2000 emerged from within as their principle labor market activity. Another industry improvements as production processes 10 million (20 percent) identify their non-farm began to modernize, market competition forced household enterprise as the primary labor activity out less-productive firms, and new technologies (Figure 1.7).9 Among the other 20.6 million with were adopted (Figure 1.6). The post 2000 period wage jobs, about 8.4 million of them, representing was then characterized by workers moving 17 percent of all workers, do not have a contract. between sectors, namely shifting from agriculture These mostly work in the construction sector (30 into the fast-growing service and manufacturing percent), agriculture and manufacturing (more sectors. This is apparent from the rapid expansion than 20 percent each). Less than 15 percent of all in employment in industry and services that workers have a wage job with a contract in the continued post the global financial crisis. The private sector. Foreign owned enterprises (the evolution of the labor market in recent years can FDI sector), where most employees have a wage thus be summed up as a movement of people from job with a contract, contribute less than 5 percent low productivity sectors to more productive ones, of all employment. Though its share is growing but with marginal improvements in productivity very fast, it is still small having started from a within sectors. A mix of intra- and inter-sectoral low base. It is also an indication that most of the productivity improvement are expected over the jobs in the export sector are provided by domestic next 20 years. owned firms where wage without a contract is predominant. Jobs Today: Better jobs created, but low-quality jobs still dominate The structure of jobs implies that most of the workers are engaged in low value added, low The majority of workers are still concentrated pay activities. The least paying occupations in in low value-added activities. Increasing labor Vietnam are elementary occupations and sales productivity that accompanied the structural persons which respectively earn about VND 3.2 transformation of the labor market suggest million and VND 4 million per month. Though better jobs are being created, but from a worker above the minimum wage,10 they respectively, perspective, most jobs are still low quality. pay 30 percent and 25 percent less than the mean Workers assess job quality through a range of monthly wage of VND 5.7 million (Figure 1.9). variables, from employment in a registered or Family farming, household enterprises and wage unregistered job, to being in a more lucrative without contract have the highest concentration occupation, receiving social benefits through of such occupations (Figure 1.8). Four in five one’s job, earning higher wages, stability of these workers engaged in family farming are elementary earnings and flexibility of their time use. By these workers, while two in three workers working measures, about 76 percent of jobs in Vietnam are in their own household enterprises are in sales mostly classified as low-quality jobs. This reflects occupations. The second highest concentration the structure of employment and occupations in of elementary workers is among wage workers which workers are concentrated in jobs with lower without a contract. Wage with contract type of than average earnings, have long or irregular hours jobs are dominated by the four highest paying and do not pay social benefits. occupation types, with the highest earning 9 Non-farm household enterprise is defined as “unincorporated businesses owned by individuals or families, which produce or distribute goods and services for the market.” 10 The 2015 minimum wage was 3.1, 2.75, 2.4, and 2.15 million dong in regions I-IV, respectively. 8 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E FIGURE 1.7: Distribution of Jobs by Employer and Contract Status (2015) Source: Author’s calculations based on VHLSS 2015. The percentages do not sum to 100% due to rounding errors. occupations (professionals) mostly concentrated wages are for public sector workers, either in in the public sector. SOEs or government departments, with a median hourly wage of 28,800 thus 75 percent higher than Wage jobs with a contract pay more on average. median wages for wage workers without contract The median hourly wage for workers without a (Table 1.1). These public-sector workers constitute contract is about 30 percent lower than the median just 10 percent of all workers and are mainly in wage for those holding a wage job with a contract professional occupations. in private sector enterprises. The highest median FIGURE 1.8: Occupational Distribution by FIGURE 1.9: Mean Monthly Wage Earnings Employment Type, 2015 by Occupation, (‘000 dong) Source: Adapted from GSO (2016) Source: Authors estimates from LFS, 2015 Note: Solid horizontal line is the total mean wage 9 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Jobs outside the wage sector earn less than the accompanied by social benefits and 19.6 percent mean wage.11 The household business sector provide a health insurance card. Almost none of earns net profits that are significantly below that of the workers with a wage job without a contract wage workers. A survey of household businesses have a health card or social insurance through their in 2016 finds that nearly half of informal jobs (Table 1.1). In contrast, 85 percent of wage household business owners earn monthly profits workers with a contract had both social insurance below the minimum wage.12 Average per capita and a health insurance card acquired through earnings in agriculture is roughly the same as their jobs. One-third of those working for a wage mean wage earnings. However, the agricultural with a contract in non-farm household enterprises income figure does not account for the value received bonuses and paid leave.13 Those who own of inputs, likely pulling down net earnings their own small enterprises are not required to significantly (see Chapter 2). Not all activities in pay social benefits, therefore family farm workers this sector provide low labor productivity jobs and household enterprise owners are largely not though. Some – like cash crops production - are covered with social or health insurance cards just as productive as in manufacturing. It is only through their jobs, outside that provided from that too much of agriculture activity is still at the universal social assistance programs. This leads to low productivity end. a job quality profile where nearly no one holding a job on a family farm or a household enterprise Most jobs in Vietnam are not accompanied by has social or health insurance through their jobs social benefits. Only 21 percent of all jobs are (Table 1.1). Table 1.1: Job “Quality” by Job Sector, 2015 Hourly Wages Average % under- % workers with insurance % working (‘000 dong) Hours employed (via their jobs) in jobs <5 Worked years Average Median Social Health Total N/A N/A N/A 1.8 20.9 19.6 37 No Contract Farming N/A N/A 34 3.1 0.2 0.1 19 Non-farm Self-Employed N/A N/A 46 1.1 1.0 0.3 36 Wage no contract 18.2 16.5 46 2.0 1.1 1.0 56 Wage with contract Government 34.6 28.8 39 0.2 91.9 94.2 29 State-owned enterprise 35.7 28.8 44 0.1 92.9 92.8 30 Private Domestic 26.9 21.6 48 0.0 74.4 74.8 64 enterprise Private foreign enterprise 26.3 21.6 49 0.0 94.1 94.0 72 Household enterprise 21.7 19.2 50 0.2 20.1 10.1 72 Source: Author’s calculations from LFS, 2015. Notes: Hourly wage is in 1000 dong. Underemployed is defined as employed less than 35 hours per week but available and willing to work more. Health insurance from Vietnam LFS 2014. 11 The data in this paragraph are derived from different sources, which do not allow us to compare point estimates. Instead, we present general trends, but even these should be cautiously interpreted. 12 Pasquier-Doumer et al. 2017. 13 This sample also reports that wages are low relative to the mean national wage; these workers earn 3-4 million dong monthly, depending on their region (Pasquier et al 2017), many workers feel that it is sufficient to meet their needs (Nguyen 2017). 10 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E Irregular hours worked and seasonality limit jobs in the private sector range between 46 and 58 earnings or lead to unproductive time use among hours. many workers. Farmers on average work 35 hours a week in their primary job compared to the 48 Wage jobs with a contract offer better job hours a week worked in the primary jobs outside opportunities on balance, based on average farming and public sector employment (Table 1.1). earning, social benefits and hours worked. The Few workers outside agriculture express a desire most inferior jobs on these three measures are to work more hours, reflecting that their primary in household based employment, where earnings job is too time consuming to allow them to take are lower and unpredictable and most workers on other work. The exception is farm jobs, where have no social benefits. Individuals employed in one in three of those who identify farming as their farming work fewer hours per week and almost primary job also hold another job. In the majority never have written contracts, health insurance, of cases (87 percent), their secondary jobs are or social insurance. These so called inferior jobs also in agriculture. Other types of workers work employed 59 percent of workers in 2015. The best full time or excessive hours. Household enterprise jobs, on average, are in the public sector, where owners work more than 50 hours weekly, and median earnings are higher and most workers usually get time off (and lose profits) only when have social benefits (Box 1.1). Only 10 percent of ill.14 The median hours worked in various wage employees are in this sector. BOX 1.1: Is Vietnam’s public sector crowding out private sector employees? On average, the public sector offers the best jobs in Vietnam. It is the most highly paid sector of the Vietnamese labor market, with the greatest coverage of social and health insurance and low weekly work hours. This is not an unusual phenomenon; global statistics show that public sector employees earn a premium of 15 percent15. But is it a good investment? Do these benefits create perverse incentives? A well paid public sector may attract the most talented workers to public service and may encourage high performance for fear of losing a lucrative job (an “efficiency wage”). Returns to education are higher than those in the private sector and increasing with time. However, if the public sector’s high wages are not determined by productivity levels, they may have detrimental effects, by drawing talent away from a potentially more productive private sector. Namely, if salaries and work conditions are better in the public sector, more talented workers have an incentive to seek public sector jobs rather than directing their talents toward the for-profit sector16. FIGURE B.1: Employment Types by Education Vietnam’s talent is flocking to the public sector. In 2014, for Ages 15-64, 2015 86 percent of public sector employees had a post-secondary education --- 52 percent were university graduates, as compared to 21 percent of the domestic wage sector and 9 percent of the FDI wage sector17. Employers, in the meantime, are lamenting the shortage of skilled labor, particularly those in management and professional (i.e. university educated) fields. These facts cannot determine if Vietnam’s high public sector wages are distorting labor markets. But they do raise the question for further exploration. Would a lower public sector wage release talent and unleash productive potential of the private sector? Or is the current set of incentives optimal for jobs and growth in Vietnam? 14 Pasquier et al 2017. 15 Postel-Vinay 2015. 16 Caponi 2017. 17 Demombynes and Testaverde 2017 11 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T However, both informal wage workers and Jobs Today: Some segments of the household enterprise owners find some positive workforce left behind benefits in their jobs, suggesting that not all The better jobs – typically a wage job with a employment in these sectors are of low quality, contract -are taken up by the more educated. neither is it always involuntary. Chapter 2 will That means older, rural and especially ethnic show that some agriculture production activities are minorities, are largely left behind. Less than 25 just as rewarding as wage jobs in the manufacturing percent of people with lower secondary education sector. In spite of not having a written contract, have a wage job, let alone one with a contract. On two-thirds of employees interviewed in HCMC felt the other hand, more than 80 percent of workers their jobs were stable,18 perhaps due to a sufficient with a college or university qualification have a number of jobs in this sector and high turnover wage job with a contract (Figure 1.10) The older among these kinds of jobs that nearly guarantees generation and rural workers, who entered the a similar job elsewhere.19 Nearly 80 percent of labor market with low education and mostly household enterprise owners cite positive reasons operate in an economy dominated by household for owning their own unincorporated business, based production mostly on family farms, are i.e. better income (34 percent), independence therefore left behind in low quality jobs. More (14.6 percent), family tradition (9.9 percent), or than half of workers who are at least 50 years to balance personal and professional life (14.6 old are engaged in farming and an additional percent). In fact, more than 25 percent of women 25 percent run their own household enterprises informal household business owners state the latter (Figure 1.11). They are deemed too old and not as a motivation, as compared to six percent of men. educated enough to begin to search for a first- Only 20 percent would be willing to shift to formal time wage job now. Ethnic minorities are also employment at a slightly higher wage. Most felt that left behind, with three of every four ethnic their lack of education prevents them from getting minorities (as compared to 35 percent of Kinh another job despite only a few of them wishing to or Hoa workers) also engaged in farming. Those continue their education.20,21 working in wage jobs without a contract, are mostly people with secondary education or less Improving the quality of jobs thus requires a too, but these tend to be younger people. They two-pronged approach. One aspect is to facilitate still have an opportunity to transition into wage transitions into wage jobs with a contract that on jobs with a contract. average, presents better job opportunities. Chapter 3 will dig deeper into the drivers of employment While the export sector has been particularly growth for such types of jobs. The second aspect, is beneficial for women’s jobs, most women to improve the productive potential in household are still engaged in low paying occupations. based or informal employment in agriculture Women have dominated the garment export or household enterprises, to raise the earnings sector for many years, and are also starting to potential for people engaged in these sectors take over the electronics and automotive export either by choice or involuntarily due to barriers sectors. 22 Women held 61 percent of direct to transitions to the wage jobs with a contract. A export jobs in the electronics sector in 2012 and significant share of the labor force is in the latter 71 percent of direct export jobs in total wearing category. Chapter 2 speaks more to this aspect, apparel jobs. However, jobs to directly produce focusing mostly in agriculture jobs. transport equipment, including motorcycles, was 18 Pasquier et al 2017. 19 Nguyen 2017. 20 Nguyen 2017. 21 In fact, nearly 80 percent reported that their employers did not even inquire about their schooling or certificates when they were hired. (Nguyen 2017). 22 UN Women 2016. 12 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E FIGURE 1.10: Employment Profile by FIGURE 1.11: Employment Profile by Age, Education, 2014* 2014 Source: Analysis of 2014 Labor Force Survey Source: Analysis of 2014 Labor Force Survey Note: * The educational categories “Trade Vocational school” and “Vocational School” are not necessarily presented in a sequential order as these professional certifications can be obtained at different stage of academic education. less female intensive (33 percent).23 Because of in four managers or leaders is a woman. Instead, women’s high participation in the export sector, women are disproportionately represented in the they face an even chance, or slightly better chance low-paying “service sand sales” occupation group (1.5 percent more) of holding a wage job with a (Figure 1.12). This clustering does not seem to contract than men with similar qualifications24. be driven by aspirations while young. Young girls However, women engage in lower level have career aspirations that would result in higher occupations even in the same industries. Only one wages than those of young boys.25 FIGURE 1.12: Share of Women in Each Sector FIGURE 1.13: Gender and ethnicity wage gap, relative to men and Hoa/Kinh ethnicities, 2011-2014 Source: Adapted from GSO (2016). Note: The reported coefficients are the marginal effectes of Note: solid vertical line is gender parity. probit regressions that estimates the probability of holding a wage job (conditional on being employed) and controls for a cubic in age, urban/rural, region, education level, gender, and ethnic minority status. 23 Hollweg 2017. 24 Demombynes and Testaverde 2017. 25 Perova et al 2017. 13 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Pay remains unequal, but the gaps have the transition out of primary agriculture and into closed higher earning jobs, namely geographic isolation, On average, men earn about 10 percent more lack of diversity in off-farm activities, and a low than women. Once adjusting for women’s higher skill level.28 education levels, the gap expands to 12.6 percent (Figure 1.13). Notably, the gender wage gap A better labor market for the young, not a has fallen rapidly in a short period. The gender good one for the old wage gap is partly explained by “occupational Overall, the quality of jobs keeps getting better segregation”, namely that women and men are for younger workers who now enter the labor clustered into different occupations. However, market with more education unlike the older even within broadly-defined occupations, except workers. Compared to 2007, when 39 percent of for “clerks”, women earn less than men. workers aged between 25-34 years old worked in family farming, only 27 percent of workers in The gender wage gap is largely explained by this age bracket in 2015 worked on family farms. women’s preference for non-wage job qualities. Instead, 55 percent of them held a wage job in Women seem to select those occupations that 2015, compared to the 40 percent in 2007. More allow for a better work-life balance. Namely those than double the share worked in the FDI sector in that provide job security, flexible work hours, and 2015 than in 2007 (Figure 1.14). Younger workers vacation time. This association holds even when are also getting into higher paying occupations. controlling for occupational selection that may In 2015, about 30 percent of those aged between be driven by gender identity; namely “female” 25-34 were in an elementary occupation – the jobs.26 As discussed in Chapter 4, women’s “full least paying of the lot, compared to 55 percent in time” job in the household underlies the need to 2007. There has been an increase in the share in select into these more flexible jobs. Traditional professional occupations or as plant and machine discrimination may also play a role, though. A operators or assembly (Figure 1.15). review of advertisements for top managers and supervisors found that 65 percent specified a Labor market transitions suggests the labor market (male) gender requirement for the job.27 is more dynamic for youth. Evidence from the VHLSS panel data for 2012 and 2014 suggests Ethnic minorities fare a bit better, with wage gaps that about 50 percent of those in school in 2012 of 7.2 percent, once controlling for their lower had a wage job in 2014 and only 18 percent went educational attainment. This gap has increased into farming. Youth hold out for a wage jobs, as 23 over time. The reason underlying the wage gap percent of those who left school after 2012 were not and its increase has not been well studied, but working in 2014. However, 75 percent of youths out movements in the labor market suggest some of a job, either went back to school or mostly found possible causes. First, ethnic minorities crowd into a wage job within a two-year period. Thus, youth low-paying elementary occupations – more than unemployment is largely transitory. Youths are 65 percent of rural ethnic minorities worked in clearly much more likely to enter better quality jobs agricultural activities in 2014, while 50 percent than their share of the labor force would suggest. of Kinh and 25 percent of Hoa held agricultural While adults have relatively low mobility across jobs; wage growth is in other occupations. job types, youth are disproportionality drawn to Second, a combination of factors faced by ethnic “better” jobs in private domestic firms and foreign- minorities has limited the number who have made invested firms (Table 1.2). 26 Perova et al 2017. 27 ILO 2016. 28 Due to history and practice, several factors limit the agricultural productivity of ethnic minorities more than that of Kinh or Hoa. For example, relative to Kinh and Hoa, cropland owned by ethnic minorities is largely unirrigated and low quality. The communal land-holding, that had been law, also aligns with some ethnic groups’ sense of collective ownership who are unwilling to sell the collective land (Chapter 3). 14 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E FIGURE 1.14: Employment Profile of 25-34 FIGURE 1.15: Occupation Profile of 25-34 Years Old Workers by Year Years Old Workers by Year Source: Authors’ calculations from LFS 2007, 2015. Notes: Focuses Source: Authors’ calculations from LFS 2007, 2015. Notes: Focuses on the 25-34 age groups instead of 15-24 since most of on the 25-34 age groups instead of 15-24 since most of them are in school at this age. them are in school at this age. Table 1.2: Worker Transition between Employer Types, 2012-2014 2014 15 – 24 35-44 Not Not Farming Self- Private SOE Foreign- Not Not Farming Self- Private SOE Foreign- working work- employed domestic invested working work- employed domestic invested – not in ing – in – not in ing – in school school school school Not work- 3.6 0.5 0.7 2.1 2.5 2.3 1.4 16.0 0.3 0.1 0.5 0.0 0.6 ing - not in school Not working 1.0 1.2 0.5 0.7 0.8 1.4 1.2 - in school Family 0.6 0.2 3.0 0.8 1.0 0.5 0.8 0.3 1.7 0.4 0.5 0.1 0.1 Farming 2012 Self- 1.0 0.1 0.8 8.6 4.2 0.5 0.6 0.5 0.5 3.4 0.5 0.0 0.4 employed Private 0.8 0.1 0.9 2.4 6.7 0.5 3.4 0.7 0.4 0.4 4.0 0.2 2.3 domestic SOE 1.5 0.1 0.4 0.6 1.1 55.9 0.0 0.0 0.1 0.0 0.7 7.9 0.6 Foreign- 0.7 0.0 0.0 0.0 2.6 0.0 35.6 0.0 0.0 0.1 1.5 0.0 30.1 owned firm Source: Pimhidzai and Cunningham. Notes: The table shows conditional transition matrices. A value greater that one shows larger than expected transitions between sectors and is shaded in grey, a value less than one indicates less than expected transition. Yellow denotes the diagonal, signifying no change in work type across periods. 15 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T The entrance of youth into better quality job quality jobs, as measured by productivity (Map 1) has been the main driver of the structural shift and worker wages (Map 2). These good jobs are in the labor market in Vietnam. School leavers highest in densely populated and highly connected accounted for less than 17 percent of the working cities (Map 3). In contrast, workers in rural, remote age population in 2014, but more than 21 percent areas in the Midlands and Northern Mountain areas new wage workers with a contract, or 22 percent are disadvantaged by geography. Being far, and less of employees moving into the FDI sector during connected to either HCMC and Hanoi, they have 2012-2014 for example. In a manifestation of the limited access to centers of agglomeration where fast pace of change in the labor market in Vietnam, better jobs are being created in Vietnam. youth now enter a different labor market and are more likely to take up the better jobs being created Jobs in the Future than their predecessors a decade ago. A shift to higher-value jobs is taking place Regional disparities in job quality cut Just as the labor market for the young looks largely across rural-urban divides different from that of the old, so will the labor Higher earning and more productive jobs are market of the future look different than today’s concentrated around cities and coastal areas, as more human, higher value jobs are added to thus rural, remote areas are largely left behind. the labor market. The most recent trends show Most formal private firms are concentrated in and that growth in higher value occupations is taking around cities, that are better connected. There is a off. The number of business and administration substantial overlap of regions with better (or worse) professionals grew by 12 percent per year Map 1: Labor productivity Map 2: Average wage per worker Map 3: Access to markets Source: World Bank staff mapping using GIS data from various sources (district-level population and economic census from General Statistics Office, and PCI from Vietnam Chamber of Commerce and Industry) Disclaimer: The map shown is for illustration purpose. The boundaries, color, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 16 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E during 2013-15. That of science and engineering Importantly, some of the most low-paying professionals grew by 7 percent. Semi-skilled and low-value added occupations are rapidly technical trades grew significantly, the fastest contracting. Between 2013 and 2015, the number being electrical and electronic trade workers of street and related sales and service workers (by 10 percent per year) followed by metal and declined by 14 percent and subsistence farmers machinery related trade workers (6 percent per by 8 percent. In fact, most of the agriculture year). However, blue-collar work in manufacturing occupations declined, marking a turning point is expanding too. Assembly workers grew the in which the number of people employed in fastest of all occupations, by about 35 percent agriculture declined. More so, the number of per year since 2013, while stationery plant and sales workers – mostly employed in household machine operators grew by 15 percent per year. enterprises – barely grew. Thus, the emerging Other elementary occupation outside agriculture, trend is one in which the poorer quality jobs manufacturing and industry also expanded by are beginning to decline and being replaced 6 percent per year (Figure 1.16). Being mainly by the more formal types of jobs . Even within wage with contract jobs, even the growth of blue agriculture, there is some shift towards more high collar occupations such as assembly line workers value crops and more non-crop based agriculture and plant and machine operators represents a shift activities. towards better jobs than most jobs existing today. FIGURE 1.16: Growth in Employment by Occupation, 2013-2015 Source: Authors calculations from LFS, 2013, 2015; Notes: Showing two-digit occupation classification level for occupations with an absolute change of more than 25 000 workers 17 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T The composition of jobs is thus slowly shifting climate change and jobs is scarce, but as climate toward those characterized as “better”. Private change evolves, it may become a significant force sector employment grew while farm and off-farm shaping the jobs picture. household enterprise jobs contracted in the period 2007-2015. This reflects the continued structural Rise of the Asian Consumer Class transformation, urbanization, automation, The Asian consumer class is rapidly expanding. demographic change and overall dynamism of While Asia is home to some of the richest Vietnam’s economy. Whether this trend continues, countries in the world, it is also home to a stalls or accelerates depends on how Vietnam will growing number of middle-income countries. ride the emerging domestic and global mega- In 2002, approximately 20 percent of households trends that will affect the future of jobs. in developing Asia countries could be classified as having high enough income to cover the cost Megatrends will reshape Vietnam’s of day-to-day living, savings to protect against economy and Future Jobs income shocks, and have some left over for additional consumption.29 By 2015, this had risen Five trends are particularly likely to affect the to more than half of households in developing ability of the current economic model to create East Asia, equivalent to a consumer class of better and more inclusive jobs. These are the more than a billion households (Figure 1.17). rise of an Asian consumer class – including in Projections predict that more than 80 percent of Vietnam itself, shifting trade patterns and new developing Asia households will have incomes for partnerships, demographic shifts, the rise of consumption by 2030 (Figure 1.18). knowledge economies and automation. While many of these trends intersect with each other, Within Vietnam, ab out 70 p ercent of all provide potential opportunities to improve households have disposable income. While Vietnam’s jobs picture. This section sketches out most of these households can be categorized the nature of the jobs trends, how it is currently as “economically secure”, namely that they affecting Vietnam, and how it might affect future spend US $5.50 – US $15.00 per capita daily, Jobs. A brief mention is made about the role of they are already a dominant potential source climate change on the changing nature of jobs of consumers. This is reflected in the changing (Box 1.5). The evidence on the link between consumption patterns in Vietnam. For example, FIGURE 1.17: Share of Developing Asia FIGURE 1.18: Share of Developing Asia Households in Each Consumption per Capita Households in Each Consumption per Capita Category, 2002-2015 Category, projections 2015-2030 Source: World Bank (2017) Source: World Bank (2017) 29 World Bank 2017. 18 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E in the agro-food industry, rice consumption is is expected to be particularly heavy in general expected to slightly decline in favor of higher services, aged-care services, and education.31 value (and healthier) fruits, vegetables, livestock, and seafood products (figure 1.19).30 These shifts may have two implications for jobs in Vietnam. First, jobs will diversify within sector. Rising income is coupled with increasing For example, as the demand for rice declines in urbanization across the East Asia region, favor of vegetables, jobs will shift out of lower-value which is more reliant on traded consumption rice and into higher value vegetables. Second, the than on self-produced consumption. Not only demand for manufactured goods and services will do urban residents need to buy food that they increase. Rather than self-production, Vietnamese may have previously produced, they tend to consumers will have means to purchase more have higher incomes and thus purchase more processed goods and services on the market, expensive food baskets. Thus, the composition of thereby encouraging people to move into these the Asian food basket, while still dominated by sectors. If Vietnam successfully markets its goods rice, is expected to shift toward other products to neighboring countries, the demand from foreign by 2030. Urban households also spend a higher consumers could lead to an even bigger boom in share of their income on services (rather than manufacturing and service export jobs. food or other basic necessities) than do non- urban consumers, investing in communications, Shifting trade patterns and new transport, restaurants, banking, and a range of partnerships other spending categories. While urbanization Foreign direct investment (FDI) flows have may re-shape Vietnamese consumer preferences, driven job creation across the globe. FDI inflows perhaps the biggest opportunity for Vietnam is are an estimated USD 1.7 trillion in 2016, an China’s rapid urbanization: the growth of China’s increase of 30 percent just since 2000. More than 700 largest cities is expected to account for 30 USD 100 billion flowed into developing East Asia percent of global urban consumption growth in 2015, one-third of that to Vietnam. Across over the next 15 years. The increased spending the region, FDI has transformed the economic FIGURE 1.19: Daily Consumption of Selected Food Groups in East and Southeast Asia, 2009 (actual) and 2030 (projected) Source: Jamora and Labaste 2015. Note: Unit is kcal per day. *Others is residual that includes principally sugar, other sweeteners, legumes, pulses, nuts, other oils, and animal fats. 30 Jamora and Labaste 2015. 31 McKinsey 2017. 19 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T landscape and been the source of millions of player and Myanmar is emerging as a destination jobs. Vietnam has successfully integrated into for FDI of garment and apparel factories. African the global economy, and today is one of the most countries are increasingly entering sectors where open economies to trade in the world. This sector Vietnam enjoys significant FDI. In 2016, some is an important engine of economic growth, job of the top greenfield FDI in Africa were in creation and poverty alleviation.32 manufacturing textile, clothing and leather and motor vehicles and other transport equipment.34 A number of factors are beginning to change While high transport costs between African the patterns of globalization, with potential countries and source/destination do not make implications for the number of and nature of jobs them a serious threat for Vietnam at this time, in Vietnam. The accelerating pace of technological they have the potential to crowd out Vietnam in change - smart automation, advanced robotics, its current role as a source of low-skilled assembly and 3D printing - are affecting production jobs in the future. Outward FDI of firms from processes of manufactured goods and affecting the developing countries has also grown dramatically location of manufacturing production decision. in recent years, accounting for nearly one fifth of Re-shoring is starting to emerge, where previously global FDI flows in 2015.35 African countries are out-sourced low-skilled jobs are returning to the also an increasing source of outward FDI from home country of the lead firm, where high-skilled other developing countries automated processes are being employed. China will also change the global manufacturing Related, knowledge-intensive flows of trade panorama and offer new job opportunities are growing faster than traditional goods- and to Vietnam. As China’s labor costs rise, more services-trade, pointing to different types of labor-intensive and low value-added activities are exports than have driven the past three decades moving to lower cost locations. However, China of growth in Vietnam. Goods exports are itself is increasingly a source of outward FDI becoming more sophisticated and increasingly flows, looking for new investment opportunities embedded with new technologies, requiring a overseas. To date, these movements have largely more knowledge-based assembly process than stayed within the Asia Pacific region, providing in the past. Additionally, cost-competitive wages a greater opportunity for Vietnam to take on have driven growth in knowledge-based industry activities higher up the value chain than under the segments in developing countries, many of which current model, where lead firms are remote and have become major destinations for offshored little integrated with local producers.36 Though / outsourced IT services, business process value chains in EAP are already extremely regional, outsourcing (BPO) services, and fintech services, the sources of final demand are also shifting. among others. In fact, the top 10 countries for Today, most of the final demand of GVC products outsourcing are all developing countries33 while produced in Asia is Western countries. However, many others are positioning themselves to become as developing Asia moves into middle-class status, major players. as discussed above, and as China rebalances from investment-driven to consumption-driven growth, Competitors for low-skilled production jobs are consumer demand in Asia is expected to boom. also emerging on the regional and global stage. Protectionist sentiment in Western countries may Within the region, Cambodia is already a big accelerate the Asia Pacific regional integration. 32 For example, the boom in exports to the United States following the US–Vietnam Bilateral Trade Agreement of 2001 was particularly beneficial to wages of unskilled workers, reduced the skill premium, and was a key driver of poverty reduction in Vietnam because it was concentrated in unskilled, labor-intensive manufacturing sectors, most notably textiles (Fukase 2013, McCaig 2011). 33 India, Indonesia, China, Bulgaria, Philippines, Jordan, Singapore, Thailand, Lithuania, and Egypt. 34 UNCTAD 2016. 35 World Bank 2017. 36 Frederick 2017. 20 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E Vietnam may have a lot to win, or lose, from 95 percent of jobs intact, but with a different these shifting patterns. Vietnam’s current profile.39 export-oriented jobs may be threatened if on-shoring, automation, or emerging economies The estimates of job losses in Vietnam range from substitute for Vietnamese jobs. However, if 10-70 percent, reflecting great uncertainty in Vietnam can better integrate into Chinese-led when and how automation will affect the nature and regional value chains, as well as provide of and number of jobs. The most severe case – higher-value service exports, the global trends where machines eliminate any occupation that could benefit from these shifts. requires manual, repetitive work – street vendors, sewing machine operators, accountants – put the Automation and Digitization in the estimated job losses high. The most generous Workplace cases assume that job tasks, not occupations, will Machines, robots, artificial intelligence, and be replaced and humans will undertake different information technology are rapidly entering the tasks in the same occupations – street vendors workplace across the world and could provide may spend less time buying product inputs and great opportunities for jobs in Vietnam. Jobs are instead order those on-line while focusing on already incorporating technologies. Cell phone product innovation, for example. Other estimates apps monitor weather conditions for farmers are in the middle. But what tasks and jobs will be in the Mekong delta, electronic jobs boards are automated, and over what time frame depends accessed by youth in Ho Chi Minh City who are on several factors, many of which portend a long searching for task-based work, machines are transition process for Vietnam (Box 1.2).40 alleviating manual work in farms and factories, and the technology value-chains themselves have In rural areas in Vietnam, agricultural been the second largest source of FDI in Vietnam mechanization is on the rise following the (after garments). This technology has the potential global trend of increasing machinery use as real to free up Vietnamese workers from lower value- wages rise with overall economic development added tasks, allowing them to engage in less and structural transformation. In the areas of tedious, and potentially higher value-added, work commercial rice production in the Mekong River tasks and jobs. Delta, for example, the use of machines for land preparation and harvesting, along with the shift While jobs will adapt or emerge in response to from labor-intensive manual seed transplanting new technology, others may be lost. Some jobs to manual broadcasting, reduced the average will adopt these technologies and boom, others labor per hectare requirement from 80 days in the will switch out some tasks with machines while mid-1990s to 20 days in 2013. Vietnam follows taking on new tasks, new (unskilled and skilled) the trend of the countries such as China, India jobs will emerge because of technology, and some or Thailand where rice production becomes jobs will disappear. Recent studies predict that increasingly mechanized. In the near future, many machines will displace 47 percent of the jobs in farming jobs in Vietnam will still be difficult to the United States by 203537 and that 70 percent mechanize though. Examples include harvesting of Vietnam’s jobs are at a high risk of automation of coffee, tea or cashew nuts and production in the next decade or two, nearly wiping out the of fruits and vegetables. Yet where technical garment sector.38 Other studies, mostly using solutions become economically feasible, the use of developed country data, recognize that machines agricultural machines will accelerate. may transform the tasks underlying jobs, leaving 37 Frey and Osborne 2013. 38 Chang and Huynh 2016. 39 Arntz, Gregory and Zierahn 2016. 40 Kahn (forthcoming), Hallward-Driemeier 2017. 21 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T In some instances, mechanization replaces hired out routine, manual tasks. And smart machines labor but in others, it creates more and better can adopt a broad range of routines through jobs in rural areas. Mechanization of manual interaction with humans. However, many jobs processes tends to increase returns to labor are not routine or manual. These may be low- thereby improving the quality of jobs. Irrigation skilled jobs such as a beautician, housecleaner, or infrastructure facilitated by mechanized pumps harvester of coffee and tea or may be high skilled often allows two or three more crops to be grown jobs such as child care provider, manager, teacher, on the same plot of land per year, increasing labor or communications director. Some jobs that are use. Mechanized rice transplanting, increasingly considered “automatable” may, instead, adopt being adopted in the Mekong River Delta, not technology and morph into higher value added only reduces per hectare seed use from 170 kg to jobs, such as store clerks or office secretaries.41 70 kg, it also creates jobs for preparing seedlings suitable for transplanting machines. Agricultural These patterns are consistent with the Vietnam machinery rental and repair services provided by data. Based on the STEP survey – a specialized cooperatives and private companies deliver well- skills survey collected in 2012, the jobs with a low paid jobs in rural areas and attract young people risk of being replaced by technology are those who otherwise migrate to urban areas. that require human skills (such as management), cognitively challenging skills, and higher level This all means that some jobs will benefit from reading comprehension and math. 42 Those automation while others may be eliminated. Jobs jobs that require basic math and reading are that will be somewhat immune from automation more susceptible to automation.43 That said, the are those requiring non-routine and non-manual predictions of job loss are likely more imminent tasks. Machines can be programmed to carry than is realistic (Box 1.3). BOX 1.2: Rise of the sewbots? Maybe not for a while… Recent publications have estimated that 86 percent of Vietnam’s garment jobs will be replaced by machines in the next 15 years. This is certainly a frightening prospect, given that this $29 billion (annual exports) industry is the source of 13 percent of Vietnam’s exports (2015) and 1.3 million jobs. However, a closer look at the apparel industry suggests that these predicted job losses may be excessive, especially in the short run. Several factors need to come together for machines to begin replacing humans, none of which are the case in the apparel industry: 1. The existence of machines to replace labor. While technology is being employed in some parts of the apparel global value chain, there is still not a machine that can replace the cut-make-trim (sewing machine operators) that employs 70 percent of garment workers. While the first CMT machine is expected on the market in 2019, it can only produce the most basic garment – an 8 step tee-shirt – quite distant from the 78 step dress. 2. Repetitive tasks with few changes. Fashion changes quickly. While people can easily learn to stitch a new angle, stretch a new fabric, or add a new adornment, machines will not have the flexibility for many years. 3. High labor costs relative to the cost of machinery. Although labor costs are increasing in Vietnamese garment factories, they still pale relative to machines. While the CMT machine for tee-shirts is estimated to pay for itself within two years (of displaced worker wages), the machine itself will need to be replaced frequently as fashion changes This is not so say that technology will not move into the apparel industry, only that it will not happen soon. The jobs that cannot be automated – specialized apparel, knowledge tasks that are higher up the value chain – will still exist. And a host of new jobs will arrive – running and repairing the machines, programming machines to accommodate new style, and designing shop floors to be machine-friendly. ILO (2016), Frederick (2017): http://softwearautomation.com/ 41 World Bank 2016a. 42 Kahn (forthcoming). 43 These estimates are derived from a logistic estimation strategy, using labor and skills data from the Vietnam STEP survey. See Kahn (forthcoming) for details. 22 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E BOX 1.3: Five Factors Influencing the Pace and Extent of Automation of the Work Place The predicted rate of job loss is built from recent trends of technological change in developed countries. However, several factors in developing countries suggest that the change will be much slower due to certain developing country characteristics. 1. Technical feasibility. Many machines that would replace job tasks or entire occupations have not been invented. For example, while “sewing machine operators” are expected to be lost to machines, the technology is only beginning to emerge. 2. Cost of transforming production processes. The structure of the factory floor and the flow of the production processes limit a rapid and massive adoption of new technologies. 3. Labor market dynamics and the cost of labor. Ample skilled and inexpensive labor lower the motivation to automate. Automation is most pressing when there are labor shortages. In developing countries, employers express a concern about an absence of skilled workers to meet new technology demands. 4. Regulatory and social acceptance. The regulations to import and maintain machines, and the willingness of workers to engage with or allow replacement by machines can delay full mechanization. Social norms may enhance the adoption of technologies such as when mechanization facilitates the work tasks or takes the drudgery out of work 5. Rate of economic transformation. Mechanization may displace workers as economies of scale lead to merging of many small businesses that use productivity enhancing technologies. Such an economic transformation is not instantaneous. For example, stall and market salespeople is one of the most “automatable” jobs, but rival services – namely on-line purchasing – will likely take time to develop in Vietnam. This will require digital literacy, on-line sites in Vietnamese, sophisticated banking and payment systems, delivery services, and a range of other complements to take over. 6. Valuing the human touch. Although many jobs can be defined as consisting of routine and manual tasks, which should be easily automatable, some industries still derive value from the human touch. Though shop sales assistants are deemed highly replaceable in Vietnam, the customer is more likely to make the purchase if ensured by a human that the dress does, indeed, look fabulous. Source: Manyika et al (2017), http://www.textileworld.com/textile-world/knitting-apparel/2016/05/the-rise-of-robotic-automation-in-the-sewing- industry/, https://www.washingtonpost.com/national/rise-of-the-machines/2017/08/05/631e20ba-76df-11e7-8f39-eeb7d3a2d304_story. html?utm_term=.8b8b9d824b39 Rise of the knowledge-economies Instead, they need to have basic literacy, numeracy, Twenty-first century workers require a more and reading comprehension to use technology. complex set of skills than in the past. While Humans will also have to take on more non- basic cognitive skills (reading and writing) and routine, non-manual tasks, requiring higher-order limited technical knowledge in one’s field was the cognitive and socio-behavioral skills. For example, recipe for a productive worker in the past, today’s employers in ASEAN identify technical knowledge employers are looking for a range of skills and (40 percent) and teamwork and communications knowledge. Many of these macro-trends reflect (33 percent) as the most important skills in a the rise of the knowledge economies. digital workplace.44 Automation will require a broad range of Knowledge jobs are the better-quality jobs in knowledge; most of which is less about computer the export sector. The jobs in global value chains programming and more about digital literacy that have been the source of economic growth and (technical knowledge) and human skills. While poverty reduction are mostly in low-knowledge STEM (science, technology, engineering, and assembly in the manufacturing sectors. However, mathematics) is part of the new economy, general the emerging higher value-added jobs are in skills are the key to interacting with technology. services that are higher up the value chain in For example, agricultural laborers in developed knowledge-intensive occupations. Indeed, design, countries need to be able to do internet searches R&D, marketing, after-sale services, logistics, and to consult manufacturer instructions for fertilizer a range of other manufacturing or distribution use or a specific tool repair while accountants jobs represent a larger share of overall value added need to know how to use special software. But compared to production (Figure 1.20).45 neither need to know how to program a computer. 44 ILO 2016. 45 Fernandez-Stark et al 2011. 23 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T FIGURE 1.20: Schematic Presentation of Job Quality and Value Chain Stages Value Added High Globalization ail s s Ret ice ale t Tes uts erv &S & on & np es uts g bly uti tin ic i Business sal inp n em trib rke ner er- sig Functions D Low Key Ass Ma Dis Aft R& De Ge Upstream Downstream Value Chain Source: Fernandez-Stark et al (2011). The aging population, shrinking work The combination of an increasing share of force and shift toward higher productivity elderly and a declining share of working age The share of the population that is of working implies an increase in the dependency ratio. In age has reached its peak and will begin its 1990, there were 0.7 people under the age of 15 decline. Since 1972, the share of the population or over the age of 64 for every person age 15-64. age 15-65 has been increasing, from 51 percent Implicitly, each worker “cared for” 0.7 people, then, to 70 percent by 2017. Due to birth rates that primarily children. This ratio declined to 0.42 by have been slowing for many decades as well as an 2015, meaning that the potential worker had fewer aging population, the working age share of the home burdens and could dedicate more time to population is expected to begin its decline in 2018, the workplace. But with the aging population, the just as the elderly share of the population takes off ratio is expected to begin increasing again in 2020, (Figure 1.21). While 6.7 percent of the population meaning that care of children and older adults will is age 65 or above in 2017, this is expected to reach crowd out work time. By 2050, the ratio should be 21 percent by 2050. above 0.6. Unlike in the past, the rapid increase in FIGURE 1.21: Share of the population by FIGURE 1.22: Vietnam Dependency Ratio, by age, annual, 1950-2050 youth and older adults, 2015-2050 Source: UN (2015), extracted April 2017. Source: Merotti et al. 2017. 24 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E the future dependency ratio is due to an increase moving into more knowledge-intensive work and in the elderly, from a dependency ratio of 0.096 in jobs that allow for high labor productivity. Third, 2015 to 0.34 by 2050; the child dependency ratio the falling size of the workforce may encourage, is expected to only increase slowly (Figure 1.22). and help align, Vietnam’s future jobs with labor saving technology. If Vietnam’s workers can This has several implications for jobs. First, harness technology to do the low-value added women, who already have high work rates and tasks, the smaller labor force can focus on the spend significant time on housework (Box 1.4), higher value-added tasks. Fourth, this may be will be pressured to provide unpaid eldercare the boom of a new care industry, as is occurring services for family members, thus crowding out in China, which may offer new job opportunities market work time. Second, since there will be to women. However, the implications of the fewer people, it will be necessary for the existing demographic shifts are not destiny, it is possible workers to do more, creating a strain on an already to make adjustments now to lower the burden of overworked working age population. This means aging on Vietnam’s labor markets. BOX 1.4: Measuring Total Work A recent study by ActionAid (2017) provides micro- data to better understand the burden of non-market work that women and men carry. Time diaries were collected from more than 800 people in 9 provinces to estimate the hours dedicated to home and family care. The women in the sample worked an average of 35 hours weekly, which is nearly equal to a full-time job. Men contributed to the household as well, offering 21 hours weekly. Women spent more than five hours daily engaged in housework, child care, collection of fuel or water, and eldercare, as compared to men who spent three hours daily on the same tasks.46 Women without an education and those from certain ethnic groups and more rural zones calculated more than nine hours of unpaid care work daily. The homecare burden limits women’s access to jobs, particularly those jobs that require extended periods away from home. It also reflects certain labor market choices. Over 25 percent of female household enterprise owners stated that owning a business allowed her to reconcile personal and professional demands, as compared to 6 percent of men.47 Similarly, women gravitate toward lower-paid yet more flexible wage jobs that allow family leave and provide social insurance.48 46 The last year that the VHLSS collected data on time use was in 2008. The data from that random sample found that women who engage in housework (79%) spend an average of 132 minutes per day – just over two hours – in this activity, as compared to men (56%) who spent about 90 minutes daily (cited in UN Women 2016). 47 Pasquier et al 2017. 48 Chowdhury et al 2018. 25 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T BOX 1.5: Climate change and jobs Climate change is expected to have a significant impact on jobs globally. There is little evidence about its exact impacts, but there are some scenarios that merit consideration. Climate change is a significant risk to Vietnam. Temperature increases per decade in Vietnam since the 1960s is double that of the global average. Rising sea-levels expose a third of Vietnam’s population to the risk of flooding, rising to more than 80 percent in the Mekong and Red River Deltas (see map). These shifts are accompanied by greater rainfall variability, more extreme weather, increasing water salinity, droughts, and the nature and frequency of crop and livestock Percent of (and human) disease. population exposed These changes may lead to jobs loss, particularly in industries that rely on the environment. Changing salinity threatens 0 - 20% 2/3 of Vietnam’s fish from aquaculture. Agricultural land in 20 - 40% the Mekong Delta is slowly eroding and, when coupled with increasing salinity, puts at risk the livelihood of 13.6 million 40 - 60% Disclaimer: rice farmers. The services and manufacturing jobs that The map shown is for 60 - 80% form the up-stream jobs in agro-food value chains may be illustration purpose. Percent of affected. The tourism industry may suffer as temperatures 80 - 99% The boundaries, color, population and denominations, rise, coasts erode, and weather becomes more unpredictable exposed other information and severe. And productive assets may be lost to floods or shown on any map sold-off to manage the income losses induced by weather in this work do not 0 - 20% imply any judgment shocks on the part of the 20 World Bank 40% - Group Jobs will be created, destroyed, or transformed. They may concerning the legal respond to the new conditions created through climate status of40 - 60% any territory or the endorsement change, such as more air conditioner installers, deep water 60 - 80% or acceptance of irrigation engineers, or infrastructure repair or they may such boundaries slow down climate change, as in renewable energy. But 80 - 99% international experts predict that the primary implications of climate change are the transformation of jobs. Primary producers may need to shift to drought (or flood) resistant crops or livestock. Tourism operators may need to diversify movement of low-skilled people to cities will expand the size into regions that are less threatened by rising sea levels or of the household enterprise sector as well as provide new high temperatures. workers in low-skilled manufacturing. More workers will be looking for jobs and income insecurity will increase. Climate changed-induced migration is also expected to change the jobs picture. Massive out-migration from the The policy challenge is to facilitate the transitions now to Mekong Delta is partly attributed to impact of climate limit the negative jobs impacts and prepare for a changed change; a similar picture is emerging in the north. The future jobs market. Summary more and on average offer better quality. It could also be seen through a greater leveraging of the More jobs and better jobs could be created if agriculture sector by shifting crop production and Vietnam deepens links to local, regional, and developing agro-value chains to serve Vietnamese, global value chains. The country and the region’s Asian, and global markets. Chapter 2 of this report growing consumer class and urbanization, as well explores how Vietnam could improve job quality as the emergence of regional value chains offer and create new jobs that are linked to a higher opportunities for Vietnam to increase the jobs in value-added agricultural sector. Chapter 3 looks value-chains. As Vietnam’s workforce becomes at how Vietnam could create more quality jobs in more sophisticated, this also opens the potential to the private sector in general, by putting in place move into higher added value chains. This could the right policies to capitalize on a growing middle see a continued change in the structure of the jobs, class, urbanization and the growing regional value towards more private sector wage jobs that pay chains. 26 C H A P T E R 1 - V I E T N A M ’ S L A B O R M A R K E T TO D AY A N D I N T H E F U T U R E The movement to the knowledge jobs threatens take full advantage of opportunities provided to leave some populations behind. While young, by a changing domestic and global economy as urban, and educated people are already benefitting described above. However, “good” wage jobs only from the shifting jobs picture, others – women, comprise one in four jobs. If we assume the same the older population, ethnic minorities, and those rate of transformation that has been observed in living in remote areas – may face challenges in the period 2008-2015, about 2 in 4 (43 percent) integrating into the new structure. This requires will be in “good” jobs by 2040. Family farming and Vietnam to prepare its workforce for future jobs household enterprises jobs will continue to decline and implement labor supply side measures to – though still being the source of more than half enhance access to better jobs for those at risk of the jobs in 2040. This points to a policy agenda being left behind. This is explored further in that both supports profitability and earnings in Chapter 4 of this report. agriculture (Chapter 2) and family enterprise while also setting the stage for expansion of large Still, many jobs will look like today’s jobs in domestic and foreign enterprises (Chapters 2 and many ways. The jobs structure is changing and 3) and the job opportunities they will bring. will continue to provide better jobs if Vietnam 27 CHAPTER 2 - SHAPING VIETNAM’S AGRICULTURE AND FOOD SYSTEM TO DELIVER JOBS49 Vietnam’s rate of agricultural growth has been Thailand, only between 25 and 40 percent of impressive by regional standards. During the cultivated land is serviced by irrigation. In recent 1990s, Vietnam’s growth in agricultural value years, however, Vietnam’s agricultural growth in added averaged 4.2 percent per annum, and value-added has been decelerating—between 2010 between 2000 and 2009 it averaged 3.9 percent per and 2016 it averaged only 2.5 percent per annum. annum (Table 2.1). This was a higher growth rate than that experienced in all other Asian countries Within Vietnam’s agricultural sector, the pace other than China and Cambodia. Agricultural and pattern of growth has varied considerably growth in Vietnam has also been less volatile than among different subsectors. The growth of paddy elsewhere in the region. Having very ample water production was weak, at 2.8 percent per annum supplies and a comparatively large proportion of over 2000-2014, but steady, according to the Food its agricultural area serviced by irrigation, Vietnam and Agriculture Organization Statistics (FAO). has not experienced the wide fluctuations in food Capture fisheries and aquaculture grew at a very and other agricultural output faced by other impressive 8.5 percent per annum over 2000-2014 countries. More than 70 percent of Vietnam’s period, although the bulk of this growth took place cultivated area (considering multiple crops within in the period up through 2007. Since then, capture a year) is now serviced by irrigation infrastructure. fisheries have had to contend with a partially For the Philippines, Indonesia, Malaysia and depleted near-shore fisheries resource-base, Table 2.1: Annual growth in agricultural value added in selected Asian countries, 1991-2016, percent Countries 1991-1999 2000-2009 2010-2016 Cambodia 4.4 4.8 2.1 China 4.0 3.9 4.0 India 3.9 2.5 3.7 Indonesia 2.3 3.4 3.9 Philippines 1.8 3.2 1.0 Thailand 2.1 2.9 0.5 Vietnam 4.2 3.9 2.5 Source: World Development Indicators (WDI), 2017. 49 This chapter is prepared by the team consisting of Sergiy Zorya and Steven Jaffee from the World Bank and Nguyen Do Anh Tuan, Truong Thi Thu Trang, Nguyen Le Hoa, and Nguyen Thi Thuy from Vietnam’s Institute for Policy and Strategy for Agriculture and Rural Development (IPSARD). It builds on the World Bank and IPSARD (2016). 29 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T while the shrimp aquaculture industry has faced they were sold at a discount as a result of several large losses of production, as in 2012 and 2013, factors, including: (i) issues related to lower due to disease. Livestock production grew at 4.5 or inconsistent quality or food safety; (ii) the percent per annum over 2000-2014 period. Yet, incidence of and perceived risk of contract non- this production has been quite volatile, in large fulfillment by Vietnamese suppliers; (iii) real part due to disease outbreaks plus volatility in or perceived risks regarding the environmental the costs of animal feed and in prices of meat, footprint of Vietnamese commodities; and especially pork. While domestic milk production (iv) intensive competition among Vietnamese is growing rapidly, this still accounts for a very exporters, which has enabled international small share of livestock value-added. buyers to negotiate prices downward. Over the past two decades, Vietnam has also Another contextual point about Vietnam’s emerged, seemingly out of nowhere, to become agriculture is its regional differences. Several a major supplier in international agricultural regions, including the Red River Delta and the commodity markets. Both the scale and the two Central Coast regions, have seen their rates breadth of this trade have been very impressive. of growth lag over most of the period since 2000 Vietnam now has more than US$1 billion in trade (Table 2.2). The Red River Delta, for instance, for eight different commodities (or commodity has seen an absolute decline in agricultural groups), and it ranks among the top five global gross value-added in four of the past five years. exporters of each 50. Vietnam’s farmers have Urbanization and industrialization are the main responded exceptionally well to the opportunities drivers of economic development there. The provided by (i) growing global demand for Central Highlands region has witnessed the most agricultural raw materials and both staple and rapid and sustained rates of agricultural growth. higher value foods; (ii) Vietnam’s entry into The Southeast has also seen higher-than-average the World Trade Organization and into various growth. Commercial tree crop development trade agreements; (iii) an improved domestic has underpinned this growth in both regions, environment for business and investment; (iv) the together with expanding livestock development country’s diverse agro-ecological conditions; and in the Southeast. The Mekong Delta region, which (v) Vietnam’s favorable geography nearby rapidly accounts for about one- third of agricultural growing middle-income countries. Particularly gross value-added, saw growth taper off between impressive is the recent increase in the export of 2009 and 2013 due to some disruptive events in horticulture products—from the very low values the aquaculture subsector and declining rates in 2000s to above US$1 billion in 2016. In 2017, of growth in rice value-added. Among regions, the export of dragon fruit alone is projected by the Vietnam’s two rice bowls—the Mekong and Red Ministry of Agriculture and Rural Development River Deltas—have experienced the slowest pace (MARD) to exceed US$1 billion. of agricultural growth since 2009. Three regions, the Mekong Delta, the Southeast, and the Central Yet the picture of Vietnam’s agro-food Highlands, now account for about 60 percent of trade is not all positive. Most of Vietnam’s Vietnam’s gross agricultural output and more expanding export subsectors have failed to take than 80 percent of its agricultural exports. full advantage of the market opportunities for generating increased value and, in some cases, Despite diversity and regional differences, failing to have a transformative impact on the primary agriculture remains the largest employer farmers and communities which serve as their in Vietnam. In 2013, the farming share accounted foundations. Vietnam has been cost-competitive for 50 percent of total employment, down from when it comes to crop-based commodities but 80 percent in 1986 (Figure 2.1). By 2015, this 50 These commodity groups include rice, coffee, pepper, rubber, cashew nuts, cassava, fishery products, and horticulture. 30 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S Table 2.2: Composition of agriculture and agricultural growth by Vietnam’s region Rate of growth in agricultural Share of national agricultural value-added, %, in constant prices value added 2000-2013 2000-2004 2009-2013 2000 2013 Total 3.6 3.9 2.8 100 100 Red River Delta 1.2 1.9 0.3 20 14 North East 4.4 3.4 5.7 9 10 North West 4.5 4.7 4.2 2 3 North Central Coast 2.5 3.0 1.2 11 9 South Central Coast 2.9 3.1 1.7 7 6 Central Highlands 8.7 8.5 8.6 6 11 Southeast 4.6 4.0 5.6 12 14 Mekong Delta 3.5 5.0 1.1 33 32 Source: IPSARD calculations based on GSO data. share dropped further to 46 percent.51 The most construction sites around large cities and women rapid labor movement out of agriculture occurred being heavily employed in garment, footwear between 2005 and 2013, a period in which many and fish processing industries. The decline in jobs were created in industry and services. agricultural employment was accompanied by a Rural people, especially the younger generation, decline in the share of agriculture in GDP, from 40 have taken up these opportunities, with many percent in 1986 to 17 percent in 2013 (Figure 2.1) men finding at least periodic employment at and 14 percent in 2015. FIGURE 2.1: Vietnam moved from an agro-based to transition economy during the last 30 years Source: WB staff based on the WDI, 2017 51 Vietnam’s Government Office of Statistics (GOS), 2016. 31 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T As a result of the shift in labor composition, the land productivity in Vietnam is among the agricultural labor productivity, measured highest in the region, due, in part, to the very as value-added per worker, increased. Yet, it broad coverage of irrigation and thus the ability continued lagging the labor productivity in to produce multiple crops in a year (Table 2.3). industry and services. Despite some convergence These data suggest that in 2014, agricultural labor with productivity in manufacturing and productivity in Vietnam was only 60 percent that construction during the past 10 years, productivity of China, less than half that of the Philippines and in these sectors was more than double productivity Thailand, and about the same as of Cambodia. levels in the agricultural sector (Figure 2.2). On These findings are plausible for China and the positive side, however, the productivity gap in Thailand, yet seem less likely for the other two Vietnam was lower than the 3.5-fold gap estimated countries considering Vietnam’s much greater by Gollin et al. (2014)52 for developing countries dynamism in terms of agricultural diversification, overall and the 6-fold gap in Sub-Saharan Africa. yield improvement and mechanization. While the numerator (i.e. agricultural value-added) Based upon the official classification of should be reasonably accurate, there is likely to be ‘agricultural labor’ Vietnam’s agricultural a problem with the denominator (i.e. number of labor productivity has also lagged that of many agricultural workers). More on this below. regional peers (Figure 2.3). This is even though FIGURE 2.2: Sectorial GDP per worker in Vietnam, 2005-2014 Source: GSO, 2016. 52 Gollin, Lagakos and Waugh 2014. 32 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S FIGURE 2.3: Agricultural labor productivity in Vietnam and selected countries, 1986-2014 Source: WDI, 2017. Table 2.3: Agricultural land and labor productivity, selected countries, 2000-2014 Country Agricultural land productivity Agricultural labor productivity (in constant 2010 $ per ha) (in constant 2010 $ per worker) 2000 2014 2000 2014 Cambodia 486 765 575 803 China 749 1,328 774 1,398 Indonesia 1,586 2,179 1,545 2,521 Philippines 1,651 2,143 1,495 1,949 Thailand 1,464 1,776 1,446 2,134 Vietnam 1,729 2,232 585 791 Germany 1,336 1,069 22,442 32,521 France 1,348 1,558 45,774 94,946 United States 329 430 44,136 76,457 Source: WDI, 2017. The above analysis would naturally lead to a labor productivity in the country. Yet, Vietnam is recommendation to adopt measures to accelerate already on this path. The share of farm labor in the movement of labor from less productive the labor force declined by 32 percentage points primary agriculture to more productive industry during 2000-2015, from 65 percent to 46 percent.53 and services. This would yield higher overall For comparison, the decline in Indonesia and 53 World Development Indicators, 2017. 33 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Thailand averaged 27 percentage points (from composition of employment within the agro-food 44 percent to 32 percent). Only in China has the system in accordance with broader economic share of farm employment declined faster, by 44 development and income growth. percentage points (from 50 percent to 28 percent). Thus, Vietnam is already undergoing a fast A third consideration is the ability of other transformation and accelerating it further will be manufacturing and service sectors to absorb challenging, for several reasons. large numbers of underemployed rural workers and offer better pay than farm jobs. As this First, the aggregated statistical analysis does Report indicates, this process has been slow in not give an accurate picture of the underlying Vietnam, due to both the supply-side constraints, productivity levels and trends and the associated such as poor enabling environment for private incentives for inter-sectoral changes in investments or lagging development of secondary employment. As will be illustrated below, labor towns, and the demand-side constraints, such productivity differs widely within the agricultural as low skills of rural workers, poor working sector. For some commodities, it is relatively conditions in new jobs, and constrained mobility high—including relative to industries requiring from rural to urban areas. Only when these similar skills—while for other commodities it is constraints are addressed can a faster structural quite low. Own production or wage labor in some change can be expected. segments of agriculture pays better than minimum wages in industry and may also involve better This chapter seeks to better understand the work (and social community) conditions. We want situation regarding Vietnam’s agricultural to see more employment in more productive and labor productivity and how it can be improved. remunerative segments of agriculture (which still This is important to ensure competitiveness of have opportunities to substantially grow) and less agricultural jobs in the context of slow nonfarm reliance on employment in those areas providing job creation and opportunities to create more low returns, although we should not ignore the jobs in the food system in the future. The chapter important social safety net function, which own begins with a stocktaking of the role of agriculture rice production serves for large numbers of rural in income generation and jobs and how this households. has changed over time, spatially, and ethnically. It is followed by a re-measurement of labor A second consideration is that many of the future productivity in Vietnamese agriculture, on an work opportunities for today’s underemployed aggregate and disaggregated basis. Subsequently, rural workers may occur in manufacturing a preliminary look is taken at the job prospects or service industries closely affiliated with in Vietnam’s broader agro-food system. Policy agriculture. These would be jobs in the options to spur better jobs in primary agriculture agricultural inputs or services sub-sectors, in food and related downstream businesses services in the and agro-industrial processing, in agro-logistics, future and strengthen the ability of rural people to and the broad range of formal and informal food access these jobs are then presented. distribution services. In some cases, the growth and stability of these jobs would be closely linked Agricultural Jobs and the Jobs to the performance of agriculture. Unlike in some Portfolio of Rural Households in of Vietnam’s export-oriented assembly industries, Vietnam such agriculture-related exporting subsectors tend to have strong forward and backward linkages The number of people working in Vietnam’s and so growth has direct multiplier effects. We primary agriculture54 is large, but it is decreasing will see below some illustrations of the changing 54 Agriculture in this report is defined to include crop cultivation, livestock, fishery, and forestry. 34 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S over time. In 2000, about 25 million people investments have significantly improved service worked in agriculture, accounting for 65 percent delivery, education and public infrastructure, of total labor force. In 2012, their number reduced which facilitated growth and enabled broad to 24.3 million (or 47 percent), and in 2015, participation in the economy. The transformation the latest data available, it decreased further from an agrarian economy to labor-intensive to 23.2 million (46 percent), out of whom 50.7 manufacturing and services industries has been percent were women. Within the sector, the key, where these sectors created 15 million jobs largest number of workers was engaged in paddy over the past 20 years55. Improved education has production, 7.7 million (Table 2.4). Commodities been an important pathway to obtaining better with agricultural employment above 1 million jobs. A college degree, for example, significantly people included coffee, cattle, and pigs. Among increases the likelihood of having a wage job (by major commodities, the lowest employment 52 percent compared to only lower secondary numbers were observed in production of cashew education). Migration to cities further presented and pepper. Most agricultural labor force work rural households with non-farm opportunities. on their own farms (self-employed) or provide These factors have contributed to households services to other farmers (wage work). A small diversifying their income sources from agriculture. number of farmers are members of cooperatives and other farmer organizations (estimated at In rural areas, the reliance on agriculture among 121,200 people in 2014 by the Labor Force Survey) rural households is declining. The transformation and this number is decreasing over time, in spite of from farm to nonfarm activities is reflected in the the government efforts to promote cooperatives. changing composition of household incomes. The share of households classified as “agricultural” The movement of rural people out of agriculture households declined from 71 percent of all has largely been a result of rapid economic growth rural households in 2006 to 58 percent in 2016, that created many nonfarm jobs. Government according to the 2016 Agricultural Census. Only 49 percent of rural households in 2016 reported their leading source income to be from agriculture, Table 2.4: Vietnam’s agricultural labor force compared to 68 percent in 2006 (Table 2.5). by activity, 2012 Number of workers Table 2.5: Role of agriculture in rural areas of Paddy 7,658,156 Vietnam, 2006-2016 Sugarcane 453,453 2006 2011 2016 Cashew 231,158 Number 13,768,472 15,343,852 15,990,000 Pepper 255,591 of rural Rubber 710,960 households Coffee 1,900,286 Agricultural 71 62 58 households, Tea 304,218 % Cattle 1,103,091 Rural 68 57 49 Pigs 1,344,549 households with Poultry 846,302 leading Forestry 957,689 income from Catching fish 628,798 agriculture, Aquaculture 630,474 % Source: Input-Output Matrix, GSO, 2012 Source: Vietnam Agricultural Census 2016 (GSO, 2017). 55 World Bank 2017. 35 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Vietnamese households increasingly rely on regions which have been experiencing a stagnation nonfarm sources of income. Between 2004 and or decline in agriculture (Figure 2.5). There has 2014, the share of rural households relying entirely been less change elsewhere, with agriculture on nonfarm income and wages increased from remaining the leading income source in Mekong 22 percent to 32 percent. At the same time, the Delta, Central Highlands, and Midlands and share of rural households relying only on income Northern Mountains. In 2014, the income from from agriculture declined from 23 percent to 19 agriculture accounted for about 40 percent of total percent. About 90 percent of rural households per capita income in these parts of the country have multiple sources of income.56 (Figure 2.6). Wages are the largest single income source for rural households. In 2014, they accounted for FIGURE 2.5: Agriculture’s contribution to rural 37 percent of average rural income, up from 32 household income by region, 2002-2012 percent in 2010 (Figure 2.4). The income from 80 Share of HH income, % 70 self-employment in agriculture comprised 30 60 50 percent of total income, followed by the income 40 30 20 from own nonfarm businesses, either formal or 10 0 informal. nt ra elt l a lan a ds in s he as t a elt l HH s HH s rD Ce nt ut g D ura an ve i gh ou o l n r b Ri n M oa lH Ssta ek o R U d er ra Re C nt M rth and The pace of the shift in income sources has, dN o n Ce an er th however, varied substantially across the country. l a n ds N or 2002 2012 id The most significant declines in agricultural as a M share of household income have occurred in the Source: IPSARD’s estimate based on VHLSS 2012 (GSO 2013). Red River Delta and the North Central Coast, FIGURE 2.4: Sources of income of rural households in Vietnam, 2010-2014 Source: IPSARD’s estimate based on VHLSS 2014. 56 These shares are drawn from the national Vietnam Household Living Standard Surveys (VHLSS) and they imply that the number of agricultural workers used to calculate agricultural labor productivity is significantly biased upwards. 36 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S households still obtain a large share of their FIGURE 2.6: Job portfolio of rural households income from agriculture – from their own by region, 2014 farms and through seasonal work for others 25,000 Other (Figure 2.7). In the Mekong Delta, where many 20,000 Transfers households have landholding less than 1 hectare ‘000 VND/capita 5,000 Remittances 1,000 Wages cannot continue to rely only on rice, a traditional 5,000 - Own business crop there, to increase their income in line with s a al s st ta r ve Mou nt ain entr land hea Del De lt lC h t ig Sou ong Livestock & Fisheries nonfarm earners. A 2009 survey of the Mekong i t a H Crops dR n Re ther d Co ent as ra l M ek Development Institute found that only farmers N or an C sa nd ther r n with more than 3 hectares were earning a large la nd No M id part of their income from paddy, while farms with below one hectares obtained nearly two-thirds of Source: IPSARD’s estimate based on VHLSS 2014. their income from off/non-farm sources.57 Agricultural jobs and income play a much more The degree of change in the structure of rural important role for poor households than for households’ income reflects factors such non-poor ones. In 2014, agriculture accounted for as landholding size, education, availability 44 percent of the income for poor households vs. of nonfarm jobs, and proximity to urban 29 percent for non-poor households (Figure 2.8 centers. In much of the Central Highlands, and Figure 2.9) The non-poor derive more of their where nonfarm job opportunities remain rare, income from wage work and income from their agriculture continues to account for the largest own businesses. share of GDP and employment, and most rural FIGURE 2.7: Distribution of employed population by sector and socio-economic regions, 2014 100 90 18.5 20.3 29.1 29.0 32.2 32.5 80 12.0 7.1 51.3 70 64.6 60 17.3 16.7 31.0 50 36.7 40 69.5 72.6 27.0 30 53.8 50.9 20 39.9 32.8 31.1 10 21.8 0 2.6 Red River Midlands and Northern and Central Southeast (*) Mekong Delta (*) Hanoi City Ho Chi Minh City Delta (*) Northern Coastal Central Highlands Mountains Agriculture Industry and Construction Services Note: (*) Red River Delta excludes Hanoi, and Southeast and Mekong River Delta exclude HCMC. Source: Labor Force Survey, GOS 2015. 57 Le Canh, Nguyen and Duong 2010. 37 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T FIGURE 2.8: Source of per capita income of FIGURE 2.9: Source of per capita income of poor households, 2010-2014 non-poor households, 2010-2014 25,000 25,000 Other Other 20,000 20,000 Transfers Transfers Remittances ‘000 VND/capita ‘000 VND/capita 15,000 Remittances 15,000 Wages Wages 10,000 10,000 Own business Own business Livestock 5,000 Livestock 5,000 & Fisheries & Fisheries Crops 0 Crops 0 2010 2012 2014 2010 2012 2014 Source: IPSARD’s estimate based on VHLSS 2014. Source: IPSARD’s estimate based on VHLSS 2014. The ethnic minorities, made up of 53 groups, their limited participation in most aspects of high accounted for 15 percent of total population value agriculture, is responsible for the lower in 2016. On average, ethnic minorities rely on agricultural productivity and incomes of ethnic agriculture for a much larger share of their income minorities.58 than does the Kinh population (42 vs. 18 percent). Few ethnic minority workers are trained and have Differences in agricultural productivity, wages, skills to get jobs outside of farming, and more own business income, and remittances account than 75 percent of them do simple jobs (Table for the income gap between the ethnic minority 2.6) This lower level of skills, together with their and majority in Vietnam. The per capita income of access to more marginal agricultural land and ethnic minorities from agriculture is less than half TABLE 2.6: Selected labor indicators for Vietnam’s ethnic minority, 2014-2015 Ethnic minority Total Population Number of people, million 13.4 91.7 Average income per person, million VND 1.2 2.8 Average poverty rate, % 23.1 7.0 Income sources, % Agricultural and non-agricultural wages 39.6 46.9 Own agriculture 42.1 17.8 Non-agriculture 9.9 20.2 Others 8.4 15.2 Share of trained labor, % 3.0 20.3 Number of over 15-year old workers, million people 8.1 52.8 Share of over 15-year old workers with technical qualification, % 6.2 20.3 Employment of over 15-year old workers by sector, % Agriculture 81.9 44.0 Industry and construction 8.6 22.8 Services 9.5 33.2 Share of over 15-year old workers who do simple jobs 75.4 39.8 Source: IPSARD’s estimate based on VHLSS 2014, 2015 socio-economic situation survey of 53 ethnic minorities, and World Bank 2017a. 58 World Bank 2012. 38 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S of that of the Kinh majority. The ethnic minorities the respective rates amongst ethnic minorities and also earn much less from own businesses and the Kinh ethnic minority group were 58 percent receive much less remittances than the Kinh and just over 6 percent.59 majority (Figure 2.10 and Figure 2.11). Lower income from wages for the ethnic minorities has Vietnam has closed many gender gaps though a been a result of their weaker participation in wage wide range of social and economic measures60. activities and the lower wages in rural areas with For example, in 2015, female-headed households ethnic minorities. in Vietnam were less likely to be poor than male-headed households. There are more female Agriculture is especially important as a source students attending school than male at the upper of employment for ethnic minorities. Few ethnic secondary and tertiary education levels. Women’s minority people own non-farm businesses, with economic empowerment has also steadily some exception in the Northern Mountains and improved over the past decade. Women’s labor Mekong Delta, yet they actively complement their force participation rate is within 10 percent of self-employment in agriculture by wage work, that of men. There has been an upward trend in especially in Central Highlands, Mekong Delta, the share of women in wage work, mostly driven and Southeast (Table 2.7). by increased employment for women in foreign- owned export-oriented factories. Nevertheless, This limited access to higher-paying jobs some gaps persist, including: (i) women’s access underlies the high poverty rates experienced to high level leadership positions in public by ethnic minorities. Poverty in Vietnam is, and private sectors; and (ii) a widening gender increasingly, linked to ethnicity and a variety of earnings gap, with women earning 13 percent less human development and locational factors. While than males (for similar work) in 2004. In 2012, this the national poverty rate was 13.5 percent in 2014, gap was 20 percent61. FIGURE 2.10: Source of per capita income of FIGURE 2.11: Source of per capita income of ethnic minority households, 2010-2014 Kinh majority households, 2010-2014 Source: IPSARD’s estimate based on VHLSS 2014. Source: IPSARD’s estimate based on VHLSS 2014. 59 World Bank, 2017. 60 See World Bank Group’s CPF, 2017a, where the data and analytical work on this topic come from various sources, including the UN Women (2016) report. 61 UN Women 2016. 39 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T TABLE 2.7: Jobs of rural households by region and ethnicity, 2014 (%) Wage jobs Self-employment in Self-employment in agriculture non-agriculture Ethnic minority Kinh majority Ethnic minority Kinh majority Ethnic minority Kinh majority Red River Delta 25 29 55 41 0 14 Midlands and 18 25 65 51 6 13 Northern Mountains Northern and Costal 28 26 66 47 1 12 Central Central Highlands 33 23 56 43 3 11 Southeast 48 33 36 21 0 12 Mekong Delta 34 28 40 38 9 12 Total 25 28 60 40 5 12 Source: IPSARD’s estimate based on VHLSS 2014. Women also make up a large share of unpaid to engage in other activities; (iii) insufficient access family workers, particularly in agriculture. to technology, services, training and credit; and Their role in farming is changing along with (iv) unequal participation in the decision-making the structural transformation (e.g., more process surrounding farm-related activities,62,63 job opportunities outside agriculture, farm mechanization, and population aging, which leads Where the gender gaps are the largest is to a growing demand for elderly care services— between women from ethnic minority and most often a female occupation). Women majority groups. Ethnic minority women have increasingly do farming activities, which are lower literacy rates and working knowledge traditionally viewed as male such as cleaning of of the Vietnamese language, higher maternal the fields, pesticide spraying, seed gap filling, and mortality ratios, and lower access to social and shrimp feeding. Women are also largely responsible basic services, and are poorer than women from for production of vegetables and small livestock. the Kinh majority group64. The ethnic minority Yet cultural norms and expectations about gender women are much more likely to be unpaid roles prevail over changes in the division of labor agricultural family workers and own fewer and create constraints for many women. These nonfarm businesses than Kinh women (Table include: (i) insufficient recognition of their unpaid 2.8). They also less likely to engage in wage work work; (ii) excessive work burden and limited time than other women and all men. TABLE 2.8: Jobs portfolio of rural people by gender, 2014 Male Female Ethnic minority Ethnic majority Ethnic minority Ethnic majority Having a wage job 32% 34% 17% 22% Self-employed in agriculture 62% 40% 59% 40% Self-employed in non-agriculture 4% 11% 6% 13% Source: IPSARD’s estimate based on VHLSS 2014. 62 Grassi, Paris, and Chi 2017. 63 FAO 2017. 64 World Bank 2017. 40 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S Several jobs-related conclusions can be derived than the share of agriculture in GDP. This leads to from the above analysis. First, the large and a large productivity gap between agriculture and increasing proportion of rural people in Vietnam non-agriculture, as noted earlier. earn income from a range of sources, doing several jobs at the same time. Most of them are Yet agricultural labor productivity is not part-time farmers, rarely spending 250 working necessarily lower than other sectors when days a year and 8 hours a day on farming. Second, measured on per-hour-worked basis. The agriculture as a source of income and jobs is very recent survey evidence from around the world important in the Central Highlands, Mekong indicates that on a per-hour-worked basis, rather Delta, and Northern Mountains, partially due than simply using national accounts data on the to their favorable agro-ecological environment number of people employed in agriculture, and and partially due to fewer nonfarm jobs there. It accounting for differences in human capital, is important to capitalize more on agriculture’s agricultural labor productivity is not intrinsically advantages in these areas and the fact that nonfarm lower than other sectors – it is often similar65. job opportunities are still rare there. Third, the When accounted for hours worked and human dependence of ethnic minorities on agriculture, capital, the productivity gap is reduced from 3.5 especially women and youth, is disproportionally to 2.2 times in the developing countries and from high. Increasing quantity and quality of jobs 6.0 to 3.5 times in Sub-Saharan Africa in study of for them would require not only investments in Gollin et al. (2014), and it disappears altogether raising their agricultural productivity but also in in Sub-Saharan Africa66. The difference in annual economic development of close-by secondary and per-hour-worked productivity estimates cities to complement their agricultural income by suggest underemployment in agriculture due to nonfarm jobs. seasonality and other factors, such as small farm sizes, which is highly relevant to Vietnam. Re-Measurement of Agricultural Labor Productivity in Vietnam The below estimates of labor productivity in Vietnam are derived using the following As primary agriculture remains a large methodology. The labor productivity is estimated employment and income source in many parts as value-added (defined as revenue less variable of rural Vietnam, improving the remuneration costs) divided by actual time spent on production of this work is an important task for policy of certain commodities measured in person days. makers. How to do it is strongly related to labor The data on actual time spent by commodity are productivity, which is perceived to be low. When derived from the 2014 VHLSS covering various measured in a traditional way, by dividing the agro-ecological zones (Table 2.9). Only half of sectoral value-added by number of workers, the households receiving any income from crop it is indeed low: the average agricultural labor production receive 70 percent or more of total productivity in 2014 was 2.5 times smaller than income from crop production; they are therefore the average labor productivity in Vietnam’s considered “specialized” in crop production. industry and construction (Figure 2.2). The same The proportion of specialized farms in other is largely true for many countries where during the subsectors, except fisheries, is smaller than a process of structural transformation the share of half of total farms, confirming a wide-spread labor engaged in agriculture declined more slowly phenomenon of part-time farming in Vietnam. 65 World Bank 2017. 66 McCullough 2015. 41 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T TABLE 2.9: Vietnam’s households receiving income from and specialized in agriculture Number of households with income Number of households with income from activity above zero from activity > 70 percent of income Crops 4,234 2,380 Livestock 1,075 365 Agricultural services 46 7 Fisheries 356 221 Forestry 171 61 Paddy 1,779 536 Coffee 79 50 Pepper 31 11 Mango 15 13 Citrus 20 10 Pigs 195 58 Shrimps 109 34 Fish 149 106 Source: IPSARD’s estimate based on VHLSS 2014 On average, on per-hour-worked basis, the The labor productivity of some specialized labor productivity of specialized agricultural agricultural households appears to be even households is found to be higher than that of higher than that in nonfarm sectors where skill non-specialized households. The productivity gap requirements are comparable to that in primary was estimated at 28 percent for crop producers, 38 agriculture 67. The value of the unadjusted percent for livestock producers, and 11 percent agricultural labor productivity in 2014 was VND for providers of agricultural services (Table 2.10, 28.6 million per worker; yet the per-hour-worked Table 2.22 and Table 2.23 in Annex). At the same adjusted annual productivity is estimated to be time, no difference was found for households almost as twice as large at VND 53.7 million per involved in fisheries, while the productivity of worker (Table 2.11). Some productivity gap with forestry-engaged households declined along with manufacturing and construction remains, but it specialization, for reasons which need to be further narrowed from more than 200 percent when using explored. This might simply relate to locational national accounts annual data to only 20 percent factors with ‘specialized’ forestry households being for construction and 30 percent for manufacturing in more marginal and remote areas. and transport and warehousing when using TABLE 2.10: Estimates of per-day-worked agricultural labor productivity by sub-sector VND/day68 Households with income from activity Households with income from activity above zero above 70 percent of income Crops 159,000 204,000 Livestock 165,000 228,000 Agricultural services 262,000 304,000 Fisheries 277,000 275,000 Forestry 202,000 157,000 Source: IPSARD’s estimate based on VHLSS 2014. 67 Table 22 in Annex presents the labor productivity for all subsectors covered by the government statistics. 68 The daily rate is calculated with assumption of 8 hour working day and 40 hours per week. 42 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S per-hour-worked data. In addition, the labor by dividing the total wage fund by the number of productivity in agricultural services, provided by workdays, ranged from VND 83,000 in livestock cooperatives and other farmer organizations, was production to VND 183,000 in forestry, averaging found to be higher than that in nonfarm sectors, VND 117,000 (Table 2.12). Nominal daily wages and the labor productivity in fisheries was higher were higher in non-agriculture but once adjusted than that in construction, a common off-farm jobs by the lower cost of living in rural areas they were alternative to farmers. largely in par with that in agriculture. This is not a surprise given that many workers in processing High labor productivity in some agricultural industries, garment factories, and construction activities offers good income as confirmed by in Vietnam receive only minimum or just-above- wage data. Daily wages in agriculture, estimated minimum wages. TABLE 2.11: Comparison of annual and per-hour-work adjusted labor productivity, 201469 Annual labor productivity Per-hour-work adjusted (GDP/worker) (VND) annual productivity (VND) Agriculture 28,600,000 53,710,000 Crops 51,000,000 Livestock 57,000,000 Agricultural services 76,000,000 Fisheries 68,750,000 Forestry 39,250,000 Manufacturing and processing 70,000,000 industry Construction 60,700,000 Transport and warehousing 73,200,000 Note: The share of crops in total agricultural output was 56 percent, livestock accounted for 16 percent, fisheries for 16 percent, forestry for 3 percent, and agric. services for 1 percent. Source: IPSARD’s estimate based on VHLSS 2014 and GSO 2016. TABLE 2.12: Estimated wages by sector, 2014 Number of workdays Total wage, VND Wage per workday, VND Agriculture 313 36,664,000 117,000 Crops 300 33,965,000 113,000 Livestock 269 22,203,000 83,000 Agricultural services 259 26,502,000 102,000 Forestry 226 41,432,000 183,000 Fisheries 299 43,671,000 146,000 Non-agriculture 451 87,281,000 194,000 Food processing 349 44,419,000 127,000 Construction 300 52,924,000 177,000 Textile 338 50,291,000 149,000 Source: IPSARD’s calculation using VHLSS 2014. 69 Working hours in manufacturing and construction were not adjusted for actual labor time spent. On average, wage workers in Vietnam’s industry and services are reported to work 40-48 hours per week, which is more than assumed for agricultural workers in Table 11 (40 hours per week). It implies that the nonfarm labor productivity in Table 11 is overestimated, further reducing the gap between agriculture and nonagriculture. 43 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T The analysis of labor productivity by agricultural with higher labor productivity in Vietnam also commodity provides even more insights on the tend to be more labor intensive, allowing the range of productivity within various subsectors. full use of sector resources for job and income We observe major differences between subsectors generation (see Table 2.14 below)71. (i.e. crops vs. livestock) and within subsectors (i.e. paddy vs. coffee). Based upon 2014 VHLSS data, Supplementing this use of VHLSS 2014 data, a the daily labor productivity ranged from VND rapid survey was undertaken to estimate more 94,000 for paddy to VND 511,000 for pepper, recent farm labor productivity in six major against the average productivity for crops at VND agro-ecological zones. The survey was carried 204,000 (Table 2.13). The daily labor productivity out by IPSARD in late 2016-early 2017, with the in producing coffee was VND 411,000 and mango following coverage: (i) paddy in Thai Binh and was VND 484,000. The daily labor productivity Dong Thap; (ii) fruit: oranges in Hoa Binh and in fish production was estimated at VND 329,000 Nghe An, mango in Dong Thap, and dragon fruit and in shrimp production VND 403,000 compared in Tien Giang; (iii) black pepper in Kien Giang to the average fisheries subsector productivity at and Dak Lak; (iv) coffee in Dak Lak; (v) pigs in VND 277,000. Thai Binh and Dong Nai; (vi) shrimp in Kien Giang; and (vii) pangasius fish in An Giang. In Labor productivity varies significantly by each Province, two case studies were conducted commodity, pointing to the ability of different by commodity, differentiating between large- and jobs to provide differentiated income. This small-scale production, following the guidance analysis suggests that large gains can be achieved of the Provincial Departments of Agriculture from changes in land use, e.g. by moving land from and Rural Development. In addition, for maize less labor productive to more labor productive and cassava, data were drawn from a 2013 World commodities 70. Importantly for employment Bank/IPSARD survey carried out in Phu Tho discussions, is also the fact that the commodities province of Northern Vietnam72. TABLE 2.13: Estimates of the per-day-worked agricultural labor productivity in Vietnam by commodity for ‘specialized’ households Labor productivity by subsector, VND/day Labor productivity by commodity, VND/day Paddy 204,000 (crops) 94,000 Coffee 411,000 Pepper 511,000 Mango 484,000 Citrus 297,000 Pigs 228,000 (livestock) 157,000 Shrimp 277,000 (fisheries) 403,000 Fish 329,000 Source: IPSARD’s estimate based on VHLSS 2014. 70 The impacts of lifting rice land-use restrictions were estimated using the MONASH-VN CGE model. The major results were (i) an 11 percent decline in rice plantings, yet little impact on the overall national rice balance; (ii) significant positive impacts on agricultural growth and per capita expenditures of nearly all income groups; and (iii) significantly accelerated growth in certain regions, especially the Mekong Delta. Giesecke, Tran, Corong and Jaffee 2013. 71 See also Annex Tables 25 and 26. Some of the more labor intensive production systems—i.e. those for coffee, horticulture, and spices—rely heavily on hired labor, thus providing an important seasonal or regular source of income for rural households with the smallest landholdings and/or lower potential agricultural land. 72 Keyser, Jaffee and Nguyen 2013. 44 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S TABLE 2.14: Labor input and productivity from the field data by commodity, 2016-2017 Labor input, days/ha Labor productivity, ‘000 VND/day Paddy [VHLSS 2014] 46-150 [278] 174-276 [94] Maize 165-170 [n/a] 95-110 [n/a] Cassava 185-220 [n/a] 118-135 [n/a] Oranges 350-415 [300] 600-1,000 [297] Mango 200-300 [182] 500-900 [484] Dragon fruit 700 [n/a] 550-650 [n/a] Pepper 360-500 [329] 520-1,830 [511] Coffee 115-130 [287] 500-700 [411] Pork 500-1,500 [n/a] 320-950 [157] Shrimp 240-335 [261] 1,700-3,300 [403] Fish 212 [373] 280-980 [329] Source: IPSARD’s estimate using the data collected in 2016-2017; Maize and cassava from Keyser et al. (2013) Figures in parentheses are the estimates based on VHLSS 2014 The field surveys confirmed the results based yet this low value commodity has more commonly on VHLSS data, illustrating large differences in given a low return to labor. More than a half labor intensity and labor productivity among million hectares are planted with cassava. The low the selected commodities. Again, among the labor productivity for paddy, maize, and cassava major commodities, paddy production involves has dragged down the aggregate measure for the the lowest labor intensity as well as lowest labor entire sector. On the other hand, the highest labor productivity (Table 2.14 and Annex’s Table 26)73. productivity was found for shrimp aquaculture The result is similar for two other important crops and relatively high labor productivity was also —maize and cassava. Maize was historically a food found for each of the tree crops reviewed. Their crop in upland areas yet more recently has been labor productivity is between three and ten times grown primarily as an animal feed ingredient. As that for the staple food/feed crops. Importantly, Vietnam’s feed and feed ingredient imports have considerable differences in labor productivity surged (now more than $4 billion per annum), the are found among farms, illustrating the existing government has more actively promoted maize potential for considerable gains by assuring that cultivation. There is now more than one million farmers adopt available technologies and known hectares under this crop, although productivity good production practices. Structural changes and farmer profitability are still low as Vietnam are underway in Vietnamese agriculture, with tries to catch up with varietal and agronomic consolidation occurring in pork and aquaculture practice advances made elsewhere. Cassava was production and in commercial, higher quality also a traditional upland area food crop, whose paddy production. The implications of this cultivation was expanded to meet growing national consolidation, both for employment and for labor and regional demand for feed, starch, and biofuel productivity, requires further analysis. feedstock. Much of this expansion occurred on sloped or degraded forest land. For several years, This analysis has illustrated that labor this was something of a ‘boom’ crop for farmers, productivity in primary agriculture is generally 73 The variation in paddy production is notable between the Red River Delta and the Mekong Delta. In the former, labor use per hectare remains significant as landholdings are typically very small (0.2-0.5 hectares) and are divided among multiple tiny plots between which household members must walk. There is little mechanization of paddy production there. In contrast, the average landholding for paddy producers in the MKD exceeds one hectare and mechanization has advanced significantly at nearly all stages of paddy production. See, for example, Keyser, Jaffee, and Nguyen 2013. 45 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T higher than often perceived in Vietnam. This services that together include many enterprises is most evident when one looks beyond paddy (and self-employment persons) and a relatively production or production of other low value feed large share of jobs in the manufacturing and commodities. The latter have dragged down the service industries. In Vietnam, the agro-food aggregated estimate of labor productivity in the system is comprised of multiple complete value entire sector, and this is especially the case when chains, which (can) locally produce raw materials, statistics do not take account of the part-time and intermediate products and end products, either highly seasonal nature of paddy production— for domestic use/consumption or export. In especially in the Mekong Delta, which has contrast, many of Vietnamese traditional (and accounted for a large majority of Vietnam’s rice non-traditional) export manufacturing sub- production expansion since 2000. When adjusting sectors feature significant imports of raw materials labor input by per-hour-worked efforts and or product components and involve limited differentiating by commodities, some of which are backward linkages to the economy. more labor intensive and higher value than others, a brighter picture arises for agricultural labor With a growing middle class seeking higher productivity. Significant economic and “better job” quality and more varied food offerings and with gains can still be achieved in Vietnam’s primary favorable trends in international demand for agriculture going forward by facilitating the shift agro-food products which Vietnam can produce of labor from less to more productive activities, competitively, the country’s agro-food system is often requiring a shift of farmland from paddy very well positioned to create more of better jobs. and maize to other crops. This would be consistent This is supported by the global experience, which with the government efforts to promote high-tech shows that as countries progress with economic agriculture and would be similarly consistent with development, the share and composition of jobs a broad employment agenda. in the agro-food system change. For low-income countries, farm jobs predominate (Figure 2.12). Jobs in Food Processing Industry in This pattern changes for middle-income countries Vietnam: A First Look as the number of farmers tends to decline, while significant job creation occurs in agro-industrial A return to a more accelerated pace of growth and food processing and in the various services in agriculture will not only contribute to better associated with food distribution, especially to jobs in the primary sector, but it will also help urbanizing populations. In high-income countries, the whole agro-food system to deliver better the size of the farm labor force shrinks further. jobs. The agro-food system comprises more Agro-processing employment may continue to than just primary agriculture. It includes farm grow, yet is typically overtaken by employment inputs and services, food storage, food and agro- growth in other manufacturing sectors. In these industrial processing, distribution and logistical countries, the bulk of (new) jobs in the agro-food services retailing, food service provision and other system occur in food services. 46 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S FIGURE 2.12: Progression and distribution of jobs in a food system as the countries develop Low Income: e.g. African countries Food manuf./ industry 3% Farming 91% Food services 6% ~80% of all jobs Middle Income: e.g. Brazil Food manuf./ industry 25% Farming 49% Food services 26% ~30% of all jobs High Income: e.g. US Food manuf./ industry 13% Farming 21% Food services 66% ~10% of all jobs Source: WB presentation. Vietnam is now at a transition point where one-half of all industrial jobs in those countries the number of ‘farm households’ has begun to with a similar level of income, while wearing decline and where faster employment growth apparel and textile industries also accounted for will occur in agro-food processing and in significant shares (Figure 2.13). The UNIDO food distribution than at the level of primary analysis suggests that significant employment agriculture. In 2016, the country’s GDP per capita growth in food and beverage manufacturing can in purchasing power parity prices was US$6,400.74 be expected in Vietnam up through its realizing Using the pooled data of 95 countries from 1993 to a per capita GDP of US$15,000. The upcoming 2007, UNIDO estimated that employment in the decade is thus one in which large employment food and beverage industries accounted for at least opportunities will emerge in this area. 74 World Development Indicators (WDI) 2017. 47 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T FIGURE 2.13: Changes in employment by income and manufacturing industry, 1963-2007 Source: UNIDO, 2013 Only a partial picture is available on the current Employment and productivity in Vietnam’s food size, composition, and productivity of Vietnam’s and beverage sector differ by industry, but there agro-industrial and food and beverage labor seems to be a strong inverse relation between the forces. These industries together account for number of workers and the labor productivity. 11 percent of GDP, yet we estimate that they For example, the fish processing industry employs currently account for only 4.5 percent of all jobs the most workers but its labor productivity seems in the economy (equivalent to about 31 percent of to be below average. On the other hand, labor industrial jobs) (Table 2.15). This is lower than we productivity within the dairy industry is very high, would expect given Vietnam’s level of income. while employment numbers are low, although these TABLE 2.15: Estimates of the size of Vietnam’s agro-food system*, 2014 % of GDP % of labor force Primary agriculture 14.2 46.0 Agroprocessing industry (Total) 11.0 4.5 Food processing 4.4 2.3 Agro-industrial processing (leather, bamboo, rubber, paper, and furniture) 6.6 2.2 Farm inputs 0.6 0.1 Total Food System 25.8 50.6 Source: IPSARD’s estimate using the input-output matrix and labor surveys. Note: * Food services are not included in this table because little is known about employment in food services (e.g., wholesale, retail, restaurants, and street food), which is likely to be high in Vietnam, given its rapid urbanization and the growing middle class. 48 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S data are from 2012 and that industry has been Employment generation was one of the experiencing rapid growth during the past several factors considered in a recent analysis by years75 (Table 2.16). This inverse relationship can the International Finance Corporation of be partially explained by the difference in capital the potential attractiveness of foreign direct intensity—milk processing requires more machines investment in Vietnamese agriculture and food/ and equipment than fish processing, which, in beverage processing. Twenty-two subsectors Vietnam, involves heavy manual handwork (for were considered both for their attractiveness sorting, cutting, etc.). It also can be explained by to investors and their value to the Vietnamese the low skills of most workers in Vietnam (see more economy. Segments identified for investment discussion on this below), which translates into low targeting included fish farms and processing, value creation. While these questions require more fruits/vegetables/flower farms and processing, research in the future, the labor productivity in food and specialty rice products--they are all located processing appears to be consistently higher than in the top right corner of Figure 2.14 offering the that of primary agriculture (see Annex’s Table 2.27). high rates of return to investments. Some of these The transition of people shifting from agricultural areas would also deliver jobs, but others would to agro-processing work would raise the overall not (Table 2.17). For example, investments in productivity of Vietnam’s economy. production and processing of fish and horticulture (fruits, vegetables, and flowers) are expected to What is less clear and much less studied in create more jobs, while investments in rice, coffee, Vietnam is which segments of the food processing seeds, and milk processing might be expected to industry would deliver the most jobs in the future. generate few new jobs or even contributed to a Several factors will contribute to this, including: reduced number of jobs in a consolidated subs- (i) the trajectory of domestic demand for different sector, even if increasing the productivity of the food and beverage product lines; (ii) the continued fewer remaining workers. Note that the strong competitiveness of Vietnamese industry, both for capacity of fish and horticulture processing to it exports (i.e. aquatic products) and products for deliver jobs is consistent with its strong capacity which increased import competition can be expected to create jobs in the primary agriculture. It implies (i.e. other animal products); and (iii) the technologies that investments in and support of development used and labor-intensity of production as the indus- of strategic value chains such as for horticulture try grows and modernizes. These issues need to be and aquatic products would deliver many jobs further studied as well as the growth (and employ- with high returns in both primary and tertiary ment) prospects for other agro-industrial sectors (i.e. segments of the value chain76. furniture and other wood products; leather). TABLE 2.16: Employment and labor productivity in food processing industry of Vietnam, 2012 Value added, Labor force Value added per worker, million VND ‘000 VND Meat processing 13,957,047 68,988 202,311 Fish processing 24,386,273 235,533 104,414 Vegetables and fruit processing 4,469,052 170,793 26,166 Vegetable oil products processing 2,287,562 5,479 397,906 Milk and dairy products 10,668,590 11,977 890,749 Milling products and flour production 19,480,667 153,546 126,872 Source: IPSARD’s estimate using the GOS’s input-output data for 2012. 75 Business Monitor International, Vietnam Agribusiness Report, quarterly reports. 76 The sustainable expansion of these industries will depend, in part, upon improved management of natural resources, the broad adoption of sustainable production practices, and advances in food safety practices and oversight. 49 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T FIGURE 2.14: Prioritization of food system’s segments for investment attractiveness in Vietnam More agro-food processing jobs would do good TABLE 2.17: Job creation’s capacity of for Vietnam, but as mentioned above, they different segments of food system are being created slowly. Several factors likely Seed production 1 contribute to this. One is the strong preference Commercial rice farms 1 of Vietnamese consumers for fresh produce and General rice mills 1 ingredients, although changing living and work Specialiaty rice mills 2 patterns are certainly raising the demand for more Rice products manufacturing 3 Robusta coffee mills 1 convenience (i.e. processed/prepared) foods. A Arabica coffee mills 2 second factor is the legacy of and continued large Fruits/flower/vegetable farms 5 presence of state-owned enterprises (SOE) in a Fruits/flower/vegetable packing 5 number of industries (i.e. sugar, tea, dairy, beer, Animal and feed fish procesing 4 rice milling, rubber processing) deterring private Fish/seeafood farms 4 investment at one time or another. These and Fish/sefood grading/packaging 4 Secondary fish processing 3 other constraints on the more rapid take-off of the Milk collection and treatment 3 food and beverage processing industry warrant Dairy manufacturing 2 further attention. Also requiring attention is Note: Note: 5=very positive; 4=positive; 3=neutral; 2=negative; and the spatial distribution of this industry. This 1=very negative. has important implications for efficiency (i.e. Source: IFC, 2014 proximity to raw materials) and, especially for 50 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S employment. Most current fish processing and be higher than required in primary agriculture. rice milling operations are in close vicinity to The share of workers with good skills in the food primary production, yet the remainder of the processing industry in Vietnam is estimated food and beverage processing industry appears at 54 percent, compared to 30-40 percent in to be concentrated in and around Hanoi or Ho wage work in agriculture (Table 2.18). There is Chi Minh City. The development of this capacity growing demand for technical, adaptable skills in secondary cities, especially among the upland for a variety of new jobs in the food industry provinces of north Vietnam and the Central with multitasking capacity (Annex’s Table 2.28), Highlands, would provide greater employment calling for public investments in vocational opportunities for Vietnam’s ethnic minorities77. training. Investments in skills are especially important for rural people. They are, on average, While addressing the supply side issues of less educated than urban people, thereby having job creation, it is important to pay attention fewer chances to find better-paid occupations to the demand side, too. Do farmers or rural outside of agriculture (Figure 2.15). The skill people in general have the skills to get nonfarm gap is especially large for ethnic minorities jobs? While most jobs in food industry are (Figure 2.16), which is exacerbated by the slow considered to require a relatively low set of skills industrialization of most secondary towns and such as literacy, numeracy, and simple technical thus a lack of nonfarm jobs near the areas with a and managerial training, these skills seem to high proportion of ethnic minorities. TABLE 2.18: Skills by employment, Vietnam Subsector Share of skilled workers (*) Workers receiving wages Agriculture 36.9 Crops 30.1 Livestock 43.3 Forestry 55.9 Fishery 28.1 Nonagriculture 77.3 Food processing 53.5 Construction 56.6 Garment 78.3 Footwear 63.8 Workers in agricultural households Crops 46.3 Livestock 44.6 Forestry 44.8 Fishery 29.8 Workers in nonagricultural households 60.4 Note: (*) Primary vocational, Secondary apprentice, College vocational, Professional secondary, College, University, Postgraduate. Source: IPSARD’s estimate using the VHLSS 2014 77 Food processing factories remain rare in the industrial zones, established in more than 60 cities and provinces. By the end of 2015, Vietnam developed 304 industrial zones, with many industrial production parks. Almost each zone has plans for food processing factories to capitalize on the local raw materials for exports, but very few of these plans get realized. 51 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T FIGURE 2.15: Education level of rural versus FIGURE 2.16: Formal training of Vietnam’s urban population, Vietnam labor force by ethnicity Source: IPSARD’s estimate using VHLSS 2014. Source: Data for all labor (Kinh and ethnicity) from mid-term Census 2014 and data for ethnicity from Ethnic Minority Survey 2015 Policy Options for Supporting agricultural growth; (ii) reflecting employment Vietnam’s Agriculture and Food intensity considerations in policy decisions; System to Deliver Jobs (iii) promoting growth in agro-food processing industries and other parts of the food system; and Vietnam’s government has several policy (iv) facilitating continued inclusion as the system options available to increase the agro-food modernizes. Table 2.19 presents specific options system’s contribution to jobs. Strategically, in these areas, which are substantiated by more attention needs to be given to: (i) re-accelerating details below. TABLE 2.19: Spectrum of action areas and options in the food system to deliver more jobs General areas Specific actions Promote growth in primary Relax remaining restrictions on agricultural land use and facilitate a more vibrant land (rental) agriculture market Support collective action to enable small farms to achieve economies of scale Upgrade skills of farmers and support innovations to facilitate transformation Support the adoption of good agricultural and animal husbandry practices to improve productivity, protect the environment and ensure food safety Reposition and rebrand Vietnam’s offerings to enhance its commercial performance in the food and other sectors. Ensure policies do not Continue to facilitate agricultural diversification to respond to emerging food demand undermine employment Promote cooperatives and other farmer organizations intensity relative to long- term market trends Promote growth in food Improve investment climate and competition in the food sector, including through SOE and beverage processing reforms industries and other parts of Provide incentives and support for investments in food processing in secondary cities the food system Upgrade skills of workers and facilitate job matching Enter into further trade agreements to improve the competitive international market access of Vietnamese products Strengthen public and private sector capacities to ensure safe food 52 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S TABLE 2.19: Spectrum of action areas and options in the food system to deliver more jobs (cont) General areas Specific actions Facilitate continued inclusion Upgrade skills of ethnic minority farmers, through agricultural extension and communication as the system modernizes Invest in improved vocational training, experiential learning, and formation of other skills of the ethnic minority youth to prepare them for nonfarm jobs Develop secondary cities to create jobs near rural populations Support the upgrading of practices within informal food distribution channels rather than restricting the operations of small scale operators. Source: World Bank and IPSARD staff. Promoting Agricultural Growth78 based on pooled resources (e.g., high-tech The potential for promoting agricultural growth, agriculture). anticipated to generate better jobs, lies in reforms relating to agricultural land, irrigation, agricultural • Upgrade skills of farmers and support research and extension, and food safety. The innovations to facilitate agricultural following are examples of promising directions transformation. Too many farmers in Vietnam and steps that can be taken: still operate much below the production • Enable (small) farms to achieve economies of possibility frontier as indicated by a large range scale. Land consolidation, in various forms, in labor productivity reported in Table 2.14. will be critical for upgrading production Shifting from resource-intensive to knowledge- systems and product quality, reducing based growth will require major changes in transaction costs within value chains, and the ways farmers and other actors in the food enabling households to gain and maintain a system learn and gain access to technical and middle living standard based at least partly commercial information and knowledge. on agriculture. Land consolidation will also While the government has initiated a shift away enable further mechanization, a process which from top-down, supply-driven approaches to will become increasingly important as labor agricultural research and extension, a deeper costs rise. Vietnam has already demonstrated rethink is needed with respect to public sector that the development of land rental markets objectives, approaches, and roles. For example, can offer an important pathway to land public sector extension services may still have consolidation. In this respect, much will be an important role to play, though less as the gained from improved land services (e.g., main provider of centralized advisory services information, recording, dispute settlement) and more as a broker, mobilizer, and funder and other interventions that improve the of services provided by others. For many efficiency of land rental markets. By the same agencies, moving into these roles will rest token, there could be significant gains from on an embrace of structural and behavioral interventions that bolster farmers’ embrace changes, both internal and external to their of collective action (see Table 2.11 showing organization. Integrating brokerage functions high labor productivity in provision of into traditional extension services will agricultural services, which is mainly done by often require these institutions to build new cooperatives) or that enable entrepreneurs to skillsets, reframe their mission, and modify develop the shared economy on a commercial staff incentives by changing performance basis, enabling economies of scale to emerge measurement criteria. Brokering requires 78 This section is largely derived from the World Bank and IPSARD 2016. 53 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T specific facilitation skills for managing group experience of other countries in this domain. processes and building trust; and it cannot be In several countries, such strategies, together judged by traditional performance indicators with competitive pressures and market such as publications or numbers of trainings. opportunities, have stimulated shifts to In parallel, the heavy focus on improving yields differentiated commodities or value-added and output suggests room for rebalancing product development. Enhancing Vietnam’s investments to ensure their alignment with the national brand in certain industries could help realities and aspirations of a modernizing food in attracting foreign direct investment and system. tourism, and more generally promote exports and domestic sales. • Promote the accelerated adoption of sustainable production practices. This is Reflecting employment intensity in policy critical for maintaining the productivity decisions of farms as well as that of artisanal fishing Further diversification of Vietnamese agriculture operations. Poor environmental stewardship will contribute to rising labor productivity has manifested itself in over-fishing, increased in the sector. Despite the significant growth pest resistance, soil degradation/erosion and in Vietnamese production of animal and large contributions by agriculture to water horticultural products, agricultural land use and air pollution International experience remains heavily skewed toward paddy production, highlights the need for pro-active agro- as well as production of maize and cassava (Table environmental strategies which anticipate 2.20). Note that while the land devoted to rice and prevent degradation from occurring in has begun to decline, the planted area for paddy the first place. In practice, this can involve has increased due to shift to multiple crops per strengthening capabilities and infrastructure year. While many other segments of agriculture to monitor, learn, and do things differently, feature higher labor productivity than does rice through investments in anything from testing cultivation, it will take a decade or more before laboratories and data collection, to introducing significant proportions of lowland irrigated ‘rice incentives for behavioral change, to training in land’ are converted into alternative use. This areas of technical specialization and facilitation will require adjustments in irrigation systems, skills. It can also involve mobilizing multiple the acquisition of new knowledge and skills by stakeholders, developing public-private transitioning farmers, and greater investment partnerships, and intervening at multiple in marketing infrastructure, especially for levels, from farm, to landscape, to region. perishable commodities. But, Vietnam already has some successful experience with this, with land • Reposition and rebrand Vietnam’s offerings conversions and the expansion of aquaculture to enhance its commercial performance production in the 1990s and 2000s. In the uplands, in the food and other sectors. Noting the future agricultural growth will come from land low visibility and perceived value of many conversion but from increasing productivity on Vietnamese exports overseas, Vietnam could existing (or even reduced) agricultural land, in consider any number of repositioning and the contexts of climate change and increased rebranding strategies that draw on the rich competition for natural resources. 54 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S TABLE 2.20: Labor input, productivity, and land use by commodity, 2016-2017 Cultivated area, ha Labor input, days/ha Labor productivity, ‘000 VND/day Paddy 7,816,476 46-150 174-276 Maize 1,178,648 165-170 95-110 Cassava 552,760 185-220 118-135 Oranges 46,214 350-415 600-1,000 Mango 84,691 200-300 500-900 Dragon fruit n/a 700 550-650 Pepper 58,527 360-500 520-1,830 Coffee 589,041 115-130 500-700 Source: Table 2.14 and GSO data on farmland use. On the consumption side, however, Vietnam is occurring across the full spectrum of household already experiencing an accelerated process of income levels. It is projected that the domestic dietary transformation, featuring a decline in consumption of livestock and seafood products per capita and aggregate national consumption will surge in Vietnam, and the value of domestic of rice and rapid rates of growth in the spending on fruits and vegetables will exceed the consumption of fruits and vegetables, processed spending on rice and other cereals (Figure 2.17). foods and, especially, animal products79. These Vietnam is the part of the regional global trend in dietary shifts are most rapid and profound in food consumption changes (Table 2.21), and as a major urban areas80, where changes take place large agricultural exporter it can not only follow in shopping patterns and increased levels of out- the trend but benefit from supplying the higher- of-home eating. Significant changes in urban value products to the global market. food consumption and expenditure patterns are TABLE 2.21: Daily consumption of selected food groups in East and Southeast Asia, 2009 (actual) and 2030 (projected) 2009 2030 Change, % Rice 889 850 -4 Other cereals 535 645 21 All meats 350 664 90 Fish 54 79 46 Milk 55 78 42 Vegetables 74 111 50 Fruits 160 280 75 Edible oils 143 210 47 Others* 434 273 -37 Total 2,694 3,190 29 Note: Unit is kcal per day. *Others is residual that includes principally sugar, other sweeteners, legumes, pulses, nuts, other oils, and animal fats. Source: Jamora and Labaste 2015 79 See World Bank and IPSARD 2016. 80 In 2012, some 55 percent of urban food expenditures were for animal products or seafood compared to only 17 percent for rice. 55 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T The government is, therefore, recommended to not uncommon because these can contribute support accelerated agricultural diversification to to meeting broader policy objectives such as respond to emerging food demand and improve inclusive growth, food security, or the protection income and employment opportunities. Among of natural resources (though this approach has other things, this will require giving farmers more its pitfalls). In several Vietnamese contexts, such land-use choices by further loosening restrictions as in aquaculture, specialty rice, and horticulture/ on uses of rice-land, improving irrigation floriculture, agricultural cluster development services, and developing more flexible irrigation may be an appropriate strategy and lends itself to infrastructure suited to growing various crops. incremental forms of public sector support. Other examples of supportive measures include strengthening animal health and pest surveillance Promote the growth in agro-food services, better enforcing regulations relating to processing industries and other parts of the use of agro-chemicals and antibiotics, and the food system facilitating farmers’ and small enterprises’ access The constraints on private investment in food to finance. and beverage processing should be reviewed and acted upon. Developing a detailed agenda Strengthening collective action to build on this was beyond the scope of the present competitive and inclusive value chains would jobs review. For example, to what extent has help promote agricultural diversification and SOE operations and an unlevel playing field increase agricultural employment intensity. The discourage private investment? What role, if any, government can support this in producer and has an underdeveloped local industry for food industry organizations (and commodity boards) grade packaging played in the industry’s modest in two broad ways, by investing in organizational development? Have restrictions on (international) strengthening, and through legal and regulatory companies from sourcng raw materials directly means. Many such entities currently perform from farmers played an important role? Have government (program) liaison functions, but in prospective investors encountered multiple layers the future, it will need to play more important of regulations—at national, provincial and district technical and/or commercial roles. While levels—which have deterred investment, especially contract farming is primarily private-sector led, beyond the country’s lead cities? These and other government support for such arrangements is issues need to be taken up. FIGURE 2.17: Composition of food calories in Vietnam, 2009 (actual) and 2030 (projected) 2009 2030 Percent Percent 52 Rice 37 Milk 1 3 Boultry 1 Bovine 3 Vegetables 3 Fish 4 Edible oil 1 1 3 Fruits 1 2 13 Maize 2 15 5 3 Wheat 3 5 Big 3 Other 4 13 22 Source: Jamora and Labaste 2015. 56 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S Strengthen public and private sector capacities retail formats in urban areas. At present, the bulk to ensure safe food. In response to food safety of the Vietnamese population obtains its fresh challenges, Vietnam has already revamped its food produce through traditional (‘wet’) markets which safety regulations, invested in laboratories, and provide employment and livelihoods for large streamlined institutional structures by reducing numbers of people. Supermarket/convenience the number of ministries in charge of food safety store penetration remains low (i.e. below 15 from six to three. It is also redirecting capacity percent) in most cities, yet this will certainly developed to ensure export food safety to focus increase in the future. How this development will on the domestic market. To bolster these changes, impact different stakeholders—and the policy the government will need to address financial and implications of this—has likewise received little human resource pressures creatively, and may attention in Vietnam to date. consider models such as co-regulation, which rely on greater private sector involvement, to Skills development can help improve earnings manage the constraints it is encountering. In any and job perspectives. The global evidence suggests case, technical and other forms of support may that more educated and skilled individuals are be needed to enable private food operators (and more likely to adopt and effectively use modern especially SME food processors and informal technologies, respond to market opportunities, sector food distributors) to improve their food and increase their earnings. Skilled farmers are the safety management practices. first to innovate, capitalize on emerging market opportunities, and adopt modern technologies. Facilitate inclusion of the vulnerable Well-educated rural young and women trained groups in food system’s jobs in business development and vocational skills While past agricultural growth in Vietnam has are likely to benefit from increasing knowledge been highly inclusive, the modernization and intensity of the food system, with significant consolidation of primary production and the opportunities in high-value agriculture and modernization of the downstream elements associated agro-processing and value addition81. of the food system may pose considerable Improved skills and education has already been challenges for some stakeholders to remain an important pathway to obtaining better jobs in commercially engaged. We are already beginning Vietnam. A college degree, for example, sharply to see a major shift from backyard pig and poultry increases the likelihood of having a wage job, by production to the development of larger, vertically 52 percent compared with only lower secondary integrated feed and farming operations. Much of education82. The big problem is that less than 10 the recent growth in dairy production has been percent of labor force in Vietnam have college and occurring on very large farms. The implications University degrees (Figure 2.16). Skills acquisition of these patterns for employment has thus far (and practical work experience) will be especially received little attention in Vietnam. Similar important for ethnic minority youth. questions pertain to the emergence of modern 81 World Bank 2017. 82 World Bank 2017. 57 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Annex TABLE 2.22: Vietnam’s labor productivity by sector and subsector, 2005-2015 In VND million per worker, nominal prices 2005 2010 2014 2015 TOTAL 21.4 44.0 74.7 79.4 Agriculture, forestry and fishery 7.5 16.3 28.6 30.6 Mining 346.6 742.2 1,683.3 1,695.6 Manufacturing and processing industry 34.2 42.0 70.0 71.0 Production and distribution of electricity, gas, hot water, steam and air 220.0 504.8 1,024.7 1,146.6 conditioning Water supply, wastewater, and waste management and treatment 37.3 94.6 179.0 179.9 Construction 26.9 42.7 60.7 66.5 Wholesale and retail; repair of automobiles, motorcycles and other motor 24.3 31.1 58.3 63.4 vehicles Transportation, warehousing 21.7 43.8 73.2 71.9 Lodging and meals 35.6 45.5 64.2 63.7 Information and communication 66.0 77.3 84.9 87.0 Financial operations, banking and insurance 257.3 457.8 588.2 631.1 Real estate business 3,232.2 1,300.0 1,278.6 1,284.7 Professional activities, science and technology 82.0 128.8 204.2 220.7 Administrative activity and support services 32.3 42.5 56.3 56.6 Activities of the Communist Party, political social organizations; State 13.7 35.2 62.5 66.9 management, security and defense; compulsory social security Education and training 21.4 30.0 64.9 72.1 Health care and social assistance activities 35.0 53.4 134.4 133.8 Arts, entertainment and recreation 76.9 62.8 80.7 84.6 Hiring work in households to produce products, materials and consumption 7.5 15.0 32.9 35.9 services in the household Source: GSO, 2016. TABLE 2.23: The detailed estimates of the labor productivity by sector, Vietnam, 2014, households earning any amount of income from agriculture Crops Livestock Ag Services Forestry Fisheries Revenue (‘000 VND) 48,845 64,197 104,137 15,213 135,703 Intermediate costs (‘000 VND) 18,388 45,556 48,623 1,910 65,932 Value added (‘000 VND) 30,456 18,641 55,514 13,303 69,771 Hired labor costs (‘000 VND) 3,456 429 14,677 3,182 12,781 Wage of hired labor (‘000 VND/day) 71 57 91 112 107 Hired labor input (person days) 49 8 161 28 120 Household labor input (person days) 142 106 51 38 132 Total labor inputs (person days) 191 113 212 66 252 Area (m2) 7,434 19,850 12,443 Total labor input (person days/ha) 528 103 476 Labor productivity (‘000 VND/day) 159 165 262 202 277 Number of households 4,234 1,075 46 171 356 Source: IPSARD’s estimate based on VHLSS 2014. 58 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S TABLE 2.24: The detailed estimates of the labor productivity by sector, Vietnam, 2014, specialized households earning 70 percent and more of total income from agriculture Crops Livestock Ag Services Forestry Fisheries Revenue (‘000 VND) 66,283 88,565 223,000 35,659 191,819 Intermediate costs (‘000 VND) 25,369 60,237 99,407 4,753 93,756 Value added (‘000 VND) 40,914 28,329 123,593 30,906 98,064 Hired labor costs (‘000 VND) 4,825 453 24,936 9,993 20,869 Wage of hired labor (‘000 VND/day) 78 64 96 80 111 Hired labor input (person days) 62 7 261 125 187 Household labor input (person days) 139 117 146 72 169 Total labor inputs (person days) 201 124 407 197 356 Area (m2) 8,775 27,250 16,572 Total labor input (person days/ha) 492 160 588 Labor productivity (‘000 VND/day) 204 228 304 157 275 Number of households 2,380 365 7 16 221 Source: IPSARD’s estimate based on VHLSS 2014. TABLE 2.25: The detailed estimates of the labor productivity by commodity, Vietnam, 2014, specialized households earning 70 percent and more of total income from agriculture Paddy Coffee Pepper Mango Citrus Pork Shrimp Fish Quantity (kg) 6,553 5,171 1,529 10,045 5,472 2,125 1,233 4,147 Price (‘000 VND/kg) 6,677 38,176 14,2750 13,369 19,910 44,299 16,1178 42,435 Revenue (‘000 VND) 43,621 197,408 218,265 134,292 114,323 94,135 198,734 42,435 Intermediate costs (‘000 VND) 17,585 79,499 50,125 46,191 25,314 65,626 93,670 53,188 Value added (‘000 VND) 19,220 116,698 126,074 35,791 68,441 21,722 73,546 51,267 Hired labor costs (‘000 VND) 2,884 21,138 15,656 3,852 7,072 48 6,584 16,312 Wage of hired labor (‘000 VND/day) 61 182 125 85 63 67 114 98 Hired labor input (person days) 48 116 126 45 112 0.7 60 167 Household labor input (person days) 97 266 317 88 116 138 147 101 Total labor inputs (person days) 145 382 442 133 228 139 207 268 Area (m2) 11,147 17,646 12,504 5,904 4,632 17,662 2,817 Total labor input (person days/ha) 278 287 329 182 300 261 373 Labor productivity (‘000 VND/day) 94 411 511 484 297 157 403 329 Number of households 1,779 79 31 15 20 195 109 149 Source: IPSARD’s estimate based on VHLSS 2014. TABLE 2.26: Labor intensity and productivity from the field data, Vietnam, 2016-2017 Labor input, person-days/ha Labor productivity, value added/day, VND Paddy Thai Binh (household 1) 148 174,000 Thai Binh (household 2) 156 185,000 Dong Thap (commercial farm) 46 276,000 Oranges Nghe An (households 1) 350 574,000 Nghe An (households 2) 370 581,000 Hoa Binh (households 1) 405 586,000 Hoa Binh (households 2) 414 966,000 Mango Dong Thap (household 1) 199 897,000 Dong Thap (household 2) 300 500,000 59 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T TABLE 2.26: Labor intensity and productivity from the field data, Vietnam, 2016-2017 (cont) Dragon Fruit Tien Gian (household 1) 717 644,000 Tien Gian (household 2) 708 556,000 Pepper Kien Giang (in-land) 500 1,730,000 Kien Giang (Phu Quoc island) 360 1,833,000 Dak Lak (households) 454 518,000 Coffee Dak Lak (household 1) 115 522,000 Dak Lak (household 2) 130 692,000 Pork Thai Binh (household 1) 500 320,000 Thai Binh (household 2) 1,500 946,000 Dong Nai (commercial farm 1) 1,466 355,000 Dong Nai (commercial farm 1) 1,466 578,000 Fish An Giang (enterprise 1) 212 283,000 An Giang (enterprise 2) 212 978,000 Shrimp Kien Giang (enterprise) 335 3,340,000 Kien Giang (household) 240 1,722,000 Source: IPSARD’s estimate using the data collected in 2016-2017. TABLE 2.27: Estimates of labor productivity in different sub-sectors of the economy, Vietnam Value added, Labor force, Labor Ratio of Per-hour- billion VND people productivity actual worked (value added labor to labor per worker), standardized productivity, ‘000 VND labor, VHLSS ‘000 VND 1. Agriculture Crops Paddy 122,158,159 7,658,156 15,951 0.38 41,751 Sugarcane 11,156,937 453,453 24,604 0.35 70,172 Cashew 3,620,090 231,158 15,661 0.35 44,664 Pepper 8,947,592 255,591 35,007 0.33 106,390 Rubber 32,192,509 710,960 45,280 0.35 129,140 Coffee 27,558,370 1,900,286 14,502 0.51 28,254 Tea 3,532,342 304,218 11,611 0.35 33,155 Livestock Cattle 9,233,096 1,103,091 8,370 0.22 37,225 Pigs 22,348,272 1,344,549 16,621 0.36 46,572 Poultry 10,118,184 846,302 11,956 0.22 53,172 Forestry 13,633,140 957,689 14,235 0.28 50,681 Fisheries Catching fish 31,273,680 628,798 49,736 0.36 139,182 Aquaculture 50,539,582 630,474 80,161 0.36 224,325 2. Industry Food processing Meat processing and meat 13,957,047 68,988 202,311 1.00 202,311 product preservation Fisheries processing 24,386,273 235,533 104,414 1.00 104,414 60 C H A P T E R 2 - S H A P I N G V I E T N A M ’ S A G R I C U LT U R E A N D F O O D S Y S T E M T O D E L I V E R J O B S TABLE 2.27: Estimates of labor productivity in different sub-sectors of the economy, Vietnam Value added, Labor force, Labor Ratio of Per-hour- billion VND people productivity actual worked (value added labor to labor per worker), standardized productivity, ‘000 VND labor, VHLSS ‘000 VND Vegetables and fruits processing 4,469,052 170,793 26,166 1.00 26,166 Oil processing 2,2,87,562 5,479 397,906 1.00 397,906 Dairy products 10,668,590 11,977 890,749 1.00 890,749 Milling and flour production 19,480,667 153,546 126,872 1.00 126,872 Textile and footwear Textile 127,494,081 1,656,672 76,959 0.83 93,729 Footwear 91,255,730 441,955 206,482 0.83 250,519 Construction 179,908,222 2,748,265 65,462 0.95 70,285 3. Services Hired services in households 3,085,464 177,740 17,536 1.00 17,359 Source: IPSARD’s calculation based on the input-output matrix for 2012, labor surveys, and VHLSS 2014. TABLE 2.28: Potential occupational growth and related skill sets in selected food value chains in Vietnam Occupations and skills Rice Fruits and Vegetables Aquaculture Occupations Senior manager X X Assistant manager/supervisor X X X Accountant X X X Marketing (export, domestic) X X X Buying agents X X Inventory management X X Warehouse management X X Quality control X X X Production/machine operation X X X Equipment maintenance X X X Skills Pre-harvest techniques Agricultural production X Aquaculture technicians X Farm management X Post-harvest handling Electricians for cooling systems X Equipment operators X Rice milling X Food processing X Test for pesticide residue X Standards International system and quality control X X X Viet GAP X X X Cooperative management X X Marketing X Labor safety X Source: Agriteam Canada 2015 61 62 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS83 While many factors have contributed to also have preferential access to land and to credit, Vietnam’s success in transforming to a more as well as to government procurement – and diversified, higher quality jobs sector, a more continue to have monopolistic positions in certain dynamic private sector will be crucial to even sectors, including in some service sectors that greater success. Since 1986, Vietnam has achieved serve as important inputs to other sectors. The one of the highest sustained rates of growth in domestic private sector, on the other hand, does the world, becoming an attractive location for not enjoy these benefits. While they are seen as foreign investors, expanding its exports, increasing prime drivers of productivity, growth and hiring productivity in the agriculture sector, and building going forward, they face disadvantages compared a large manufacturing sector. To maintain this to these other ownership groups. To enable them momentum, three shifts are needed. First, the to play a larger role in driving Vietnam’s future, allocation of resources needs to be driven by these imbalances will need to be addressed. open competition and productivity. Preferential access to subsets of firms can serve to help them This chapter takes a deeper look at firms succeed, but can have larger costs on productivity, to better understand the key dynamics in innovation and growth for the economy as a firm productivity and employment that can whole. Second, Vietnam needs to develop a inform policy debates about the choices and more vibrant service sector that can contribute opportunities facing Vietnam. It describes to productivity and growth in its own right, but the typology and evolution of firms, labor and also provide inputs to industry and commercial productivity to identify the types of firms that agriculture. Third, improving the linkages across have been creating the most jobs and the gaps that more productive exporting firms with local remain. Given concerns about the uneven playing suppliers will enable more domestic firms to get field by ownership type, the work gives particularly pulled up the productivity ladder. emphasis to differences in the performance of firms by ownership categories. It also tries to One of the factors that affects all these identify the extent to which private domestic firms dimensions, which was identified in the Vietnam are increasing their productivity and employment 2035 Toward Prosperity, Creativity, Equity and over time and whether they are being efficient Democracy report, is that the playing field is not in their input allocation. Of particular interest is level. In particular, there are distinct advantages knowing whether more productive firms employ – and lack of advantages – by firm ownership. more people, and the extent to which resources, Foreign firms can enjoy preferential access to land including human resources, are being allocated to and tax treatment. State owned enterprises can firms that are becoming more productive. As these 83 This chapter was prepared by Reyes Aterido (Jobs Group, World Bank) and Mary Hallward-Driemeier (Trade & Competitiveness, World Bank). 63 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T are often more productive, higher paying and economy and legacy laws and practices that may more secure jobs, understanding the determinants be stunting competitiveness and job growth in of job creation and the scope for further growth today’s markets. Section 3 provides a typology and productivity is central means of improving of the types of firms where wage workers work. opportunities for more workers going forward. Section 4 looks at how these patterns are changing, i.e. which firms are driving job creation. Section In contrast to most analysis on firm dynamics 5 looks at the links between productivity and job and jobs flows in Vietnam, which rely on flows, whether more productive firms are creating aggregate data for the country as a whole84 or more jobs, and how productivity is shifting on household data, this chapter uses firm-level overtime and the efficiency in the allocation of data. The Vietnam Enterprise Census 2004-2014 inputs. These sections provide the key results on data allow for more detailed investigations of whether productivity and employment trends the determinants of productivity growth, what are reinforcing each other or if there are trade- types of firms are creating jobs and how patterns offs between these two objectives. The rest of the may be evolving across the ownership classes of chapter looks in more detail at other measures enterprises that can inform the policy debates of competition that could also provide deeper (Box 3.1). It tells the story of more than 415,000 insights into the process of allocative efficiency firms and 11 million jobs.85 The chapter also puts and the types of policies that could address Vietnam in an international perspective. ways to improve both productivity growth and employment. Section 6 looks at minimum wages The chapter has eight sections. Section 2 presents and Section 7 considers the situation of women an evolution of the firm sector, giving context workers. The chapter finishes with a conclusion to the ownership structures observed in today’s that discusses the policy implications of the results. BOX 3.1: Introducing the Vietnam Enterprise Census 2004-2014 The chapter analysis relies on a census of registered enterprises, 2004-2014. It covers the formal private (and SOE) sector: formal wage work in industry and services; and household enterprises and the self-employed who are registered, excluding agriculture (except formal agribusiness). It is important to keep in mind that the work covered here analyzes the performance and trends of about one in five Vietnamese jobs, but is an economically significant segment that is driving growth and the expansion of ‘good jobs’. The enterprise level data explore a number of firm characteristic and performance variables in the period 2004 - 2014. Enterprises report on their ownership and legal status, their total revenue and employment, their location and a detailed sector code (at the 4-6 digit code). The data can differentiate between firms that have a majority or minority ownership stake by the state, firms that have foreign owners and enterprises that only have private domestic owners. Respondents provide overall revenues, total workers and in most years, the number of female workers and the number that are formally registered. Firms are linked by the same identification number over time so the dataset is an unbalanced panel that captures both entry and exit. There are 1,899,723 observations in the sample (several are repeated across years), with the number of enterprises reporting in a given year expanding over time. The average firm has 39 employees and is relatively young (4.8 years old). For most of the descriptive work, we group size and age into categories to facilitate comparisons. Within the census, 19.5 percent of firms are in the manufacturing sector, 43.6 percent in trade, and 24.7 percent in services. The rest of the firms are in agriculture-mining- fishing, construction and utilities. 84 World Bank 2002, 2011; McCaig and Pavcnik 2013. 85 The Vietnam’s Enterprise data is a census of registered firms. It captures a large number of enterprises, 415,649 in 2014, that provide a quarter of the overall jobs in the economy. These enterprises account for all the non-governmental formal wage jobs (but does include SOEs); employing 11.4 million of the 50 million workers in the labor force or approximately half of those not in agriculture. While most of these jobs are covered by contract, a fair share are uncontracted labor. 64 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS Doi Moi and the Evolution of Firm One of the favored policies was the establishment Ownership Types of special economic zones. Vietnam’s rapid transition from an agricultural The private domestic sector began to expand. In economy, with significant SOEs, to a more 2000, the new Enterprise Law made it significantly diverse ownership structure underscores easier for enterprises to register. It had the effect some of the perverse incentives that may be of quadrupling the number of enterprises that constraining firm growth and job creation were registered, partly by encouraging firms to today. In 1986, Vietnam was in the bottom decile change their informal household enterprise status globally in terms of GDP per capita and one of the to registered enterprise.88 The vast majority of countries with the highest share of employment in these ‘new’ enterprises were very small. agriculture in the world. In 1987 and 1988, the Doi Moi economic strategy was implemented; private The SOE sector rapidly morphed under Doi economic activity was legalized, collectives were Moi, though SOEs still play a large role in replaced with household farms and price controls output and jobs. SOEs accounted for 29 percent were eliminated, exposing farms to markets of overall output in 1986, including half of the and competition. 86 A series of land reforms output in industry and services, and employing also allowed households to lease, exchange and about 16 percent of the labor force or half the mortgage their land, thereby increasing the length non-agricultural labor force. The reforms in of tenure of plots over time. this sector also served to decentralize decision making, freeing price setting and trade. SOEs In the 1990s there were a series of trade also received reduced subsidies and other support liberalization measures, including in the from the government. The SOE sector responded agricultural sector that further raised by consolidating its activities. There were productivity in that sector and released labor closures, but often there were mergers that were to other sectors. Vietnam moved from being accompanied by layoffs. The number of SOEs a significant importer of rice to being the thus fell dramatically, and the share of workers second largest exporter by 1997. This increased employed in SOEs likewise declined – but the productivity in agriculture would allow the release share of output fell by less. In 2014, SOEs still of labor that could then move to other sectors. account for 35 percent of total output and employ This growth was somewhat constrained through less than 10 percent of the formal wage sector. only partial liberalization of land markets; even today, land markets are not free and access to land In spite of these deep reforms, the state sector and market based transactions of land are limited. does not participate on even footing with the private domestic sector. It has a virtual monopoly The Doi Moi successfully attracted foreign on production in sectors such as fertilizer, coal, investment via policies that persist today. In electricity and gas, telecommunications, water 1987 restrictions on foreign ownership were lifted supply, and insurance.89 State owned firms also (except in areas of national defense) and 100 tend to have better access to capital and land percent foreign owned firms were allowed to enter. markets. The state-owned sector’s share of Foreign multinationals were even offered generous domestic credit in 2009 was 27 percent. These tax breaks and incentives to locate in Vietnam.87 firms have also been noted for their high rates 86 Glewwe 2004. 87 Dodsworth et al, 1996. 88 World Bank 2002; Minh et al. 2010; Malesky and Taussig 2009. 89 World Bank 2011. 65 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T of investment, with capital intensities among the Vietnam successfully leveraged external SOEs accelerating during the 2000s.90 agreements to encourage domestic reforms – and in lifting growth in the process. The US lifted its Beyond ownership, however, the government trade embargo in 1994. In 1995 Vietnam joined still played and continues to play important ASEAN and its free trade area and initiated its roles in shaping firm dynamics. Land policies application into the WTO. The US-Vietnam are one important way, setting limits on where Bilateral Investment Treaty was signed in 2001, firms can locate. Another is through state leading to a huge increase in exports, particularly investment policies and the commitment to in garments, textiles and footwear. Finally, spread investment across all provinces. While the Vietnam’s members in the WTO was finalized in aim may be to have more even development and 2007. The US trade deal and the WTO accession access to opportunities, agglomeration benefits help account for the surge in reallocation in the will be realized with a critical mass of production. 2000s.92 And firms, particularly foreign firms that can chose among multiple options as to where to Where do wage workers work? locate, will chose those that have the best access to input and output markets and that have sound Workers are employed in large firms. The infrastructure. The state has also had influence majority of registered firms are small; up to 80 through support programs it has offered to some percent of firms have less than 20 employees start-ups The state remains an important buyer (Figure 3.1). But most wage workers are in larger of goods; not surprisingly, the firms that supply firms (Figure 3.2). More than forty percent of SOEs have higher survival probabilities and are workers in registered firms work in firms with over more likely to grow.91 500 employees. Thus, while there are relatively few large firms, their size ensures they account for a Cutting across all firm ownership types is the significant share of employment. In contrast, evolution of external trade over the period. registered firms with up to 9 employees account FIGURE 3.1: Firm Distribution by Size FIGURE 3.2: Employment Share by Firm Size Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2004-2014. 2004-2014. 90 World Bank 2011. 91 Hansen, Rand and Tarp 2009. 92 McCaig and Pavcnik, 2014. 66 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS for 10 percent of employment. Relative to other owned domestic firms (Figure 3.3). This has countries, overall concentration of employment in changed little over time. But only about half of large firms is high.93 formal wage jobs are in the private domestic firms (Figure 3.4). This is explained by the The share of workers in small firms is increasing predominance of smaller firms and relatively few over time. The largest firms (500+ employees) larger firms in the domestic private sector (Figure have seen a 10 percentage point drop in their share 3.6). Thus, the employment share of the domestic of formal employment since 2004. While both the private sector is less prominent. number of large firms and the average firm size in this category expanded over the ten year period – Among predominantly large firms, employment a growth of 1000 large firms with an average size share of state owned firms has been steadily increase from 1,471 to 1,668 employees – firms declining while the foreign sector has been with up to 50 employees have seen almost as large increasing. Publicly owned firms (SOEs) are the a gain in their number of firms and employment largest on average in Vietnam; foreign owned firms share (Figures 3.1 and 3.2). Namely, the number tend towards large but have a wider distribution of firms with 500 or more employees has been by size (Figure 3.6). While SOEs were the bulk of expanding, but at a slower rate than small firms. formal wage employment in 2004 (Figure 3.5), This nets out to an increase in the share of jobs this had flipped to foreign-owned firms by 2014 attributable to firms with 50 employees or fewer. (Figure 3.6). SOE’s share of formal wage jobs shrunk from 40 percent to 15 percent in the period Most firms, and jobs, are in the domestic private of 2004-2014, while the share of workers in foreign sector. The vast majority of firms are privately firms rose from 18 to 30 percent (Figure 3.4). FIGURE 3.3: Distribution of Firms by FIGURE 3.4: Employment Share by Ownership Ownership Type Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2004-2014. 2004-2014. 93 Aterido and Hallward-Driemeier 2017. 67 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T FIGURE 3.5: Employment Share by Ownership FIGURE 3.6: Employment Share by Ownership (2004) (2014) Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2004. 2014. A look at employment/market However, the top 1 percent of firms account concentration for a growing share of employment and even Indeed, the largest of the large firms are greater share of revenues over the ten year period responsible for the growth in jobs (and (Figures 3.7 and 3.8). So, while the composition revenues). Another way to show the shift in the of firms is shifting towards smaller firms over composition of ownership is by the change in time, the share of employment accounted for by employment shares of the largest firms over time the largest 1 percent of firms has increased from rather than the absolute size categories (Figure 40 to 48 percent in the period. The employment 3.7). The top 5 percent of firms account for almost share of the top 5 and 10 percent largest firms has 67 percent of jobs, and this remains true even remained constant at around 68 and 78 percent as the size composition of firms has changed. respectively. FIGURE 3.7: Total Employment Accounted for FIGURE 3.8: Total Revenue Accounted for By By Largest Firm Largest Firm Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2004-2014. 2004-2014. 68 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS Vietnam’s extreme clustering of workers in the trends. Among sectors that employ at least 0.01 largest of the large firms may signal barriers to percent of formal wage workers and already innovation and new firm entry. Compared to have a significant level of concentration, most countries for which comparable data are available, show a decrease in market concentration in Vietnam ranks fourth in concentration of workers employment in the period 2004-2014, with a in the top percent largest firms (Figure 3.9). In notable, but somewhat less decrease in market essence, a few firms play an outsized role in overall concentration in revenues. This is represented by employment. While this may flag the importance the dots below and to the right of the 45 degree of enabling efficient exporters to reach scale, it line in (Figures 3.10 and 3.11).94 Those sectors also raises concerns about possible monopolistic that are above and to the left of the 45 degree behavior that should be watched. A balance line are those where market share has become is needed as too much market share can stunt more concentrated. This would signal a greater competitive processes and innovation and entry. contestability and competition in sectors.95 While the overall story is clearly one of extensive and While market concentration is declining across growing competition, there could still be a few most sectors, there are some outliers that drive important sectors where concentration could the overall aggregate higher concentration remain significant. FIGURE 3.9: Share of Employment by Top 1% Largest Firms Source: Jamora and Labaste 2015. 94 Figures 10 and 11 plot the Herfindahl index, calculated for both sales and employment. To facilitate scales that enable graph visibility, sectors included are conditioned to having employment share larger than 1 percent and a Herfindalh index based on employment concentration larger than 0.04. Thus, small or not concentrated sectors are excluded. The Herfindahl Index is the weighted sum of squared market (employment) shares so a higher number indicates greater market concentration. Each four-digit sector is plotted separately, with the Herfindahl index value plotted on the x-axis and the 2014 index on the y-axis. 95 Note, this graph is drawn looking at those with a concentration below .25 in 2004. However, there are few even more highly concentrated sectors that were not included as the scale of the diagram reduces the ability to discern the dots among all these sectors. For the dozen or so outliers, however, the pattern is the same and almost all demonstrate a decline over time in market concentration. 69 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T FIGURE 3.10: Market Concentration, Sales, FIGURE 3.11: Market Concentration, 2004-2014 Employment, 2004-2014 Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2014 2014 Market share concentration differs across (Table 3.1). The strong presence of foreign firms in ownership categories. State owned firms have communications and garments is consistent with sizeable shares in oleaginous crops, construction their strong showing in exports. It also reinforces and real estate. Majority state owned firms may the point that these sectors are really dominated be justified in sectors that are natural monopolies, by foreign firms; it would be encouraging to see but if they dominate sectors for which the private more domestic private firms able to enter and sector should be well placed, it could be a signal compete in these areas for which there is a clear of policies tilting the playing field rather than external market being served. The opportunity leveling it. Foreign firms, on the other hand, are for technology transfer and better linkages is dominant in manufacturing, with the largest there; these are sectors with clear supply chains players in communication equipment, followed (Box 3.1). by footwear, plastics, apparel, and animal feed TABLE 3.1: Market Concentration (10 Top Sectors) Industry Sector Sector Share top Domestic Foreign SOE Employment Sales 4 in sector Share Share Share Share Share Agriculture 125 Fruits and Nuts 34% 22% 32% 63% 4% 33% 311 Fishing 9% 16% 31% 98% 0% 2% 161 Support crop production 27% 13% 16% 98% 0% 2% 145 Swine/pigs 2% 9% 52% 83% 4% 13% 146 Poultry 1% 5% 74% 80% 4% 16% 322 Aquaculture 1% 5% 60% 84% 1% 16% 323 Aquatic breed production 2% 4% 54% 87% 4% 9% 210 Silviculture and Forestry 3% 4% 27% 63% 1% 36% 118 Growing vegetables 2% 4% 65% 76% 5% 19% 126 Oleaginous 7% 3% 37% 20% 0% 80% 70 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS TABLE 3.1: Market Concentration (10 Top Sectors) (cont) Industry Sector Sector Share top Domestic Foreign SOE Employment Sales 4 in sector Share Share Share Share Share Industry 4100 Construction buildings 9% 21% 82% 69% 1% 30% 2630 Communication equipment 2% 8% 93% 23% 69%3% 8% 3510 Electric power generation 2% 5% 40% 75% 1% 23% 4312 Construction site preparation 1% 3% 93% 81% 12% 18% 1080 Manufacture animal feeds 1% 3% 32% 62% 13% 25% 1410 Apparel 15% 3% 16% 77% 6% 10% 1020 Preservation fish 3% 3% 15% 75% 11% 19% 2410 Manufacture iron and steel 1% 2% 21% 67% 24% 22% 1520 Footwear 11% 2% 27% 67% 13% 9% 2220 Plastics 3% 2% 5% 72% 1% 15% Services 4620 Wholesale agriculture and animals 1% 32% 95% 85% 2% 14% 6820 Real state 1% 21% 100% 60% 1% 38% 4669 Wholesale waste 3% 7% 71% 83% 1% 15% 5229 Other transportation 2% 5% 90% 83% 1% 16% 4661 Wholesale solid, fuels 2% 4% 32% 79% 1% 20% 4649 Wholesale household goods 5% 4% 60% 80% 1% 19% 4632 Wholesale food 4% 2% 9% 87% 1% 13% 4663 Wholesale construction materials 5% 2% 18% 82% 0% 18% 4662 Wholesale metals 2% 2% 16% 81% 0% 18% 4773 Retail specialized stores 1% 2% 78% 96% 0% 4% Agriculture 3% 0% Industry 67% 31% Services 30% 68% Note: The table selects the 10 sectors with the largest market share in each agriculture, industry, and services and by ownership category (e.g. of the 10 sectors in manufacturing with largest market shares, share of firms that are private-domestic, foreign, and SOEs). Column (1) provides the employment share in the whole economy. Column (2) shows the overall market share of the sector in the economy as a whole. Column (3) is the overall sector market share of the top 4 firms (regardless of ownership). Columns (4) to (6) display the employment share of that specific ownership type in that sector. Source: author’s calculations using Vietnam Enterprise Census, 2014. 71 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T BOX 3.2: Jobs in apparel and skills for upgrading Integrating into apparel global value chains (GVCs) has provided Vietnam with greater export opportunities, which in turn has provided economic growth, job creation and poverty alleviation. Apparel has been one of Vietnam’s top export categories over the last decade, accounting for 13 percent of total exports in 2015. The sector is the largest formal manufacturing employer in Vietnam, providing jobs for more than 1.3 million people. Developing countries enter GVCs by performing basic assembly functions, and Vietnam is no exception. Vietnam is predominately in the manufacturing-related stages of the apparel value chain with firms operating on an assembly (referred to as cut, make, trim or CMT) or assembly and fabric sourcing business model (often referred to as FOB). Globally, most workers in the apparel global value chain are concentrated in the production-related segments, and are principally young, female workers earning minimum wages. In Vietnam, over three-quarters of employees in Vietnam’s apparel sector are in production-related occupations. However, upgrading beyond manufacturing activities has been limited. Some of the constraints Vietnam faces in moving into these segments include perception as a low-cost supplier, limited exposure to global markets/buyers, and minimal interaction between foreign and domestic firms that could provide this exposure, learning and buyer-relationship opportunities. Opportunities for Vietnam to functionally upgrade will be higher if there are more domestically-owned firms and those firms focus more on selling to Asian markets. As such, to facilitate upgrading opportunities, equal emphasis should be placed on entrepreneurship and shifting focus to the Asian region. Skills constraints and other workforce gaps in Vietnam’s domestic private sector, however, could impact opportunities to upgrade in the apparel GVC. English language, sales/marketing, design, research and product development present the largest skills gaps to move into these areas. It should be noted however, that Vietnam’s limited participation in these areas is not unique to Vietnam. No country outside of the US, Europe and Japan has moved into these stages for the global export market. If Vietnam moves into these areas, it will likely be for the domestic market or ASEAN region. Source: Frederick (2017) The overall trend in terms of firm size and Young firms are mostly small, thus employing a ownership is one where the biggest players smaller share of employment than expected (Figure appear to be getting bigger, but with high 3.13). Older firms are larger than new firms. There rates of entry of smaller firms, overall market is a strong relationship between ownership and concentration is increasing though it is age, where continued privatization of SOEs and decreasing within most sectors. So there is a strong foreign investment has characterized the evidence of greater competition and a decrease period. For example, there are virtually no ‘old’ in market concentration – but there are (firms 25 years +) foreign owned firms; again, exceptions. FDI is mostly likely to dominate in reflecting the earlier bans on foreign ownership.  manufacturing and the private domestic sector in services. But among the SOEs there are some By international comparisons, Vietnam stands surprises for which the case for (near) monopoly out for its young private sector and few old power is not straightforward. firms compared to other countries.97 Some of this age phenomenon reflects Vietnam’s history Young Firms tend to be smaller than older and the limited role for private enterprise pre-Doi firms Moi. It may also be an artifact of the Enterprise Most firms are young, though more than half Law of 2000 that encouraged registration in of jobs are in older firm. Vietnam has a relatively the early 2000s, resulting in mass registration, large share of young firms; more than 60 percent although the firms may have been in operation were 5-years old or less in 2014 (Figure 3.12).96 for a longer period. 96 In the period 2004-2014, 74 percent of Vietnamese firms were 5 years old or younger compared with 35 percent in the US and 22 percent startups compared to 8 percent in the US. 97 Aterido and Hallward-Driemeier, 2017. 72 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS FIGURE 3.12: Distribution of Firms by Age FIGURE 3.13: Employment Share by Age Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2014 2014 Economic activity is geographically What are the patterns of job concentrated creation and which types of firms Looking across locations within Vietnam, the are creating jobs? distribution of firms and jobs is fairly stable over In the aggregate, the rates of job creation and job time (Figure 3.14 and Figure 3.15). Two regions destruction have increased over time. Net job dominate due to the economic prominence of creation has been increasing since 2004 (Figure Ho Chi Min City and Hanoi. As the distribution 3.16). Job creation can occur through the entry of firms and employment remain consistent, the of new firms or through the expansion of existing size distribution of firms within region has not firms or incumbents. For Vietnam, job creation by changed much either. incumbents is 11.2 million or 62 percent of all jobs created, while entry is 38 percent (Figure 3.17).98 FIGURE 3.14: Distribution of Firms by Region FIGURE 3.15: Employment Share by Region Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2014 2014 98 Figure 17 has net job creation (job creation minus job destruction), but also total job creation by entry and incumbents and total job destruction by exit and incumbents. See Annex 2 for a discussion on job creation with different ways of calculating it. 73 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Likewise, more jobs are lost from incumbents Most net job creation is by small firms. Given who are downsizing (8.9 million) than from exit the crucial role of entry on net job creation, and (though 32 percent of all jobs destroyed, are due to that most new firms are small, most net jobs are exist, roughly 13 million jobs). If we consider only generated by small firms. Large firms proved the net jobs created by incumbents, entry is 75 to be erratic. They shed net jobs in 2008 and percent of jobs created. Overall, net job creation progressively more from 2010 to 2013, recovering has been positive as the wage sector has expanded by 2014. Medium size firms had an unimpressive in the economy. record with slight downslope trend (Figure 3.18). FIGURE 3.16: Job creation and destruction FIGURE 3.17: Job creation and destruction by incumbents, new firms (entry) and exiting firms Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2014 2014 Note: JC=jobs created. JD=jobs destroyed. FIGURE 3.18: Net Job Creation Source: Authors calculations, based on Vietnam Employer Census, 2004 - 2014 74 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS Net job creation is overwhelmingly accounted to estimate these trends and compare them to for by private domestic firm entry (Figure other countries. Vietnamese manufacturing 3.19). Regardless of firm size, most net job firms, on average double their size by age 25 creation from entry is by private domestic firms. (Figure 3.20). However, these manufacturing Only very large entering foreign firms and SOEs firms do not grow in the first 10-14 years, only play a significant role. catching up with Mexico, a comparator country, after they are 25 years old. On the other hand, Net firm expansion does occur, but is limited. Vietnam clearly outperforms manufacturing Net job creation through expansion (rather than firms in India or Indonesia. When the smallest entry) is largely limited to the first five years of a manufacturing firms are excluded, the results firm’s life. And even then, it is limited to younger improve. The thin red line (Figure 3.20) is higher large foreign firms, and micro private domestic than the pink one and rises even for the younger firms. SOEs do not create net jobs after entry cohorts and tracks just below the performance of (Figure 3.19). Mexico. When services are included and all firm sizes are included (the thick red line), Vietnam’s Net job destruction is mostly among larger firms’ growth even catches up with the US by the firms of all ages. Larger firms, other than 20-24 years old cohort This chart thus indicates foreign, destroy more jobs than they create. The there are two patterns worth examining. Firm foreign sector does not show net job losses for hiring is expected to rise with age, particularly any size or age of the firm. Both domestic private among service firms and secondarily among and SOE firms shed similar numbers of net jobs larger manufacturing firms. (Figure 3.19). Domestic firms grow over their lifecycle but Compared to other countries, Vietnam’s firms SOEs do not. Employment doubles by age 25, show net growth potential, especially among with growth occurring among young firms and service and larger manufacturing firms. Our continuing increase slowly (Figure 3.21). This limited data do not permit an exploration of actual pattern is quite different from those of publicly age-growth trends, but there are methodologies owned and foreign firms. These firms start on average at a size that is 2.5 to 3.5 times larger than private domestic firms. Foreign firms tend to grow at a similar rate as private domestic FIGURE 3.19: Net Job Creation by Ownership firms, doubling their size when they are 25 years old. Public firms, with majority or minority ownership, on the other hand do not grow. For certain some sectors – such as utilities – the employment might not be expected to increase over time, but as these public firms span a range of sectors, this is a worrying indicator that they are not subject to the same competitive pressures to expand over time. Thus, this analysis indicates, consistent with the graphs above, that state owned firms enter at a larger size, particularly the majority publicly owned firms, but that growth over time is very limited. Source: Authors calculations, based on Vietnam Employer Census, 2004 - 2014 75 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T FIGURE 3.20: Life Cycle of a Firm FIGURE 3.21: Life Cycle of a Firm, Average Employment Source: Author’s calculations for Vietnam and Indonesia; Hsieh and Source: Author’s calculations for Vietnam and Indonesia; Hsieh and Klenow (2014) for India, Mexico and USA. Klenow (2014) for India, Mexico and USA. Exploring dynamics over a shorter period, as in When simultaneously considering the effects of most countries, a sizable share of firms changes firm size, age and ownership on employment size category. Depending on size category, 40 growth, growth rates are highest among young to 85 percent of firms changed size category small and medium enterprises and lowest for over 10 years (Table 3.2). Very few firms grow SOEs. The graphs above allow us to account significantly, moving from a micro or small firm for one or two firm characteristics but taking to a large firm. Instead, firms that grow mostly do all together form a slightly different, and more so by moving up one size category. But downsizing nuanced, story.99 Growth rates are highest for is more common. More than 30 percent of small young firms (less than 6 years old, but not (10-19) and medium (20-99) size firms downsized, including entry). This is a common finding, but and another 20 percent went out of business. what is noticeable is how growth then drops off Downsizing and exit was less prevalent among after age 6, with rates becoming progressively larger firms. lower as firms age, with older firms growing up to TABLE 3.2: Transition Matrix Transitions 2004 - 2014 1-9 10-19 20-99 100+ exit % Size at birth to age 5 1-9 55 12 7 1 25 100 10-19 34 24 18 2 22 100 20-99 18 15 42 8 18 100 100+ 6 3 17 61 13 100 Size to t+3 1-9 54 9 4 0 32 100 10-19 30 33 16 1 21 100 20-99 11 15 54 6 14 100 100+ 2 2 16 72 8 100 Source: Authors calculations, based on Vietnam Employer Census, 2004 and 2014 99 These results are derived from a linear, multi-variate regression. See Aterido and Hallward-Dreimeier 2017 for details. 76 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS 11 percent lower than the youngest incumbents. Static efficiency: are resources allocated However, the story is a bit different for size. A to productive firms? firm with 20 to 49 employees grows on average Larger Vietnamese firms are more productive, 9 percent more than a firm with less than 10 on average, though productivity differences by employees. For firms with 50 employees or more firm size are not that notable. In the presence of the growth with respect to micro firms increases scale economies, larger firms should be more by 10. By ownership type, foreign firms are the productive. Figure 3.22 shows that there are ones with the highest rates of employment growth. very productive (right tail) – and unproductive Domestic private firms are next, with the state- (left tail) – firms in each size category. Though owned firms decreasing employment growth with larger firms skew more toward higher levels of respect to the private sector. productivity. The relationship between Productivity differences are much more productivity and employment pronounced by ownership, with foreign firms being the most productive. Foreign firms are It is desirable to have a positive correlation the most productive firms on average, with between the size of a firm and productivity (static the productivity distribution of foreign owned efficiency), but even more so to have the ones firms clearly shifted to the right (Figure 3.23). that are increasing their productivity by growing Exporting firms (foreign or domestic) are also (dynamic efficiency). More productive firms more productive. The domestic private sector gaining resources and expanding will be the has lower productivity on average, with the drivers of overall productivity growth so these distribution shifted to the left and with a longer relationships are important in informing where left-hand tail.100 bottlenecks may occur and thus what type of policy response may be appropriate. FIGURE 3.22: Value Added per Worker by Size FIGURE 3.23: Value Added per Worker by Ownership and Export Status Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2014. 2014. 100 When using TFP as a proxy for productivity, rather than value-added per worker, domestic and SOE firms seem slightly more efficient. So, the strong performance in value added per worker could be simply due to foreign firms being more capital intensive. 77 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Dynamic Efficiency: How is productivity The productivity-employment relationship shifting over time? is more nuanced, though. 103 The positive Productivity and firm size have both been relationship is particularly strong for domestic increasing over time. Productivity, proxied by private firms. However, the effects are reduced overall sales per worker, has been increasing by half in the case of foreign firms and by a over time. The line in Figure 3.24 slopes upward, fourth in the case of SOEs104 Young productive although leveling off since 2009. More productive firms (younger than 10 years old) grow faster firms have larger workforces; this relationship than older productive firms. Although the main has grown stronger over time, 2009.101 This is result prevails; productive firms of all ages tend demonstrated by the bars in Figure 3.24, which to grow faster than less productive firms. While measure the correlation between firm size and the positive relationship holds on average for productivity levels. The reallocation of labor to many different productivity measures, the most more productive firms accounts for about half of productive firms actually reduce firm size. This is aggregate productivity, and is fairly stable over primarily driven by domestic firms; though FDI time after 2009.102 and SOE firms shed jobs faster if the productivity FIGURE 3.24: Output per worker and correlation between firm productivity and firm size, All Sectors Source: Authors calculations, based on Vietnam Employer Census, 2004-2014. Note: The estimates are derived from an Olley-Pakes static decomposition, which looks at the cross-sectional distribution of productivity and size over multiple years. It is not looking at changes within firms over time. “covariance” is the correlation between firm productivity and firm size, measured by number of workers. 101 As firms become more productive they grow while less productive shrink or exit. Intuitively, the covariance can be understood thinking that if it were zero, workers would be distributed randomly between productive and unproductive firms. US manufacturing sector has a covariance value of 0.5. 102 Alternative methodologies found a trade-off between productivity and employment. Since the regression estimates find a positive correlation between these variables, the non-parametric estimates are not reported here. These can be found in Aterido and Hallward-Dreimeier 2017. 103 These results are derived from conditional estimates (regressions) that first control for random effects then account for fixed effects results. The latter are our preferred specification, but the former allow for some insights of the role of firm characteristics, generally time invariant, that cannot therefore be captured with the fixed-effects approach. The inclusion of the productivity measure does not substantially change the effect of firm characteristic; size is still associated with higher rates of employment growth and age is negatively associated with employment growth. 104 The effect is still positive as shown by the sum of the interaction coefficients with the productivity coefficient. 78 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS gains are driven by a range of factors (capital- a more efficient use of their resources. Firms that intensive technologies, worker productivity, are more productive have higher survival, while etc.). Thus, as FDI and SOEs are shifting to more unproductive firms are more likely to exit. This capital-intensive technologies, these firms are not result is consistent with all three measures of hiring as they gain in productivity. productivity, and thus for both the shorter and longer periods of time too106. Overall, there is evidence that more productive firms grow more and there is a favorable In summary, survival patterns are as expected in allocation of labor “between” firms. Young and well-functioning markets. However, that public domestic productive firms grow faster. However, firms tend to survive longer is justifiable as long firms increasing productivity, particularly among as they are involved in sectors geared toward a the most productive firms, do so at the expense public good where the private sector would have of labor. difficulties to be. Productivity and firm survival The capital-labor trade-off More productive firms have higher survival The relationship between capital intensity and rates105. An important dimension of adjustment jobs differs by ownership type. Foreign firms is through firm exit; more productive firms should tend to be more capital intensive than domestically survive and expand while less productive firms owned firms but have become less so over time should exit the market. As is common in other (Figure 3.25). This may reflect that some labor- countries, smaller and younger firms are more intensive firms are shifting production from China likely to exit. For age, the biggest effect is those to Vietnam. In contrast, private domestic firms under 6 years of age; exit increases very slightly used to be significantly less capital intensive but thereafter. This can have negative implications they have been investing and raising their capital for job creation since (surviving) young firms labor ratios on average – although they are still grow fastest. SOEs are more likely to survive than lower than other ownership categories. The publicly domestic firms, but surprisingly, foreign firms listed companies experienced an upward trend are less likely than domestic firms to survive. So towards capital-intensity overpassing foreign firms. while SOE firms are not shedding their labor as This points to a possible market distortion where quickly as others, their survival might crowd out public firms have an advantage in access to capital. FIGURE 3.25: Capital-labor ratio, by ownership FIGURE 3.26: Total factor productivity and employment growth Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2014. The grey shading is the range of the confidence 2004-2014. interval.. 105 These findings are based on probit marginal effects coefficients. 106 Results on sales per worker refer to the whole period 2004-2014, while value added per worker and TFP only to the last half 2009-2014. 79 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Firms in relatively more labor-intensive sectors The increase is not one for one, but workers are have higher total factor productivity. Firms with sharing in the rise in productivity through higher the same level of employment growth and greater earnings. This is particularly observed for foreign labor intensity have higher productivity levels firms. However, as SOEs increase productivity, than those with greater capital intensity (Figure wages actually fall. The fact that the correlation 3.26).107 It is also true for manufacturing sectors. between productivity growth and wage growth is This would be in line with key exporting sectors, positive but modest reflects that the firm deploys garments and electronic assembly, being relatively gains on new investments to other uses, such as labor intensive. It also points to the fact that some to reward stockholders or savings to stabilize productive services are relatively capital intensive. business cycle. Do workers share in productivity gains? Minimum wages Workers in older firms and foreign firms earn higher wages, though faster wage growth is Most registered firms pay at least the minimum in other types of firms.108 Older firms tend to wage; though compliance increases with firm pay higher wages and increasingly do so as firm size. An important issue to investigate is whether becomes older. Similarly, foreign firms are strong changes in minimum wages is good for overall predictors of high wages (on average, a FDI workers’ wages and employability. Minimum firm has 5.5 percent higher wages). Surprisingly, wages in Vietnam vary by region and by ownership SOE firms seem to pay lower wages than private type, and they have increased in recent years. domestic firms. In terms of wage growth, larger Almost 90 percent of firms pay average wages and older firms increase their wage bill more than above the minimum wage, so compliance is very younger and smaller firms. Exporters, higher high (Figure 3.28). Of those not complying, more share of female workers, and capital intense firms than half are micro firms and very few firms larger are also more likely to increase wages. Foreign than 100 employees do not comply (Figure 3.27). firms do not increase wages faster than domestic firms, but SOEs are least likely to increase wages. FIGURE 3.27: Distribution of Firms Paying More productive firms do not have higher Wages below Minimum Wage average wage growth. Two of the three measures of productivity - sales per worker or value added per worker – are negatively (conditionally) correlated with wage growth, meaning that as firms increase 3% 1% productivity, they do not share the benefits with workers. Only one productivity measure (total 19% factor productivity) was weakly correlated with 59% wage growth: firms with ten percent higher total 18% factor productivity (TFP) pay 0.025 percent higher wage. But as firm’s productivity increases, they share gains with workers. As firms increase their Source: Authors calculations, based on Vietnam Employer Census, productivity, wages do tend to rise. This result was 2014. found for all three ways of measuring productivity. 107 A sector is capital intense if the median capital intensity in the sector-year is above the overall median capital-labor ratio across sectors for the same year. 108 Wage growth rate is constructed like employment growth (bounded by -2 and 2): (waget-waget-1)/[(waget + waget-1)/2]. 80 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS FIGURE 3.28: Minimum Wage Compliance by Region Source: Authors calculations, based on Vietnam Employer Census, 2014. High compliance rates indicate that the vast The change in minimum wages over time majority of firms are able to pay the mandated outstrips the additional value added earned by minimums. Depending on region, no more the majority of firms, though these tend to be than 23 percent of firms paid wages below the small firms. The change in valued added per minimum in at least one year in the period 2008- worker was less than the annual change in the 2012, though non-compliance was generally below minimum wage in 70 percent of firms in 2012, as 20 percent for all regions in most years (the dark shown by the dark pink bars in Figure 3.28. But blue bars in Figure 3.28). Non-compliance has these firms only represent less than 10 percent of increased in all regions since 2008. The share of employment (the light pink bars). Meaning that workers employed in firms that do not pay the the smaller firms are most affected. So, policy minimum – depicted by the light blue bars in makers should consider the impact of further Figure 3.28 – is less than the share of firms earning wage increases on smaller firms. If minimum below the minimum wage, indicating that smaller wage increases outstrip value added per worker firms that are more likely to be non-compliant. increases, this is likely to push up non-compliance, particularly in smaller firms. High compliance rates indicate that the vast majority of firms are able to pay the mandated How about female employment? minimums. Depending on region, no more than 23 percent of firms paid wages below the Female employment has increased tremendously minimum in at least one year in the period 2008- over the period 2004-2014, primarily due to the 2012, though non-compliance was generally below apparel and textiles sector. Manufacturing has 20 percent for all regions in most years (the dark received most women entering the labor force. blue bars in Figure 3.28). Non-compliance has Textile, leather and apparel are the chief sectors, increased in all regions since 2008. The share of with services and commerce playing an important, workers employed in firms that do not pay the but lesser role. However, men have also increased minimum – depicted by the light blue bars in in formal-wage jobs over the period, so women’s Figure 3.28 – is less than the share of firms earning overall share of employment in these sectors below the minimum wage, indicating that smaller has changed little over the decade (Figures 3.29 firms that are more likely to be non-compliant. and 3.30). The strongest predictor of female 81 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T employment is the apparel sector, with textiles tradable sectors are more correlated with female and leather and social services also playing a large employment, the foreign sector stands out for its role. Even when adjusting for the fact that these hiring of female workers.109 FIGURE 3.29: Female Employment FIGURE 3.30: Share of Female Employment Source: Authors calculations, based on Vietnam Employer Census, Source: Authors calculations, based on Vietnam Employer Census, 2004 and 2014. 2004 and 2014. 109 These conclusions are drawn from parametric estimates, regressing female employment share on dummies for firm size, firm age, ownership status, and sector. 82 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS Policy Recommendations Three striking patterns emerge from the analysis production processes and the services that are of job dynamics across firms, which should embodied and embedded in them. motivate priority areas for policy reform efforts. Each policy area is considered in turn. First, much of the gains in employment and productivity are accounted for by FDI; more Strengthen the dynamism of the needs to be done to ensure greater dynamism domestic, private sector among private domestic firms. This involves Vietnam’s aggregate performance is impressive, three recommendations: i) a closer examination of but underneath it there are continued gaps based the business environment and how the regulatory on ownership and, related, size. The analysis of environment, access to credit and access to this chapter shows seven trends that underscore markets can vary by firm types; ii) looking more the importance of raising the dynamism of the closely at the effectiveness of support programs domestic private sector. in place to support SMEs. A promising avenue is doing more to enable local firms to supply FDI First, Vietnam has doubled the number of firms, which would expand productivity spillovers, formal wage jobs in the productive sector from enable more firms to expand and underscore 2004 to 2014 – with high rates of entry of small, the external orientation of firms and the need to domestic private firms, a significant growth in remain competitive; and iii), a re-examination of the share of FDI firms (often large), even as there the case for continued SOE engagement, especially was continued privatization and consolidation of in sectors where the case for state ownership is not state owned firms (SOEs). The high rates of entry necessarily compelling. are a sign of dynamism, but the concentration of employment among the largest firms underscores Second as productivity has increased, the number the need to look at broader dynamics – whether of wage jobs has doubled in the last decade. The scale efficiencies are being realized among the expansion effects have dominated substitution smaller firms and if there is evidence that these effects, meaning that more productive firms are smaller and younger firms can gain productivity using their new profits to expand the workforce and market share and grow. rather than enhancing productivity by cutting jobs. And wages have risen, even if not proportionally Second, the number of small domestic firms has with firm productivity. Policies such as minimum increased significantly, but their employment wage legislation and tax incentives on investments growth remains limited. A large share of mature can tilt these factor choices. micro and small firms is indicative of lack of growth in this type of firms. Only 6 percent of Third, looking forward, new labor-saving micro firms were able to expand to have over 10 technologies may shift the prospects for employees after five years in operation. continued FDI coming to Vietnam and the labor intensity of the production. Having the skills Third, the distribution of productivity varies and supporting business environment to remain significantly by ownership. FDI firms are the an attractive location for production brings most productive on average. Domestic firms are out greater urgency on issues around logistics, significantly less productive than FDI firms. SOEs liberalization of services, worker and management also have lower productivity, somewhat more skills and the approach to the data ecosystem of dispersion – particularly at the lower end. Firms privacy, security and trade in data that underlie with a higher level of productivity employed a the digital economy, both more data driven relatively larger share of workers by 2014. This 83 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T has been especially positive in manufacturing, In addressing the need to strengthen the dynamism measuring productivity by value added per of the domestic private sector in particular, there worker. However, once capital is accounted for, are three sets of policy recommendations. The first the association of total factor productivity and focuses on addressing ways to improve the business employment is weaker and only positive at the end environment – particularly in leveling the playing of the period. field based on ownership. The second looks to improve the government’s efforts to support SMEs, Fourth, productivity growth is driven by young, particularly to strengthen links between the SMEs foreign, and large firms. SOEs have the least and FDI firms to encourage spillovers and growth. productivity growth, all other things equal, but The third looks to the remaining reform agenda the growth of young domestic firms is only a small for state owned enterprises. share of overall productivity growth. Address inequalities and improve the Fifth, those firms whose productivity is business environment improving (i.e. a positive change in productivity • Level the playing field to improve all firms’ rather than a high level of productivity) are competitiveness. The dynamism of the not all expanding their share of employment. domestic private sector continues to lag. Part Some of the efficiency gains are being realized by of the challenge is that domestic firms do not labor saving technological change or by shifting enjoy some of the same privileged access to production to become more capital intensive. land, tax benefits or regulatory facilitation This is particularly true at the upper end of that foreign owned firms may enjoy. At the the productivity distribution. This could have same time, domestic firms can find it difficult important implications for the ability to create to compete with state owned enterprises, sufficient jobs for an expanding population in particularly with regard to procurement and the future, for developing domestic markets and access to finance. In addition to continuing to ensuring a sustainable balanced growth. strengthen the business environment, ensuring equal enforcement will be important in giving Sixth, there is evidence of shared prosperity: at all firms the same competitive advantages. the lower end of the productivity distribution, firms that are raising productivity are also • Facilitate the adjustment of firms, including hiring. These positive productivity-employment making it easier for firms to enter – and dynamics are also more evident among firms over to exit. Within the business environment, 6 years of age. more could be done to improve the ability to reallocate resources to their most productive Seventh, there are signs of greater competition, uses. The number of procedures to register a but employment is highly concentrated in business is higher than regional averages and very large firms and this trend has been rising above what those most other lower-middle throughout the period. Selected sectors are income countries according to Doing Business. dominated by a few players. The overall degree Even more concerning is that bankruptcy of market and employment concentration has proceedings can be very lengthy, with fallen across almost all sectors; consistent with considerable difficulties in resolving cases of greater competition. However, while this is true insolvency. The difficulties of an orderly exit overall, it is not true at the very top. Whereas from the market can have implications for the the composition of firms is shifting towards allocation of credit as well as hiring patterns. smaller firms over time, the share of employment Making exit more transparent and efficient can accounted for by the largest 1 percent of firms has help with ensuring the most productive firms increased from 40 to 48 percent by 2014. continue and can thrive. 84 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS Improve support to SMEs, including investments or upgrading that may be needed. expanding linkages between local SMEs The potential to develop a suppliers’ database and Multi-national corporations (MNCS) could be one solution – if there is critical mass (or their tier one suppliers) to use it and it is seen as reliable enough and Given the large and growing presence of FDI firms, with sufficient repeat transactions to develop a one would expect spillovers to the domestic private reputation for quality. sector. Indeed, this is the usual motivation for seeking at attract foreign firms. However, rather • Support SME’s quality of management and than serving as a broader catalyst for growth, its capacity to absorb new technologies with spillovers to the domestic private sector in and ways of operating. The low quality of the form of increased demand for inputs, access management limits SME capacity to absorb to new technology and managerial techniques, new technologies and processes. Surveys of demonstration effects and agglomeration benefits, firms also indicate there is an information the domestic private sector has not been able to disconnect whereby local managers are not expand its share of GDP to the same extent as aware of MNCs’ sourcing strategies, or where foreign firms. to get the information on the quality, cost • Address information gaps between SMEs and delivery (QCD) standard requirements and MNCs and support SMEs to meet needed to become a supplier – as well as how Quality Standards. A lack of information to meet these standards. For example, the about quality and reliability can hamper recent Enterprise Survey showed that the lack supplier relationships from developing. of management skills topped the list of skills Having certification that is widely recognized firms reported as difficult to find (compared is important for exporters, but also for firms to other skillsets like IT, non-IT, writing, and that are seeking to supply to multinationals or interpersonal skills). Lastly, access to finance their tier one suppliers. Providing easy access appears to be a binding sectoral concern for to what the standards are and how to meet nascent firms, including in the electronics/ICT them is a service the government can provide. software sector. Financial access is particularly Key sectors to focus on would be those that restrictive for firms aiming to make a could prepare more local firms to service breakthrough to become suppliers. foreign producers in garments, electronics and automotive parts. With the coming reduction • Strengthen government’s capacity to serve of tariffs to ASEAN countries in sectors such SMEs. There are also issues on the government as automotives, competitive pressures will rise, side that should be addressed. A review but there will be expanded opportunities for of SME programs 110 points to policy and low priced goods of sufficient quality. institutional constraints such as lack of contract From the MNCs’ perspective, there is the enforcement, insufficient policy alignment, need to overcome information asymmetries and poor implementation and capabilities about the quality and timeliness of delivery constraints in the public sector: from prospective suppliers. From the SMEs’ - Use the new SME law to streamline and perspective, there can also be considerable prioritize support to SMEs: Vietnam risk if there is no secondary market for the has a plethora of overlapping programs specialized good the MNC is seeking to for SMEs. As the World Bank study on purchase. This is in addition to concerns Linkages points out, separate regional TAC about how to meet the standards and how to Assistance Centers for SMEs (provided by have credit necessarily to make the necessary the Ministry of Planning and Investment) 110 Linkages study, 2017. 85 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T an d C e nte rs for SI D e vel opm e nt smaller firms and could involve a wider (sponsored by the Ministry of Industry range of domestic players. and Trade) provide training courses, direct development support for companies using Review the role of state owned international experts, and opportunities enterprises and support important input for overseas visits seeking to promote services – for success in manufacturing international business linkages. The SME as well as an important driver of law that is under advanced preparation productivity and job creation. by the MPI also promises wide-ranging • Even with the privatization and consolidation support for all SMEs, with targeted over the last decade, state owned enterprises programs for start-ups, formalization of continue to have a significant presence household enterprises and SMEs to become in the economy. There are sectors where part of GVCs. As this gets rolled out, there natural monopolies can justify this approach. is the risk that overlapping efforts expand However, where the private sector can be – or there is the opportunity to undertake expected to operate efficiently, the approach greater streamlining and prioritization now. to using the public sector should be reviewed. - Building capacity within the lead agency The concern is that private sector actors may be - or other relevant investment promotion more innovative and responsive, particularly institution – to provide systematic in services that are important inputs to other matchmaking services between buyers sectors throughout the economy. and sellers. It draws feedback from MNCs/ lead firms regarding their demands to help • Further support to the service sector is also design and implement follow-up support. important in its own right. Vietnam has had - Upgrading local firms to address the a strong focus on developing its manufacturing weak domestic supply capacity. This may sector, particularly for exports. Capturing scale entail, among other things, designing and economies, facing strong competition and implementing a demand-driven Supplier benefitting from technology diffusion are all Development Programs (SDP). This may important elements of this successful strategy. require a package of horizontal and vertical But services are also becoming an increasingly initiatives in specific sectors/GVCs. Based important source of value added within the on good practice lessons, support can be overall manufacturing process. Indeed, design provided through behavioral incentives to and R&D as well as marketing and after-sale local suppliers for upgrading, and to FDI services represent a larger share of overall value firms to encourage sourcing locally or added compared to production. Currently investing in supplier training, and research Vietnam is primarily active in the production and development. stage; really moving up the ladder will require - Strengthening public-private dialogue moving into some of these services as well. between the government with some Logistics services is one important one. But key stake holders from both large firms financial services, design, marketing and other and SMEs to better understand what professional services deserve attention too. the constraints and opportunities are Given its importance in facilitating trade, to deepen linkages. This may be most logistics services deserve attention and sup­ effectively done on a sectoral basis; porting public investments in infrastructure. garments, electronics and transportation As an exporting country and seeking to equipment may be the places to start given expand in this regard, policies around trade the prevalence of larger, FDI firms in these and the logistical performance supporting the areas. Agri-processing is another area that movement of goods will be critical. Vietnam may have greater backward linkages to performs well overall, higher than many other 86 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS lower middle-income countries. But it is far depreciation rates, discounted loans and tax breaks behind China, and not that much ahead of can all affect the choice of factor mix. If the aim the Philippines (Figure 3.31). Its international is to increase productivity, the impact on the labor shipping scores favorably, but its ability to intensity of production may be less of a concern. track and trace shipments is less sophisticated. If expanding employment is also an objective of This type of more micro-management policy makers, the effect of all of these incentives system is likely to become more important, need to be taken into account on how they affect particularly with more advanced goods and this mix of factors. processes, and as customers are expected to want greater speed in getting customized • Rising capital intensity. The evidence shows goods to market. This will be an area for shifting patterns of capital intensity, particu­ Vietnam to continue making improvements larly increasing among private domestic in the logistics performance index areas on to firms and some SOEs and decreasing for maintain its export growth. foreign firms. Private domestic firms have always been less capital intensive, but the Review policy incentives that aim to gap has been decreasing significantly over support workers and those that may tilt time as these firms expand their investments incentives to favor capital over labor faster than employment. Capital can raise Ultimately, the decision on the production labor productivity, but can also substitute for process is based on cost effectiveness. But labor. Paying attention to whether output government policies influence the costs of effects or substitution effects dominate will factors (labor, capital, land and technology). determine how labor fares. Monitoring the The incentives governments provide through relative productivity and incentives affecting minimum wages and labor regulations, subsidies the relative choices between labor and capital for particular activities (e.g. R&D, training), will be important not only in maintaining FIGURE 3.31: Logistics Performance Index, 2016 Source: World Bank’s Logistics Performance Index 87 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T growth, but ensuring employment also smaller firms (e.g. retail) compared to mid- expands and enables Vietnam’s workers to sized firms. Sector-sorting by gender is not share in these gains. uncommon, but in the education system and with training and mentoring programs, it is • Minimum wage laws aim to ensure workers possible to encourage more women to enter share in gains over time, but increases need a wider set of sectors, including ones with to be calibrated with changes in firms’ higher returns. ability to pay overtime too. Minimum wage levels have increased in recent years. While Strengthening Vietnam’s readiness for these can be well-intended, they need to new technology be sustainable and not repeatedly outstrip Larger changes in the global economy and the gains in productivity firms are able technological advances – whether they are to achieve to be able to pay these higher happening within Vietnam or in countries that wages. If the adjustments are an attempt to compete with Vietnam in export markets – the catch up and to have labor’s share reflect its ability to upgrade and improve performance over true contribution to firm performance, the time will be an increasingly important agenda.111 increases can be justified. However, if they In addition, enabling entry of new firms using exceed labor’s contribution or value added new technologies and business models will also be per worker, the mandated increase in wages important for innovative approaches to contribute become unaffordable, particularly for smaller to Vietnam’s growth. Some may be disruptive and or less productive firms. The risk is that require social safety nets to adapt,112 but enabling there will be employment losses or increased firms and workers to pursue new opportunities non-compliance. Currently, 89.8 percent of will be key to shaping the overall impact and firms pay average wages above the minimum prospects going forward wage. Of those that do not, 98 percent are private domestic firms. The 2015 minimum Looking forward, several trends will affect wage increases outstrip about 10-15 percent the competitiveness of Vietnam. One is the of firms’ changes in productivity – already diffusion of new technologies, particularly labor- pushing up non-compliance, particularly in saving process technologies that can shift the smaller firms. sources of comparative advantage for making traditional manufactured goods. At the moment, • Women are sharing in the expanding transportation equipment and some types of formal wage sector –maintaining similar electronics and machinery are automating fastest. rates of employment rather than increasing Garments is one of the least automated – for now their share – but more could be done (Figure 3.32). That certain sectors are automating to encourage greater diversification of does not mean that all jobs will be replaced by women’s participation across sectors and machines, or that it will not be viable to compete sizes of firms. Women have been active in with efficient low unit labor costs using older significant numbers throughout the period, technology. But it does put a premium on raising although there is no significant overall the competitiveness of the country. trend in the share of women in these wage jobs. What is striking is the concentration Vietnam’s readiness for technological adoption of women in particular (important) sectors compares favorably to other lower-middle such as apparel. Particularly based on sector, income countries. The World Economic Forum women are relatively concentrated in either provides 10 dimensions for ‘readiness’, using very large firms (particularly apparel) or largely subjective indicators to rank countries. 111 Hallward-Driemeier and Nayyar 2017. 112 World Bank 2016. 88 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS Again, Vietnam does well compared to lower- programmers’ community, which can help provide middle-income countries – particularly on local context and adaptation; further supporting affordability, but the supporting infrastructure is the development of these skills will be important lagging somewhat. Vietnam does have a nascent (Figure 3.33). FIGURE 3.32: Automation is spreading – but unevenly across sub-sectors Source: Hallward-Driemeier and Nayyar, 2017, using International Federation of Robotics data. FIGURE 3.33: Technology Readiness Index, 2016 Source: World Economic Forum. 89 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T However, the evidence of the erratic performance Thus, digital literacy and the ability to use a of productivity growth within firms over time wider set of ecommerce tools is still limited. points to the importance of strengthening • Expanding use of technology could itself innovation and internal management of the represent a way to help overcome some of firm -- even with today’s technology. Few firms the information asymmetries that can make consistently improve their productivity over forming linkages with new suppliers difficult. time and many improve to regress another year. While business-to-business transactions Measurement issues and changes in the business are expanding, there is the potential to cycle can be part of this story, but this result is develop far more. Online platforms can both consistent with weak incentives or capabilities of dissemination information about standards, innovating or adopting more efficient practices how to meet them – but also as a trading within the firm. These are areas where increased platform, can serve to build up a reputation for attention is being paid, where firms’ abilities quality and dependability. to absorb new ways of doing things need to be expanded and government incentives tailored to Ensure continued connectivity to these abilities.113 international trade – not only in goods, but of services. Supporting the diffusion, absorption and use of • Export-led growth has been a successful technologies will be critical. As new technologies development strategy for Vietnam, following that will likely be more labor saving, digitally in the footsteps of several neighboring based and more oriented to customization diffuse countries. Continued liberalization on goods further, there will be additional items on the trade and engagement in larger regional trade reform agenda to be able to support the absorption agreements would ensure access to larger and use of technologies. For Vietnam, this is a markets and encourage technology diffusion high priority for sectors such as electronics and and competitive pressures to keep improving transportation equipment where automation is performance. rising. • Continued improvements in logistics is also Supporting business environment, needed to support increasingly competitive including infrastructure, ICT, and data international trade and the shift to demands ecosystem for faster times to market and the ability to • There will need to be a supportive regulatory support greater customization of trade (see framework to enable new technologies to discussion above). be used. This will include fostering a data ecosystem – balancing data privacy and • Greater liberalization of services trade is an security with international data flows that can area where more progress is needed. As the allow firms to compete effectively in networked importance of pre- and post-production value chains. services rise as a share of the value added in a value chain, ensuring access to these services is • Continuing the expansion of ICT infrastructure becoming a more important source of success as well as training will be important for within production itself. enabling more firms and workers to participate in new opportunities new technologies will Strengthening worker and firm bring. Access to the internet remains fairly low capabilities (23 percent of the population), although the use • The first is worker skills, not just literacy and of mobile phones is much more widespread. numeracy but also digital skills, creativity 113 Cirera and Maloney 2017. 90 CHAPTER 3 - ENTERPRISE DYNAMICS AND JOB FLOWS and more interpersonal skills. These will • The second is management skills. These are increasingly important in helping workers important predictors of productivity in any move to good jobs, beyond just repetitive, case, but as many of the new technologies manual tasks that are at highest risk of depend on data flows and efficient feedback automation. loops, more sophisticated management practices will be needed. 91 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES114 Workers are the “supply” side of the jobs market. labor force, including the number of potential Workers do not create jobs. Instead, firms create workers, those who are working, and the overall job openings and workers offer their labor so profile of workers. Section 2 explores the skills that that a job opening becomes job. That job creates they have, both to address today’s challenges and profits for the firm, remuneration for the worker tomorrow’s emerging jobs. The third section lays and economic growth for the country. But it is not out the importance of, and challenges in, the job- just the presence of the worker that is needed, her matching process. The final section talks through skill level is also a fundamental input to the jobs policy areas for consideration. process. Labor Supply: Today’s labor force Workers are under-performing today and, if not addressed, they could hold back Vietnam’s The Vietnamese are a hardworking people. The ability to capitalize on the mega-trends. As Vietnamese labor force – defined as the share noted in Chapter 1, most workers are in low- of the working age population (16-65) who are skilled occupations, working in family farm- and working or seeking work – exceeded 51 million non-farm enterprises, with unfavorable work people in 2015. About one million of these people conditions. At the same time, the economy were unemployed, meaning they actively searched continues its transformation toward deeper global for a job in the week prior to being interviewed; integration, diversification within sectors, shifts a low unemployment rate relative to global toward high-value services and manufacturing, standards.115 Another 50.4 million declared that and automation. If workers are not ready to they worked at least an hour in the week preceding take-on these challenges, Vietnam will lose out, as the survey, equivalent to nearly 81 percent of the will its workers and their families working age population. This far exceeds the 68 percent average labor force participation rates This chapter explores the jobs question from in countries at similar levels of development as the worker perspective and reflects on how to Vietnam (Figure 4.1).116 In fact, Vietnam’s labor prepare workers for tomorrow’s jobs. It has force participation rates are among the highest in four sections. It starts with a quick profile of the the world. 114 This chapter was prepared by Wendy Cunningham with inputs from Mauro Testaverde. 115 Vietnam’s unemployment rate was approximately 2.0 percent in 2015, as compared to a global unemployment rate of 5.7 percent and an East Asia and Pacific rate of 4.3 (extracted from WDI http://mydatabank.worldbank.org on December 2, 2017). 116 Figure 1 uses a slightly different sample than the sample used in this chapter to analyze the Vietnam Labor Force Survey. The sample for Figure 3 is the population older than age 15, while this chapter limits the sample to the 15-65 age range. The longer age range slightly reduces Vietnam’s labor force participation rate to 80 percent. 93 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T FIGURE 4.1: Labor force participation rate, FIGURE 4.2: Female labor force participation, global, 2015 global, 2015 Source: Author’s calculations based on WDI (extracted June 2017). Source: Author’s calculations based on WDI (extracted June 2017.) Certain groups of the working population have compared to women in countries at a similar level particularly high work rates. First, 93 percent of development (Figure 4.2). While Vietnamese of prime-aged adults age 25-49 are working, as women have lower labor force participation rates well as 80 percent of those older than age 50. than men (86 percent), this does not account for Second, women’s labor force participation rates women’s “second” job, namely nearly full-time are particularly high in Vietnam: 79 percent of care of the household (Box 4.1). Third, ethnic adult women are working, as compared to a global minorities have particularly high employment average of 49.6 percent and a regional average of rates, with more than 90 percent of those age 15-65 61.1 percent (Table 4.1).117 Similarly to overall work holding a job, as compared to 82 percent of those rates, a larger share of Vietnamese women work as of Kinh or Hoa ethnicity (Table 4.1). TABLE 4.1: Distribution of the working age population (WAP, age 15-64), labor force (WAP who are working or unemployed), and labor force participation rates by demographic/geographic characteristics, 2015 Variable Share of total WAP Share of total LF Share of category in the labor force Gender Male 49.4 51.7 86 Female 50.6 48.4 79 Age Age 15-24 21.6 15.5 59 Age 25-49 54.7 61.7 93 50+ 23.6 22.8 80 Education Level No Education 3.5 3.3 78 Primary 31.5 33.0 87 Secondary 54.1 51.0 79 Post-secondary 10.9 12.0 91 117 48.4 percent of the Vietnamese labor force is female as compared to a 40.4 percent global average (WDI, extracted June 2017). 94 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES TABLE 4.1: Distribution of the working age population (WAP, age 15-64), labor force (WAP who are working or unemployed), and labor force participation rates by demographic/geographic characteristics, 2015 (cont) Variable Share of total WAP Share of total LF Share of category in the labor force Ethnicity118 Kinh 84.9 83.5 82 Other Ethnic Group 15.1 16.6 91 Location Urban 34.4 31.9 77 Rural 65.6 68.1 86 Region Red River delta 22.0 22.0 83 Northern midland & 12.9 14 90 mountainous areas Northern and Coastal Central 21.3 21.43 83 Central Highland 6.2 6.42 86 South Eastern 18.0 16.99 78 Mekong delta 19.6 19.16 81 Source: LFS 2015, author’s calculations. BOX 4.1: Measuring Women’s Work Although a smaller share of women than men are engaged principally in market work, a sizeable share of women identify homecare and family care as their primary activity. If we “count” women’s work as both market and full-time housework, a higher share of women than men work after age 30. By age 34-44, 97 percent of women are engaged in full-time market or homecare (Figure B2). Dedication to full time home care increases as women age, while it remains very low for men (Figure B1). FIGURE B.1: Time use by age, males FIGURE B.2: Time use by age, females Source: Author’s calculations based on LFS 2015. Source: Author’s calculations based on LFS 2015. 118 As the 2015 LFS does not capture information on ethnicity, statistics on ethnicity are based on the 2014 LFS. 95 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T BOX 4.1: Measuring Women’s Work (cont) Women spend almost an entire work week in unpaid care work. A recent study by ActionAid (2017) provides micro-data to better understand the incidence of housework by gender. More than 800 people in 9 provinces kept time diaries, recording their home and family care, market work, and leisure activities every 30 minutes all day, for several weeks. The women in the sample worked an average of 35 hours weekly, which is nearly equal to a full-time job. Men contributed to the household as well, offering 15 hours weekly.119 Women without an education and those from certain ethnic groups and more rural zones calculate more than nine hours of unpaid care work daily. The homecare burden limits women’s access to jobs, particularly those jobs that require extended periods away from home. As noted in Chapter 1, these high work rates is leading to a growing population and an older have been a driving force in Vietnam’s economic population. As this trend continues, it could have development. It would be difficult to squeeze significant implications for labor supply. more workers out of the working age population. But Vietnam’s changing demographic profile will First, the size of the labor force will begin lead to shifts in the working age population itself, to decline in 2040. The number of potential potentially putting even more strain on labor workers is projected to reach approximately 72 supply, as discussed next. million adults age 15-65 by 2040 (Figure 4.3).122 This will be the largest potential workforce in Demographics: Fewer potential the developing East Asia region after China and workers and less potential work time Indonesia, and will allow Vietnam to expand its As discussed in Chapter 1, the Vietnamese jobs and output. The size of the labor force will population is rapidly aging. The combination of decline thereafter, creating a strain on an already low birth rates120 and increased life expectancy121 overworked population. FIGURE 4.3: Size of the working age FIGURE 4.4: Vietnam Dependency Ratio, by population, ‘000s, 2000-2065 youth and older adults, 2015-2050 Source: UN (2015), extracted April 2017. Source: Merotto et al. 2017 119 The last year that a national survey about time use was carried out was the 2008 VHLSS. The data from that random sample found that women who engage in housework (79%) spend an average of 132 minutes per day – just over two hours – in this activity, as compared to men (56%) who spent about 90 minutes daily (cited in UN Women 2016). 120 While there were 5 children born to every woman, on average, in 1980, this had declined to an average of 2.0 children by 2014. Vietnam has the lowest fertility rates among key comparator countries since 1996 (Merotto et al. 2017). 121 WDI, extracted July 2017. 122 Life expectancy has been increasing, being among the highest in the developing Asia (East and South) region, at 76 years (WDI, extracted April, 2017). 96 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES Second, the demographic shifts threaten the Machines, robots, artificial intelligence, and available time for market work as soon as 2020. information technology are rapidly entering As noted above, women already have high work the workplace and will affect jobs. Some jobs rates and spend significant time on housework. will adopt these technologies and boom. Others But as the population ages – old age dependency will hand-over some tasks to machines and take rates are expected to increase from 0.096 in 2015 to on new tasks.124 Some jobs will disappear and yet 0.34 by 2050 (Figure 4.4), the demand for women’s others will be invented.125 The jobs that will be unpaid work in eldercare of family members will somewhat immune from automation are those also rise.123 So while the size of the working age that require non-routine and non-manual tasks. population will increase until 2040, the number For example, beautician, housecleaner, child care of available people – women, in particular – who provider, manager, teacher, or communications can enter the labor force may be lower due to an director require a series of non-routine decisions increasing elder-care burden. and human interactions, although they may increasingly use technology, thus requiring a But eldercare does not have to squeeze out work different skills set than today. Some jobs that are time. Public and private services and technology considered “automatable” may, instead, adopt can provide quality care to older members of technology and morph into higher value-added society. Many aging societies are investing in jobs, such as store clerks or office secretaries, community-based care so that older citizens can which also will require a broader skill set than stay in their homes while relying on community- in the past.126 While other jobs may thrive with level supports to assist them in managing their technology, such as the small businesses that use daily needs. Technology can provide access to apps to reach new consumers and markets, if the services, such as transport, on-line shopping, business-owners have the skills to take advantage or virtual medical appointments. Improving of technology. the access to and delivery of health services can provide greater health, and independence, into Digital literacy and human skills will rise in old age. Further, a smarter labor force, labor- the age of automation. While STEM (science, saving technology, and shift toward less labor- technology, engineering, and mathematics) is intensive service jobs can help counter-balance the part of the new economy, general skills are the demographic trends. These are discussed in the key to interacting with technology. For example, next section. agricultural laborers in developed countries need to be able to do internet searches to consult Skill-Up or Lose Out manufacturer instructions for fertilizer use or a specific tool repair while accountants need to Skills underlie labor market productivity. While know how to use special software. But neither important today, they will need to play an even need to know how to program a computer.127 larger role as Vietnam’s work force downsizes Instead, they need to have basic literacy, numeracy, and as knowledge-intensive industries and and reading comprehension to use technology.128 technologies shape future jobs. Skills interact with Workers will also have to take on more non- the mega-trends in several ways. routine, non-manual tasks, requiring uniquely 123 Taken together, while 6.7 percent of the Vietnamese population is older than age 65 today, this is expected to reach 14.6 percent by 2035 (Merotto et al. 2017). 124 Arntz, Gregory and Zierahn (2016) recognize that machines may transform the tasks underlying jobs, leaving 95 percent of jobs intact, but with a different task profile. 125 Frey and Osborne (2013) estimates that machines will displace 47 percent of the jobs in the United States by 2035. 126 World Bank 2016b. 127 Of the 160 million jobs in the United States, 0.002% are computer programs (328,000). 128 O*Net occupations database, available at https://www.onetonline.org/ 97 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T human skills. Employers in ASEAN identify Emerging occupations. As noted in Chapter technical knowledge (40 percent) and teamwork 1, the fastest growing jobs in Vietnam require and communications (33 percent) as the most more cognitive and fewer physical abilities than important skills in a digital workplace.129 the most prevalent jobs in today’s labor market. This points to a broader set of skills requirements Moving up value chains and into the knowledge- in the top growing jobs, such as science, economy. Moving to the service-segments of writing, time management, and judgement and value chains and into more sophisticated value decision making. The most striking differences chains will require both greater mastery of some of between the most common and the top growing today’s skills as well as an emphasis on knowledge- occupations is the type of knowledge required in intensive skills. This implies trading out assembly the newly created jobs. While language, customer for jobs that manage logistics, marketing, design and personal service, and administration and and the many before-and after- assembly activities management continue to be important, new fields that are knowledge intensive and have higher of relevant knowledge also include computers value added. For example, Table 4.2 shows the and electronics, education and training, and stages of an apparel value chain. The occupations psychology. that pay higher wages are in services and general management; they are also associated with higher levels of education. TABLE 4.2: Employee and Wage Profile for the Apparel Value Chain Stage Position Share Education Level Tasks/Skills Wages Production Sewing Machine 70% Primary education; on Knowledge of how to Operators (55%) the job training operate a sewing machine Other Assembly- Primary or technical Cutters, packers, spreading Related (10%) Supervisors/Inspectors Secondary education, Communication skills (5%) technical Services Sourcing/Logistics 20% Tertiary; university Business, organizational, (backward links) degree in business computer, communication Sales (forward links) Tertiary; university Customer service; take degree in business orders; find buyers Design Tertiary; university or Creativity; computer skills apparel-specific degree General Administrative 10% Tertiary; university Sales, finance, customer degree in business service Top Management Tertiary; university Business, interpersonal degree in business Wage Levels Low Low-Medium Medium Medium – High High Hourly; Minimum Hourly Hourly or salary Salary Highest paid wage or piece rate employees; salary Source: Frederick (2017); relative increases in salary based on analysis of (U.S. BLS, 1997-2015) 129 ILO 2016. 98 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES Vietnam’s current labor force, and its skills on the 2012 PISA tests.130 Remarkably, nearly development system, is not effectively serving one in five Vietnamese students from the most today’s jobs and will not be ready for tomorrow’s. socioeconomically disadvantaged households Vietnam needs to skill-up or it will be left out of were in the top quartile of test-takers worldwide. future economic growth. Young workers (age 16-25) have literacy scores on par with those of Austrian and Danish students.131 A Stock problem: Vietnam’s youth are If these trends continue, Vietnam’s labor force showing progress, but overall labor force will eventually possess the fundamental skills has a low education profile, with pockets that could offset the eventually shrinking labor of exclusion. force. However, the education system can offer Vietnam’s basic education system is reaching more to today’s youth. One in four students does global standards. Vietnam’s success in creating not complete upper secondary school. Dropouts a quality primary and (lower) secondary lament the lack of relevance of secondary education system is a globally recognized education, little support is available to those who success, best demonstrated by its performance have fallen behind, and students express general on internationally comparable standardized tests. boredom with the learning process in schools.132 Vietnamese 15-year olds outpace the average Certain groups, such as ethnic minorities fair OECD adolescent in language, math and science rather poorly on a range of indicators (Box 4.2). BOX 4.2: Left Behind, But Glimmers of Breakthrough Ethnic minorities have lower school enrolment rates and lower skill levels than Kinh or Hoa children and adults. While ethnic minority and Kinh children have similar primary school enrolment rates, parity begins to quickly drop off by lower secondary for some ethnic groups. By upper secondary, only the Hoa and the Tay are at par or have higher enrolment rates than the Kinh; all other groups show an enrolment gap of 20 percent or more (Figure B3). On average, the quality of education is lower in ethnic minority schools, as well. Ethnic minority children score 15 percent lower on fifth-grade standardized mathematics and reading tests than Kinh children. Though ethnic minority children who speak Vietnamese perform at levels closer to their Kinh peers. Among adults, only 6 percent of ethnic minorities have a vocational or tertiary education. This compares to 20 percent of Kinh or Hoa adults, the low university education is particularly troubling given its high economic returns. FIGURE B.3: Net Enrollment Rate, Difference from Kinh average, by level of education (2014) Source: Author’s adaptation from (Social Inclusion chapter of World Bank and MPI 2016). Notes: The Kinh net enrolment rates are 93 percent, 84.5 percent, and 65.1 percent, respectively. 130 Bodewig and Badiani-Magnusson 2014. 131 Bodewig and Badiani-Magnusson 2014. 132 Nguyen 2017. 99 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T But the majority of the labor force is left behind. Women are left behind even before entering the The rapid improvement in basic education is labor force. Girls’ enrolment in secondary and benefitting today’s young workers but has little tertiary education are higher than that of boys. effect on the majority of the workforce, some of Moreover, at the age of 12 girls appear to aspire whom left the education system more than 50 to better remunerated positions than boys. 135 years ago. Instead, most of the workforce has However the trends begin to shift by post- skill levels far below international standards. As secondary school. Girls cluster into management, of 2015, 70 percent of the Vietnamese labor force education or health fields of study while boys (age 15-64) has no more than a lower secondary cluster into IT and science (Figure 4.7). Such education (Figure 4.5).133 While Vietnamese youth clustering across occupations and industries have literacy scores on par with Western European explains a significant portion of observed students, Vietnam’s labor force (age 15-65) has the gender wage gap.136 If these patterns continue as lowest scores in the sample (Figure 4.6).134 automation enters the work place, the gender wage gap is at risk of expanding. FIGURE 4.5: Highest level of education of the FIGURE 4.6: Literacy Proficiency Scores of the labor force, 2014 (% of total) Labor Force Source: Bodewig and Badiani, 2014. Note: the OECD figures are based on the PIAAC survey, summarized in OECD 2013; the Source: adapted from Demombynes and Testaverde 2017 (based on Vietnam data are based on the STEP survey 2014. LFS 2014) 133 Demombynes and Testaverde 2017. 134 The Vietnamese workforce is particularly lagging in higher-level comprehension and inference (Bodewig and Badiani-Magnusson 2014). 135 Chowdhury et al. 2018. 136 Chowdhury et al. 2018. 100 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES FIGURE 4.7: Gender Gaps in Field of Study in Post-Secondary Education 20 18 16 14 12 Percent 10 8 6 4 2 0 F M F M F M F M F M F M Adminis- Business Education/ IT/ Crafts Other tration health science Vocational General Source: Bodewig and Badiani-Magnusson (2014). Notes: F=Female and M=Male Impressive rates of return to higher education percent above those who never reached upper also signal an under-educated labor force. secondary school.137 This gap could reflect higher Hourly earnings of university educated workers is productivity of university workers but, given 66 percent above those who never reached upper that employers most complain of skills gaps in secondary school (Figure 4.8). While university occupations that university workers should hold, graduates who work in the private sector – less the gap is more likely due to a scarcity of those than eight percent of the labor force – earn 70 with (even limited) university education.138 FIGURE 4.8: Rates of Return to the Level of Education, Private Sector, 2014 Note: The reported coefficients are calculated from (hourly) log wage (including bonuses) regressions restricted to all wage workers which control for a cubic in age, urban/rural, region, gender, and ethnic minority status. Source: Demombynes and Testaverde 2017 137 Demombynes and Testaverde 2017. 138 Cunningham and Perroti (forthcoming). 101 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Employers voice concern about the education- The labor market values a range of level of Vietnam’s labor force. When presented skills, which are largely missing from the with a list of 15 potential business environment workforce140 constraints – ranging from taxes to electricity A mix of skills are needed in the most prevalent to access to finance - Vietnamese firms that are occupations in today’s labor force. Although hiring workers cite “education” as one of the three Vietnam’s economy is characterized by low- top obstacles to their firm’s operations; more than skilled occupations, these require a mixed set three times as much of a problem as comparator of skills.141 Some skills cut across all ten of the countries in the region.139 This likely reflects the largest occupations today: active listening, critical poor education system that most of today’s labor thinking, speaking, monitoring, and coordination force went through, rather than an assessment of (Table 4.3). Others are very occupation-specific, today’s education system, whose graduates are such as the multiple social skills needed by shop still a small share of the whole workforce. salespeople or the technical skills needed by textile machine operators.142 And yet others do not rank among the most important skills in Vietnam’s most common occupations. 139 Cunningham and Perotti (forthcoming). 140 This report differentiates between years of education and skills, where the former is the time spent in school while the latter is the abilities that an individual has, which may or may not have been developed in an education institution. See Hanushek (2007) for a discussion on the difference between the concepts. 141 Nearly 40 percent work in agriculture, forestry, and fisheries and another 10 percent are in retail sales. A range of other low- to semi- skilled jobs round out the top ten. 142 Demombynes and Testaverde 2017. 102 Table 4.3: Most important Skills in the largest 10 occupations (at the 3-digit level) by employment size, 2014 Skill Type Skills Valued Across All Occupations Top 10 Occupations in Vietnam, 2014 (3-digit VSCO) in Vietnam Agricultural, Street and Market Shop Building frame Textile, fur, Garment and Mining and Taxi, van and Subsistence forestry market gardeners and salespersons and related leather products related trades construction motorcycle crop farmers and fishery salespersons crop growers\ trades workers machine workers labourers drivers labourers operators Basic Active Learning Active Listening Complex Problem Solving Critical Thinking Mathematics Monitoring Reading Comprehension Science Speaking Writing Resource Management of Financial Resources Management Management of Personnel Resources Time Management Social Coordination Negotiation Persuasion Service Orientation Social Perceptiveness Systems Judgment and Decision Making Systems Analysis Technical Operation and Control Operation Monitoring Note: the following technical skills were not listed as most important: equipment installation and maintenance, operations analyst, programming, repairing, technology design, and troubleshooting. Based on the most populous occupations, defined at the 3-digit VSCO. yellow shading = Indicates that a skill is in the top 5% percentile of importance in an occupation; blue shading = Indicates that a skill is NOT in the top 5% percentile of importance in an occupation, but still ranks high in importance. Blank = indicates that the skill is not important for that particular occupation in Vietnam, but is important in other occupations. Source: derived CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES 103 from Demombynes and Testaverde (2017) V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Employers also point to a diverse set of skills The current education and skills system does for today’s jobs. The 2012 STEP survey asked not address several of these priority skills, with employers to rank the skills that are most important a particularly acute shortage among higher for white and blue-collar workers (Figure 4.9). Job- skilled-occupations, exactly those jobs that are specific technical skills were the most important needed to pull Vietnam into higher valued- skill named for all workers. This may range from added jobs. Employers identify managerial skills cooking skills to machine operation to accounting as the hardest skill to fill in Vietnam (Figure 4.10); to management.143 Other skills that emerged for higher than any other country in the region.145 all workers are problem-solving, communications, This is problematic since high-quality managerial ability to work independently, and teamwork skills are increasingly seen as the key to unlocking skills; reflecting the same priorities as employers innovation and productivity in the knowledge worldwide.144 Employers particularly valued time economy.146 Employers also point to difficulties management (punctuality) among blue-collar in finding those with an appropriate work ethic workers and leadership and creative and critical and those with the interpersonal skills to do the thinking among white-collar workers. Numeracy job. While definition of “work ethic” category and literacy came in very low – perhaps due to is not provided in the data, casual interviews adequate basic literacy across the workforce – suggest that it may be related to the punctuality whereas more sophisticated “communication” was and labor turnover. “Interpersonal skills” involve deemed more important. the leadership, communication, and teamwork FIGURE 4.9: Employer’s View of the Importance of Job-Related Skills for Blue- and White-Collar Workers Source: Bodewig and Badiani-Magnusson (2015). 143 This is a difficult category to interpret since it can be a catch-all for the ability to accomplish all the tasks required by a job (Cunningham and Villaseñor 2017). 144 Cunningham and Villaseñor 2017. 145 A survey of Vietnamese employers found that more than 70 percent of employers hiring in technical, professional and managerial professions could not find appropriately skilled workers, as compared to 30 percent of those hiring machine operators or manual workers (Bodewig and Badiani-Magnusson 2014). 146 Cirera and Maloney 2017. 104 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES skills highlighted in Figure 4.10. While foreign can become more productive and more lucrative language is not commonly identified as important to workers, if workers have higher level technical for most jobs in Vietnam, it is difficult to fill skills. Although Vietnam’s vocational education when hiring. Notably, both IT and writing skills system is deemed low-quality by students147 and are not necessarily difficult to find in Vietnam, as by more objective measures,148 it still potentially compared to other countries. boosts earnings (Figure 4.8). Those who complete post-secondary vocational education see a wage Although vocational education and training premium of 34 percent, compared to 10 percent is generally not viewed very favorably by for those who only finish non-technical secondary Vietnamese students and parents, it cannot school. 149 Even secondary vocational school be left behind in a race for a sophisticated graduates earn more than standard secondary economy. Technical skills are still the primary school graduates. This points to a job market that skill that employers look for (Figure 4.9) and values low-skilled technical workers more than the right skill level for most jobs in Vietnam low-skilled general education workers. In spite of (Table 4.3). Even in economies as developed as the wage premium to technical school, less than Germany and South Korea, more than 50 percent 10 percent of men and 2 percent of women have of their labor force has a solid technical school a technical or vocational secondary or higher training. Developed countries (such as the US) education. are recognizing that “low-skilled’ occupations FIGURE 4.10: % of firms that state that it is difficult or very difficult to find each skill, when hiring Managerial 100% 80% Technical 60% Interpersonal Indonesia 2015 40% Malaysia 2015 20% Philippines 2015 0% Thailand 2016 IT Writing Vietnam 2015 EAP-7 Languages Work ethic Source: WB Enterprise Surveys. 147 Nguyen 2017. 148 Viet 2017. 149 Demombynes and Testaverde (2017) argue that the primary labor market benefit of completing academic secondary education is to pursue post-secondary education. The likelihood of obtaining a wage job is 45 percent greater for university graduates than for those with only upper secondary school and the earnings are 56 percent higher. However, vocational education also increases the chance of holding a wage job and boosts earnings over those with an academic secondary degree. Those who graduate from secondary vocational have a 17 percent greater chance than academic secondary degree holders of getting a wage job and a wage premium of 19 percent. The probabilities are 29 percent and 24 percent respectively for those who have completed professional vocational school (Demombynes and Testaverde 2017). 105 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T In summary, twenty-first century workers require mega-trends: shifting product markets to serve the a more complex set of skills than in the past, and growing consumer class, moving position in the Vietnam’s workforce must have them. Vietnam’s value chain, and automation changing the nature current high work rates, low unemployment rates, of and the structure of jobs. and shifting demographics indicate that there is little room for further mobilization of the working Already, Vietnam’s workforce is mobile. One- age population. Instead, labor supply increases fourth of the labor force changes their type of job, will have to come from the abilities embodied in the type of employer, sector, or occupation over a the workers through skills. Some mega-trends will two-year period (Figure 4.11). This share is closer exacerbate the skills shortage as Vietnam strives to to 35 percent for youth (age 16-24) and over 40 move into service and higher valued added jobs percent for youth who are not in school. These and welcomes technology to the workplace. So estimates likely underestimate labor mobility since while basic cognitive skills (reading and writing) movement within sector or occupation are not and limited technical knowledge in one’s field was captured in these data. the recipe for a productive worker in the past, today’s employers are looking for a range of skills The job transitions seem to result in little and knowledge, and emerging jobs will need these “upward” movement, except for youth. As even more. workers change job type, employer type, or occupation, there is not a clear trend that the job Transitioning up the jobs ladder switching is to “better” jobs. Workers enter some Worker movements between sector were a key job types and others leave those jobs, as seen in contribution to economic growth, as well as Figure 4.11. On average, all this labor mobility a means to acquire greater job stability and nets out to a very similar distribution of workers benefits, as discussed in Chapter 1. This labor across job types, employer types, sectors, and mobility is expected to continue with on-going occupations. Youth are the exception. Among structural transformation, though it may speed those age 16-24, the last row of Table 4.4 “wage up in response to opportunities offered by the with contract” in nearly all grey, indicates that FIGURE 4.11: Share of the working age population (age 16-65) who were in each Work Type in 2012 (x-axis) and 2014 (bar) Source: Adapted from Pimhidzai and Cunningham (forthcoming). Note: * indicates the same work type between periods. 106 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES youth disproportionately move from all work, location preferences, job search costs, and even school, and inactivity types into holding jobs with the psychological costs of changing jobs. Not a contract. Movement to wage without a contract surprisingly, unskilled workers in Vietnam face is also quite prevalent, but not into farming or higher costs to transition across sectors compared household enterprise ownership. A similar pattern to skilled workers, although the results vary by is observed when considering the type of firm, as sector. presented in Chapter 1. Most Vietnamese workers find their jobs through In spite of this mixing, the transitions are not as ad hoc, informal channels. In 2013, about half of fluid as they could be. There are significant wage job-seekers relied on friends or relatives to find a differentials across job types and occupations, job (Figure 4.12). Young people and the less-skilled indicating that something is preventing workers gravitated toward personal networks, even though from transitioning to higher paying jobs. In fact, they likely have smaller employment-relevant labor mobility (across sectors) costs are significant social circles.151 Search in cities, with their more in Vietnam, averaging 3.1 times the average annual organized labor markets, rely less on personal wage within the economy.150 The impediments to connections.152 Another 22 percent did not look job switching might include skills mismatches, for a job but instead undertook means to start limitations to geographic mobility (administrative their own business; this reflects a new generation procedures for internal migration and direct of (mostly) household enterprise owners. Older relocation costs), severance and hiring costs groups of workers have a higher tendency to start (including those imposed by law or convention), their own firms, as is observed across the world. Table 4.4: Worker transition between work types, 2012-2014, age 16-24 Work type in 2014 Not working, Not working, Farming Household Wage Wage not in school in school enterprise without with contract contract Not working, not in school Not working, in school Work type in 2012 Farming Household enterprise Wage without contract Wage with contract Note: Yellow denote the diagonal, signifying no change in work type across periods; grey indicate a larger transition between sectors than expected, given sector size. Source: Pimhidzai and Cunningham (forthcoming). 150 Hollweg 2017. 151 The statistics on job search by level of post-secondary education is drawn from the 2015 Labor Force Survey (GSO 2016). 152 GSO 2016. 107 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T In spite of the emergence of a range of wages or work conditions for which the applicant e-platforms and services to facilitate the job is eligible (Figure 4.13). match, few job-seekers use these methods to find jobs. Internet-based job search sites are First, students do not have adequate information proliferating, but only 2-3 percent of job seekers about the skills needed for their target jobs. use these sites; not surprisingly, youth are more Nearly half of hiring employers say that applicants inclined to find jobs via the internet. However, lack the required skills. This could be due to even person-to-person job search assistance – via students not having good information about the recruitment firms, education institution-based kinds of skills that they should acquire. Young services, and public employment services – are people use a range of methods to select a field infrequently used. Older workers depend more of study – newspapers, internet, guidance from on publicly provided services than do younger youth unions and schools, MOET’s book What workers, but this still accounts for less than 10 a Student Should Know, parents, relatives, flyers percent of job search by workers age 45-65 (Figure from universities - some of which may provide 4.12). This may be partly explained by anecdotal misleading or incomplete information. Rural evidence about abusive private and public search students use even fewer resources.154 support services.153 Second, there is little digestible information Poor information about labor markets hinders about the jobs market, thereby limiting efficient jobs matches. Employer cite three issues, young people’s options for selecting a skills that can be tied to information: poor information development path or for job search. Thirty-four about the skills required to do a job, insufficient percent of formally registered employers say that information about the kinds of jobs that are there were few job applicants for open positions. available, and incorrect information about the This may signal an occupational shortage, namely FIGURE 4.12: Job Search Methodologies, by FIGURE 4.13: Problems firms encounter when Age hiring Source: Bodewig and Badiani-Magnusson (2014). Notes: the data Source: Bodewig and Badiani-Magnusson (2014). are drawn from interviews with 132 businesses that hired craftsmen and 34 businesses that hired technicians. 153 Nguyen 2017. 154 Oxfam and Action Aid Vietnam 2012, as cited in Bodewig and Badiani-Magnusson (2014). 108 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES that the skills are missing. Or it may be that job Vietnam will need to develop policy to serve content and terms (wages, work conditions) are two labor markets: the current market that is below the aspirations of jobseekers. Thus, people primarily comprised of low-skilled technical may not train for or apply for these kinds of jobs and a small and emerging modern sector employment, even though there are job openings. that will require a new level and type of skills. Further, as mentioned above, job search is rather Three policy areas are proposed: (i) moderating ad hoc, so information about these job openings the impacts of the demographics shifts on the may not even be getting out. labor market by support to the aging population, (ii) rethinking the skills development process to Third, more than 40 percent of hiring employers agilely respond to shifting market needs, and (iii) say that the offered wage or work conditions generating information for better preparation for, are not acceptable to job candidates. This is integration into, and movement across the labor partly due to poorly informed jobseekers with market. misaligned expectations. Better information about earnings potential would both help job-seekers Moderating the Impacts of the set realistic expectations as well as reduce their Demographic Shifts on the Labor applications to jobs that are not aligned with their Market own expectations. Two policy areas that can alleviate the impacts In sum, the limited upward mobility and costly of demographic shifts on the size of Vietnam’s transition suggest that the job search and workforce: developing an aged care system placement system is not working as well as it and extending the productive work life of the could, thereby limiting labor productivity and population. associated GDP growth. Job search is not efficient and signals from both sides of the market suggest Developing an Aged Care System to serious information asymmetries. Inefficient Alleviate the Household Eldercare allocation of labor both reduces firm productivity Demands and leads to poorer jobs for workers who are in the wrong job. Vi e t n a m n e e d s to st a r t d e v e l opi ng a comprehensive long-term care system (LTC). Policy for More, Better, and Better- Vietnam’s tradition of family care for aging Matched Workers household members may have been efficient when families lived together and worked Labor supply policies will not increase the family farms. But with greater urbanization number of jobs in Vietnam, but they can better and women working outside of the home, work prepare workers to meet labor demand and to and eldercare are not necessarily compatible. get the right workers into the right jobs as well Other countries with similar demographic as expanding the employment opportunities for profiles are developing comprehensive LTC more vulnerable population groups. Vietnam systems, characterized by a broad range of currently has a range of public and private services designed to support people who are programs and policies to support the development unable to perform the daily activities that they of human capital and get people into the right need to stay happy and healthy. LTC services jobs but, in the face of a changing labor market may be provided in the home, community, or due to automation and structural transformation, institutions; be full time or a few hours a week; the current methods to support workers may be paid or free; and cover everything from basic outdated. Now is an opportune time to adapt the social interaction to medical care. current system to meet the new megatrends. 109 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Different models across the East Asia region To keep people healthy longer, Vietnam will need provide a range of options for the shape of to expand its health system where prevention and Vietnam’s support to the elderly. For example, treatment are offered in a coordinated manner Thailand has a program in rural areas that pays over a long period of time. Many disabilities community-based caregivers a small monthly associated with old age are acquired over time stipend to provide in-home (of the client) and, if treated early, can be minimized. This will services. Singapore offers a range of services require strengthening primary care services, from home-based care to integrated care. And shifting care away from acute care hospitals, China is rapidly expanding a range of services improving coordination among health providers, for its older population (Box 4.3). Not only do and strengthening the quality of the health these services provide support that otherwise workforce. Preventative interventions over time would have been provided by (mostly) daughters also teach individuals to take more responsibility and daughters-in-law, they also provide an in managing their own care than if they only activity, and perhaps some modest earnings, for interact with the health care system in cases of the young-elderly who have retired but are still emergency.156 eager to remain active.155 Just because people can work does not Extending the Productive Life of the Adult mean that they necessarily will; incentives Population may be needed to encourage people to stay With advances in health care and the changing economically engaged. The structure of nature of jobs, Vietnam’s population has the Vietnam’s pension system currently incentivizes potential to work longer. Those living in rural people to retire long before they are physically areas already work well into their later years, but and psychologically ready to stop working. urban workers are quicker to leave the workforce There is no evidence that moving older workers at the formal retirement age – 55 for women and 60 out of the labor force opens spaces for younger for men. Thus, there is a stock of urban residents workers. Instead, the pension system may be who will spend nearly half of their adult life not slowing down Vietnam’s economic growth. But working. Two shifts can change this: improved even those who wish to work may have difficulty health care services so people are physically able finding jobs due to obsolete skills, a shifting labor to work more years and incentives or programs to market, employer discrimination, or homecare encourage working longer. burdens in caring for grandchildren. Older BOX 4.3: A Room of One’s (Aged) Own China’s economic and population policies have led to rapid growth but also a potential aged-care problem. Yesterday’s one-child families are today’s couple with four aged parents to care for. Coupled with rapid urbanization and rising female labor force participation, traditional models of aged care are being reinvented to serve today’s reality. In response, the Chinese government is implementing pilots in 42 cities to provide comprehensive care services for the aging population. The publicly financed program is leveraging private actors to collectively address the challenge by: establishing or strengthening community care centers to provide comprehensive services, purchasing services from the market (or via vouchers), and encouraging the participation of volunteers in innovative time banks where younger elderly provide LTC services for older elderly. This is underpinned by the development of management and information communication technology to monitor and evaluate, provide quality control, and ensure solid management. Source: O’Keefe et al (2016). 155 O’Keefe et al 2016. 156 O’Keefe et al 2016. 110 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES potential workers in several other countries are Developing a broader set of skills facing similar challenges, which are being met The education system needs to continue to by public policy in job search services for older augment the traditional knowledge and basic workers, vouchers to employers who hire older cognitive skills with higher-order cognitive workers, and retraining schemes targeted toward skills, digital literacy, and socio-emotional those who were educated long ago. The most skills.160 In addition to enhancing the relevance economically (and demographically) advanced of the knowledge-based curriculum and countries in EAP employ a mix of strategies.157 improving learning of such material,161 there is a growing consensus that the classroom can be Rethinking the Skills Development used to teach a range of non-academic skills. Process Vietnams’ current initiative to reform curricula to “Vietnam should not be concerned about the include competencies (in addition to knowledge) existence of skills gaps and occupational skill in creativity, teamwork, self-guided learning, shortages but about the ability of the skills problem solving, and self-management/efficacy development system to overcome them.” 158 is a promising start, as well as other initiatives Vietnam’s Socio-Economic Development (Box 4.4). Strategy 2011-2020 paints a vision of an agile, highly skilled, scientific labor force to respond Various school-based models have been used to a world that is changing “fast, complicatedly, successfully in other countries to add higher- and unforeseeably.”159 This vision aligns with order cognitive skills and socio-emotional skills the discussion in this Report and will require a to the curriculum without sacrificing quality re-think of the current skills development system of cognitive skill development. 162 They can in the context of a rapidly changing job structure, be grouped into four types of interventions.163 automation, and globalization. At the same time, First, develop teachers’ socio-emotional skills Vietnam’s labor force does not have the skills so they model them in the classroom. Second, needed for today’s jobs, even in more traditional strengthening the school environment to provide trades. But whether new skills or old skills, the a safe place for practicing pro-social behavior. current skills development model needs to Third, create and implement a socio-emotional expand beyond the current strategy of learning curriculum. The curriculum can take many forms while young in an intensive school-based – a full class period or just a 10-minute daily process. To achieve this, today’s workers need a exercise, using worksheets or using play-acting broader set of skills and learning modalities over and music, for 5-year olds or for adolescents – the lifetime while the skills development system but all require engagement and practice. A range needs a larger set of actors and mechanisms to of toolkits have been created in developed and support adult learning. developing countries. Fourth, incorporate socio- emotional skills into the pedagogical method. Course content is best learned when the student actively works with the information. There is an 157 O’Keefe et al 2016. 158 Bodewig and Badiani-Magnusson 2014. 159 From the unofficial English language translation: file:///C:/Users/WB176789/OneDrive%20-%20WBG/harddrive%20back-up/FY17/ Vietnam%20JD/lit/Socio-economic%20Development%20Strategy%202011-2020.pdf 160 This section refers to actions that schools can take to enhance these skills. However, parents play varying roles across the lifecycle. In fact, some Vietnamese parents view socio-emotional skills as their domaine (Parankekar et al 2017). This section will not speak to the role of parents, referring readers to a broader literature on the topic. 161 For a detailed discussion of strategies to improve teaching, see World Bank (2018). 162 CASEL (2014) points to four types of in-classroom learning: (i) teacher modeling skills that she has learned through a structured program, (ii) pedagogical methods that incorporate socio-emotional and digital learnings into the curriculum, (iii) a dedicated class period for socio-emotional learning, and (iv) school climate. Cunningham et al (2016) add to this framework the role that after-school activities can play. 163 CASEL 2014. 111 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T increasing appreciation of the use of a range of of what “success” is, thus enabling all to work socio-emotional and higher-order cognitive based toward that success.165 A similar benchmark- learning methodologies, which may incorporate setting for socio-emotional skills is being used teamwork, problem-solving, oral presentation across the world. For example, the successful US skills, empathy, and other skills that are valuable KIPP schools provide socio-emotional skills report for the labor market. However, there is not a cards that are discussed by teachers, students and consensus on how to teach this broader range their parents throughout the school year. These of skills, and successful teaching will be context scores are treated on par with scores for more specific.164 This points to experimentation and academic subjects.166 evaluation to identify what works for Vietnam. Older students, and those outside the school To highlight the importance of these skills, system, can acquire these skills in a broader and assist students in acquiring them, it will be range of contexts. The OECD points to the important to evaluate student success, just as importance of “experiential learning,” where skills traditional skills are evaluated. Vietnam’s great that are “taught” in the schoolroom are honed success in PISA is partly attributed to a clear in a workplace environment. This is particularly understanding by students, parents, and teachers relevant for these new skills, that can be difficult BOX 4.4: New Schools for Vietnam? Importing Colombia’s Escuela Nueva, with Great Success In response to Resolution 29 of November 4, 2013 and Resolution 44 of June 9, 2014 from the Prime Minister’s Office, the Vietnam Escuela Nueva pilot was born. The idea was to adapt the successful Colombian “new school” model (Escuela Nueva) for the Vietnam context in order to assess if, indeed, team-based, applied learning could more successfully shape well-rounded citizens for a modernizing world, as compared to Vietnam’s traditional learning model. The Escuela Nueva model includes a number of elements that differ from traditional teaching models and contexts: • Project-based learning where students collectively solve problems requiring a mix of skills • Children working together to learn from each other, guided by a teacher who acts as a facilitator • Self-paced learning and instructional material designed to allow children to learn at their own pace, • Parent participation in the learning process and work “artifacts” in the classroom to expose children to real-life problem solving Vietnam adapted these principles to its own context for a small group of 3rd grade classroom, thus creating the Vietnam Escuela Nueva (VEN) model. Importantly, Vietnam’s pilot also tracked VEN’s students’ mastery of mathematics, Vietnamese language, and socio-emotional skills over the next two years, as well as tracking scores of non-VEN students. By the fifth grade, the VEN students had higher mathematics and Vietnamese language scores and much higher socio-emotional scores than their counterparts who were not selected to participate in the program. The figure shows that VEN students had math scores that were 0.18 standard deviations above those of non-VEN students, equivalent to nearly half a year of schooling (an effect size of 0.5 is equivalent to one year of instruction), while socio-emotional skills were 0.41 standard deviations above the non-VEN group. Source: Parandekar et al. 2017. 164 For example, cultural differences underlie the starting point, target level of, and teaching methodology of socio-emotional and higher- order cognitive skills such as empathy, teamwork strategies, and communications. Or, access to electricity or the internet may affect how digital literacy skills are taught. 165 Parandekar et al 2014. 166 Cunningham et al 2016. 112 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES to teach in a school-based setting. Although shifting markets require workers to be agile Vietnamese higher education and training and adjust rapidly by continuously relearning institutes are attempting to develop learning and retooling for a 50- year work life. Thus, partnerships with private enterprise, success has an expansion of quick knowledge and skills been limited, particularly in more rural areas. acquisition programs are necessary to keep up Job search firms can fill this gap, by expanding with changes in the labor market. their services to include information about apprenticeships. Further, geographic mobility First, recognize, and expand, on the job grants for students, accompanied by training training. Most learning for the job occurs on vouchers that firms can redeem, may alleviate the job. While on-the-job training is not often the cost of relocation and incentivize employers recognized for the role that it plays in the skills to hire those from other zones. This may be development system, in fact a large share of particularly helpful to ethnic minorities, who have workers learns something new in their jobs fewer personal connections in urban areas and daily; this is particularly the case among more who may face discriminatory hiring practices in skilled professions (Figure 4.14). This learning urban zones. largely does not come from training courses within firms – which Vietnam’s employers are Learning modalities over a lifetime: firms, notoriously scarce on – but instead learning short-courses, and adult-driven skills by doing with the assistance of more skilled upgrading supervisors, the opportunity to learn something Learning can no longer stop at the schoolhouse new, and hands-on coaching (Box 4.5). door at age 18 or 22. Today’s technologies and FIGURE 4.14: Percentage of Wage Workers in Different Occupations Who Report Having to Learn New things, by Frequency 100 90 80 70 60 Percent 50 40 30 20 10 0 ls s rs rs en rs rs an na ke ke to ke s m er ici ra sio or or or ts ag hn e w w w af es op an Cr c al s l of ua Te le M ric ne Pr sa an e hi d Cl M ac an M ice rv Se At least every 2-3 months At least once a months At least once a week Every day Source: Bodewig and Badiani-Magnusson (2014). 113 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T BOX 4.5: Extension Services – for Managers Management skills are emerging as one of the most important factors for firm competitiveness and success, as well as one of the most difficult skills to teach in a classroom. But recent evidence is showing that managers may most benefit from a service delivery mechanism more commonly enjoyed by those at the other end of the occupation ladder: subsistence farmers. The most rapid, and most effective, management training may be in-firm coaching by management specialists; the strategy that was undertaken by Japan and Korea in the 1950. Extension services that are geared toward managers have many of the same characteristics of those provided to subsistence farmers. The extension officers go to the workplace. They work with the manager to identify her firm’s needs and coach the manager on strategies to overcome these challenges. They bring latest research and methodologies to the manager to address the shortcomings. For example, the Japan Productivity Center goes into firms to provide technical assistance on a range of business management skills. These skills may be as simple as more efficiently organizing the production process, cleanliness and industry standards, or firm discipline or as complex as implementing entire management systems, such as Total Quality Management. For such a model to be effective, though, it must aim to bring outside knowledge in, namely to not to use Vietnamese managers to advise others, but for global experts to advise Vietnam’s managerial class. Such an intervention in Indian textile factories increased productivity by 11 percent. Source: Bloom et al. (2013), Bloom et al. (2015), Cirera and Maloney (2017). Better information and incentives can enhance small business or enroll in a short course on on-the-job training. While there is scarce evidence electronic repair to take on a supervisor position about the factors that encourage firms to invest in in the electronic assembly plant where she works. learning opportunities for their workers, there is a This points to an upgrading of Vietnam’s short consensus that firms that under-invest in training courses. Vietnam’s public and private VET sector do not fully understand the benefits accruing currently offers a plethora of short courses. And from a greater investment in their workers. A students are logging in to MOOCS (massive open better measurement of skills acquired on the on-line courses) to learn the most basic skills to job and the rates of return may provide firms the most complex. The public sector can play with the information that they need to enhance several roles to expand and improve the system. their investment in skills development. Further, First, to identify market-demanded skills that the evidence finds a link between better management private training sector cannot fill and incentivize and investment in the current workforce.167 the provision of such courses. Second, incentivize the creation and maintenance of central platforms Second, strengthen, expand, and co-finance where information about short term training technical short courses. While short VET courses course is stored, for access by workers and firms. are often viewed as a poor substitute for college Third, provide monitoring information on the or vocational education, they are a viable form of short course quality via the website. Fourth, adult learning for most of the workforce. Firms provide learning grants that people can use and workers do not have the flexibility in their throughout their lifetimes to upgrade skills. For business processes or personal lives for a worker example, Singapore’s SkillsFutureCredit aims to to disappear for several years in order to upskill. encourage skills development at different stages Instead, courses that teach narrowly defined skills in life by providing an opening credit of SGD500 in a short period are more realistic. For example, to all Singaporeans 25 years of age and older. This an older worker might enroll in a short course credit does not have an expiry date and can only to learn Excel so that she can better manage her be used for accredited skills courses.168 167 Saraf 2017. 168 Adapted from World Bank 2017. 114 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES Third, information for Adult-driven skills a range of skill development opportunities across upgrading. Learning across the work life requires a broad population for continuous learning will the worker to take control of her own skill involve both a larger set of actors and will change development process. As people age, they spend the role of the education and training sector. less time in formal skills acquisition processes. This transition process will require public sector However, the workforce is aging and, with better leadership, as well as incentives, to move the skills health care, will likely be able to have longer work development system toward the XXIst century. In lives. While the process of transition from school addition to students taking control of their own to higher education is well understood, planning skill development strategies: a career path that is intertwined by short course learning is much more difficult to map. First, bring employers into the skills development system. De facto, employers play a large role in To make these choices, adult-learners need skills development; they are the consumers of information about labor market trends, skills the labor force’s skills set and they are a source needed to meet those trends, and where to of skills development themselves.169 However, acquire the skills (and how to finance it). This there is limited interaction between employers will require both the creation and provision of and the education system, largely confined to the information. The MOLISA and GSO produce recruiting process.170 The enterprise sector can strong labor force data; these data can be play a bigger role in three ways: used to generate statistics that are relevant for career planning and in a format that is easily Provide skills development opportunities. understandable to workers. These data will also As noted, firms provide quite a bit of skill need to be supplemented by better information development however, given the skills gap that on short course (and longer) offerings. Private and training and education institutions are not public employment support services can guide filling, they need to do more. This must align workers to the use of these services to map out a with the firms’ profit-driven business. For life plan, in terms of the adult-learning they will example, boutique training for specific skill need to do to meet career goals. needs of enterprises,171 alleviating the firm cost of training,172 and subsidies for hard-to-employ Transition from Education/ Training workers so they may acquire job experience173 Services to a Skills Development System have been effectively used in other countries to Today’s skills needs cannot be met solely by the the benefit of enterprise and workers. education and training sector. Instead, to provide 169 Bodewig and Badiani-Magnusson (2014) report that more than half of workers have learned something new on the job over a three month period, rising to 100 percent of more skilled workers. 170 Bodewig and Badiani-Magnusson (2015) find that 83 percent of firms that have contact with education and training institutions do so for recruitments purposes. However, another 45 percent cite student work experience (internships and apprenticeships) and 38 percent interact for further training of employees. However, firms provide little guidance on the core-business of training and education institutes: only 9 percent engage on curriculum development. 171 For example, a program in China serves as a full service employment service for urban firms and rural workers. Firms request a specific number of workers with a defined skill set; the program identifies potential workers, provides the required training, and assists with relocation to the urban center where the firm is located. The public sector is engaged as the workers who are targeted are hard-to-serve populations due to their geographic dispersion and unique skill sets. For less challenging job-seeking populations, private search firms could play this role. World Bank 2011b. More generally, Jovenes programs across Latin America (and emerging in other countries) provide public financing to training institutes that have a signed MOU with an enterprise that will provide apprenticeships to their students. The program has been frequently evaluated, with positive results in terms of wages and formal sector employment (Ibarraran and Rosas 2008). 172 For example, Colombian Law 789 introduced a reimbursement of the training tax on firms that trained their own workers. Very few enterprises took up the rebate due to program design that incurred costs on the firm. 173 A program in Jordan gave “employment vouchers” to young women who had graduated from college, as a means to subsidize wages and benefits in firms that temporarily hired these new labor market entrants. The vouchers successfully opened on-the-job learning opportunities to the young women though they did not have long-term employment effects (Groh, McKenzie and Vishwanath 2012). 115 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T Guide the education and training institutions. Advocate for broader policies. In addition to The public sector can facilitate engaging service delivery, the enterprise sector can use employers and institutions in a common its platform to encourage complementary conversation and set of solutions. Such policies that will encourage skills development, dialogue needs to be structured, driven, and such greater transparency and information results-oriented. Australia’s Industrial Skills about skills providers, public support to Council plays this role, with impressive results. financial assistance to students, and social (Box 4.6). policies to allow for workers to take time off work for skills upgrading or to change jobs as per shifting skills demands. BOX 4.6: Australian Industry and Skills Council – Guiding the Education and Training Sector The Australian Industry and Skills Committee (AISC) in an example of formalized collaboration between industry and government. The AISC advises the Australian federal and state governments on matters related to vocational policies, ranging from review and development of training packages, implementation of national training policies, quality assurance of training packages and development and approval of accredited training (Figure B.4). In performing these functions, the AISC is advised by the Industry Reference Committees. Comprised of industry representatives and unions, 64 Industry Reference Committees (IRCs) advise the AISC on the development and review of training packages. Each industry finances participation of industry representative in IRCs. The role of IRCs is key as they provide insights from employers on skill needs and use this information in the process of developing and reviewing training packages. Membership in IRCs is through appointment by AISC based on public consultation or an open nomination process. Membership lasts for three years with the possibility to be re-appointed for only one more year. At least one meeting is expected to take place per year for each IRC. FIGURE B.4: Organizations gathering industry input to inform training programs in Australia Skills Service Industry Reference Australian Industry Organisations Committees and Skills Committee • Provide service to a range • Provide industry • Oversee review and of IRCs to ensure training engagement development of packages reflect skills mechanism for training training packages needs of industry package development • Advise on • Provide technical, • Gather intelligence implementation of operational, and for industry sectors national training secretariat services to to inform advice on policies enable IRCs to undertake training package • Quality assure training industry engagement development and packages and training package review Oversee development development and review • Oversee development and approval of of skills forecast accredited training Source: Adapted from World Bank, 2017. HRDF National Workforce Human Capital Development Blueprint 2018-2020 & 2021-2025. Report prepared by the World Bank for the Human Resource Development Fund. Service Skills Organizations (SSOs) support IRCs in the process of developing and reviewing training packages. An important characteristic of the six SSOs is that they are independent of both industry and the training sector and their main objectives is to facilitate industry engagement. The SSOs provide a range of activities, the most important being support to the IRCs to develop a four-year skills forecast based on industry analysis. The process is such that the AISC receives the skills forecast and uses it as an input for the development of a four-year National Schedule of training package development and review. Training package review and development is then undertaken by the AISC based on this schedule. Funding for the SSOs are provided by the federal Department of Education and Training for three-years subject to performance, with the option to be extended for two additional years. The selection of the SSOs follows a competitive grant process. SSOs are not restricted to only work with the IRCs and can undertake additional commercial activities. Source: Adapted from World Bank, 2017. HRDF National Workforce Human Capital Development Blueprint 2018-2020 & 2021-2025. Report prepared by the World Bank for the Human Resource Development Fund 116 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES Second, hand-over the institution-based parents, career counselors, and institutions have learning to VET and university institutions via the information that they need to make the right greater autonomy in the design and provision of decision. The public sector has the role to monitor their services. The current move toward higher education/VET institution results and share the education and VET autonomy is expected to information with users so they can make good improve the quality and relevance of education decisions. services to better respond to market needs. The autonomy in curriculum development and human Two types of information need to be collected, resources should allow both vocational education analyzed, systematized, and made public. First, and training colleges and universities to retro-fit outcome indicators on job placements, post- their course offerings and delivery mechanisms graduation salaries, and employer satisfaction to local and global needs. Financial autonomy for each field of study in each institution.174 This will also encourage quality enhancements as information can be collected via tracer studies institutions compete for students. Shifting from a and employer surveys, processed using simple supply-driven model, where historical financing statistical software packages, and shared through and human resources provided services using a communications materials and on-line portals. centrally determined curriculum, to full autonomy Second, general management information requires a different set of management skills than – number of students, faculty, courses, and Directors usually has. This highlights the need to other variables that paint a picture of the develop a cadre of University and VET institution skills development system - will allow systems Directors who can envision and drive the monitoring and provide information on how to transformation toward results-based institutions. improve it. However, none of this will benefit students if This information can also be used to encourage there is not an accessible and reliable information greater quality in the skills development sector. system that will give students and their parents The MOLISA and MOET will need to review the the tools to select among education and training information to ensure equality in the provision of options. services by users across the country. It will need to monitor if certain demographic groups are being Third, focus the role of the Ministry of Education left behind and may need public interventions (via and Training (MOET) and the Ministry of Labor, incentives) to close the gaps. But most importantly, Invalids, and Social Affairs (MOLISA) and their it can be used to transparently redirect resources department-level equivalents, on monitoring and to the most results-oriented institutions, further evaluation and results-based quality assurance. encouraging reform toward a market-responsive Vietnam is at a stage where it can, and should, training and education system. use results-based monitoring and financing to guide the transition of Vietnam’s post-secondary Design A National Skills Development education system toward higher-quality skills Strategy that are linked to labor markets and morph as the The changing nature of the Vietnam’s labor skills needed in jobs changes. Rather than micro- market and work force, as well as its current managing the service delivery process of the VET lagging skills profile, will require a much more and education institutions, energy and resources complex set of actors and goals than is currently should be dedicated to ensuring that students, envisioned. This points to the need to develop a 174 For example, Singapore monitors three outcome-based indicators, and ranks (and subsidizes) institutions based on these: number students entering the institution, number of students acquiring a job upon graduating from the institution, and employer perceptions of the institution 117 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T skills development strategy, which reaches beyond may allow schools to guide students on education a level of education or ministry, and instead pathways toward a career, universities and VET envisions the system from the perspective of the institutions to design courses for jobs that are citizen and what she will need to navigate a work in high demand, students to figure out what life that will shift throughout her lifetime. they would like their future work lives to look like, parents to guide their children toward an Policy and User-Friendly education pathway and world of work, workers Information for Good Decision- to upskill or change jobs according to emerging making careers and associated skills demands, and the Job opportunities in Vietnam are rapidly public sector to design education, training, and changing, and will change even faster as the labor policy. new megatrends affect the work place and the working population. It is impossible for students A Labor Market Information System (LMIS) and their parents who are mapping an education can provide a range of users with the jobs trajectory or job searchers who are looking market information for better decision-making. for better options to obtain good information Vietnam’s Labor Force Survey is a rich data about the kinds of jobs that are emerging, the trove and its annual yearbook provides valuable wages associated with them, and the skills and information on labor trends. But it is difficult experience needed to fill them.175 A lack of labor for those who are not labor market specialists market knowledge by jobseekers partly underlies to interpret the information in a way that would current employer frustrations. guide decisions. An LMIS can be the solution. Low-cost information-based interventions can An LMIS is information on the labor market that is lead to better education and work outcomes.176 presented in a consolidated, structured, and user- For example, middle school students exposed friendly way and is easily accessible to different to short information sessions about the earnings users. The objective of an LMIS is to enhance labor gains to completing secondary school have shown market efficiency by providing actors with relevant lower school dropout rates than those who did and timely information for decision-making. The not.177 Or a program that taught girls about the actors are students, parents, jobseekers, education higher earnings in traditionally “male” work – and training institutions, career advisory services, such as motorbike repair – had a higher incidence public employment services and employers. of females entering these fields of work and three Development of an LMIS requires three steps: times higher wages, as compared to girls who were data collection and processing, analysis and not informed of and encouraged to explore these presentation, and dissemination. The three core types of jobs.178 types of information are: For information-based interventions to be Job prospects. The objective is to provide clear successful, there must be information about and continuous feedback about the past, jobs trends. An effort to analyze and present current, and projected state of the labor market. information in targeted and user-friendly formats This would include disaggregated information 175 The poor knowledge about labor market opportunities is not limited to Vietnam or developing countries. Babcock et. al (2012) point to evidence from the United States that demonstrates that job seekers commonly pass up job opportunities due to inaccurate assessment of own skills and a misunderstanding about how markets will reward their skills and experience. 176 McGuigan, McNally and Wyness (2016) argues that these low-cost, simple interventions are more successful in environments with low information flows. 177 Jensen (2010) for Dominican Republic and Nguyen (2008) in Madagascar. 178 These results were derived from a program in Uganda (Campos et al 2016. A similar program is underway in Lao PDR, where training institutes that participate in the program must follow quotas to ensure that girls receive training in non-traditional areas, such as construction and automotive repair. The girls are also given a 6-month post-training wage subsidy (ADB 2013). 118 CHAPTER 4 - WORKERS & JOBS: CURRENT TRENDS AND EMERGING OPPORTUNITIES about the fastest growing occupations, wage task description. This would allow jobseekers trends in a particular occupation or region, to self-assess and decrease the inefficiency of and employment trends by gender, age, wrongly-skilled job applicants or unrealistic and level of education, for example. The job expectations, as discussed above. The information would be more detailed and user- underlying data would come from a range of oriented than the current GSO and MOLISA sources: outreach by Employment Promotion publications.179 Users – jobseekers, students, Centers, on-line job boards such as JobStreet. parents, career counselors – would access this com or Indeed.com, and job vacancy apps. information to identify the job opportunities Financial incentives may be necessary for in different careers, locations and industries. public or private actors to acquire vacancy The underlying data are a range of regular and information in for low-skilled jobs (which specialized surveys that the GSO and other are still the majority of Vietnam’s jobs) or in organizations field. remote or less organized sectors. Skills. The objective is to provide information Once students, parents, and workers have the on the skills that are associated with different labor market information in hand, simple careers. This would include a description of a tools can help them to use it. Programs to help career; typical duties; the range of knowledge, people access different labor markets than those technical, IT, and behavioral skills that are in their networks are some of the few active used in the career; and level of education. labor market policies that have been found to be Ideally, information about the education or effective.180 This may mean providing information training institutes that successfully prepare or facilitating access to sectors of employment, learners for the career would be included, as types of jobs, or other locations where the job well as information on the careers, earnings, seeker may not naturally search for jobs. Goal and satisfaction of program graduates. This setting, and supports to translate goals to behavior, information would allow students to plan a is emerging as a low-cost means to prepare for a skills development path and job seekers to broader range of job options.181 Some schools assess their fit for different careers or to upskill guide students through “life plans,” where students to dream careers. The underlying data are both from a young age identify the job that they want as regular surveys as well as an adaptation of the adults and the associated implementation map182 US O*Net database, which lists the skills used – the schooling, family decisions (marriage, family in all occupations. This information is not formation), migration – to get there. While the systematically generated for Vietnam. effect of early life planning on later labor force outcomes has not been empirically established, a Job Vacancies. The objective is to provide strong psychology literature suggest that it may be information in a single site on job openings effective. and job seekers across a wide-spectrum of the economy. The information on job vacancies Vietnam’s Employment Support Centers (ESCs) would include not only basic information can strengthen their career planning services by about the job (wages, hours worked, location, providing “life planning”, as well. In fact, such etc.) but also a skills profile for the job and an intervention can have more immediate effects 179 GSO 2016, MOLISA Bulletins. 180 McKenzie 2017. 181 The power of goal setting to orient people toward long-term desired outcomes has been proven across a range of behaviors including weight loss (Stadler et al 2010), savings (Ashraf, Dean and Wesley 2010.), school performance and attendance (Duckworth et al, 2013), and time management (Oettinger et al, 2015). 182 Babcock et al 2012, van Hooft et al 2005, Locke and Latham 2006. 119 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T on adult job search than on youth planning.183 and prepare for the future. Some important This would require ESCs to provide deeper career reforms are underway – the incorporation of a planning and guidance services in addition to broader range of skills into the school curriculum the short-term job matches that are the current and operational and financial autonomy of higher focus. The ESCs would ideally focus on harder- education and training institutes. Others can be to-employ jobseekers, namely urban informal scaled up and modernized, such as improving the workers, who live in a dynamic labor market but preventative health system so that people can work are not investing to move up the jobs ladder;184 later into life, using existing survey data to expand women who tend to have weaker labor market on and disseminate labor market information so links than men do and greater constraint to work that students can better prepare for their work (due to home duties) thus limiting potential job lives and jobseekers can better design their job opportunities; ethnic minorities who are living in search process, and tightening and upgrading remote areas or are not well integrated into urban VET services for adult upskilling. But others are life and thus face fewer job opportunities; older starting from scratch: the creations of a long-term jobseekers who may face age-discrimination; and care system to alleviate women’s eldercare burden, youth who have little labor market experience or systematic engagement of employers in the skills- networks. One significant challenge is for ESCs development system, and transition toward a to reinvent its image to overcome some of the skill-development system. But even these new negative stereotypes that these jobseekers have. reforms have seeds in Vietnam. The challenge is to prioritize them, grow them, and implement them In closing, Vietnam’s labor force is under- to the benefit of Vietnam’s workers, with spillovers performing and is at risk of falling even further to firms and society at-large. behind if it does not address today’s shortcomings 183 Nguyen 2017. 184 Nguyen 2017. 120 CHAPTER 5 - THE PATHWAY TO FUTURE JOBS Given the nature of Vietnam’s jobs today and in “good” jobs by 2040. This transformation can the opportunities presented by a changing local be faster if Vietnam abandons the status quo for and global landscape, what initiatives can lead deeper reforms. Family farming and household to better jobs in Vietnam? Vietnam’s people are enterprises jobs will continue to decline – though fully employed, the economy is still booming by still be the source of more than half the jobs in global standards, and the population is the most 2040. The rate of decline will be largely driven by prosperous that it has ever been. But success is the degree to which Vietnam integrates its own tenuous in the face of automation, shifting trade markets and engages in emerging regional and and consumption patterns, an aging population, global markets. and a labor force that is not job-ready. And Vietnam’s ambitions for middle income status by Rural jobs will continue to become more 2035 will require more than maintaining the status diverse. Rural jobs will continue to diversify into quo with marginal adjustments; it will require manufacturing and services. Limited geographic some radical changes. A move toward better jobs, mobility has led to a diversification in the jobs whether through the creation of new well-paid, portfolio of rural households such that wage good work condition and high productivity jobs earnings, not agricultural earnings, are the main or upgrading current jobs, calls for more than just source of income for rural households (with the economic growth and a conducive investment exception of ethnic minorities). The relaxation climate. of the ha khou may speed up urbanization, but existing food-chains, significant agricultural- What Will Vietnam’s Future Jobs product exports, and proactivity by rural Look Like? municipalities are the base for significant jobs Future jobs will look a lot like today’s jobs. upgrading in rural zones. The jobs structure is changing and is expected to continue doing so if Vietnam keeps up with Jobs will be more linked to local, regional, and the evolving global economy and continues global value chains. Vietnam’s export sector up-skilling its workers. Structural transformation, is directly responsible for 10 million jobs, and the role of FDI, and the growth of the domestic indirectly responsible for millions more that private section are responsible for a net increase provide inputs to the exported goods. Vietnam’s in jobs that are (largely) accompanied by social and the region’s growing consumer class and benefits and higher wages than traditional family urbanization, as well as the emergence of regional farms or household enterprises. However, “good” value chains and Vietnam’s reputation as a solid wage jobs only comprise one in four jobs (12 link of global value chains, is expected to increase million workers). If we assume the same rate of the number of jobs in value-chains. This may be transformation that has been observed in the through more efficient linkage of current jobs period 2008-2015, about 2 in 4 (43 percent) will be to value chains – such as is occurring for family 123 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T farms that sell to retailers – or the creation of new sectors. However, there are excluded youth who jobs in assembly, logistics or other services. As circulate in low-quality wage-employment, which Vietnam’s workforce becomes more sophisticated, may expand in the future. Women may benefit this also opens the potential to move into more from the jobs growth due to new opportunities in lucrative value chains. higher quality jobs; and their education levels and the emerging care-economy jobs will push them Automation will slowly begin to change the tasks along. However, an aging population may limit in some jobs and (even more slowly) displace their choices even more than current household other jobs. Vietnam’s jobs likely will benefit from duties do, pushing them into lower paying yet technology for a period. Automation of agriculture more secure jobs or, in the worst case, out of the is starting to displace labor, thereby freeing up labor market. Aging workers may also struggle workers to engage in higher value-added services as jobs become more skills-biased and there is or manufacturing. Computers are allowing greater job turnover, perhaps excluding them from accountants to better manage firm finances. More new jobs. Ethnic minorities risk not engaging advanced sewing machines permit detailing for in emerging new jobs. Their rural remoteness, higher value-added garments. Thus, for a time, limited engagement in service and manufacturing technology may change the task content of jobs jobs in their home villages, and weak connections and may displace low-skilled jobs, thereby freeing with emerging jobs centers threatens to exclude up time for higher value-added activities. As the them even more. skill level of new labor force entrants continues to shift the workforce to a higher level of skills, Job search will become more frequent though the disruption will be delayed. However, in a less difficult. With the emergence of new jobs in longer future, as labor costs increase while cost domestic SMEs and foreign firms, new jobs will of technology decreases, machines could start open in jobs markets that are easier to access as replacing jobs. This may be partially offset by a compared to today’s jobs, which require assets falling working age population. (family farming) or start-up capital (household enterprises). Job losses may also pick-up as more Job quality will improve with the movement jobs are in the SME sectors and larger firms – toward work in bigger firms, with emerging low- the latter being a primary source of job loss. quality jobs. The movement toward employment This points to more job turnover – and potential in larger firms will increase access to jobs-related inefficiencies as people spend time not working or social insurance and more secure jobs (less move into the wrong jobs – though easier to access cyclical). However, some of the benefits derived markets and more information about job openings from household farm- and non-farm enterprises due to technology. will be lost: time flexibility, the joy of being one’s own manager. The number of wage-jobs that are But Vietnam can do even better with some not covered by social insurance will also increase proactivity by government, firms, and workers to as the private domestic sector – which currently seize opportunities and minimize downside risk of only provides social insurance to 70 percent of its these future trends. workers – continues its rapid expansion. How to Make Future Jobs Better and Future jobs will be more inclusive for some, More Inclusive? more of a challenge for others. Youth are already benefitting from the shifting composition of This report proposes eight policy areas to unleash jobs. Though they spend time looking for jobs, the potential for better and more inclusive jobs as reflected in high unemployment rates, they in Vietnam, classified into three groups. These are disproportionately moving into wage-jobs, proposals take as given the strategies to attract a especially in the private domestic and foreign diversified FDI portfolio as well as to develop the 124 C H A P T E R 5 - T H E PAT H WAY T O F U T U R E J O B S private sector, agriculture sector, and skills sectors. them into the right jobs (Figure 5.1). This section Instead, they identify those actions within sector summarizes the policies; details are provided in strategies that are particularly important for jobs, the preceding chapters. as well as strategies that may not be important for overall growth, but will have a big impact on Reform Area I: Creating More Good the quality, quantity, or inclusiveness of jobs. The Jobs in the Modern Sector first three policy areas call for enhancements within the modern economy by leveraging The best jobs, defined by higher labor productivity under-developed domestic firms and moving and wages and social benefits, are through into more sophisticated value chains. The next contract wage employment. They are also inclusive two policy areas focus on enhancing the quality of women and youth. These are also the fastest of jobs in the traditional sectors by initiatives to growing types of jobs in Vietnam today and, if increase value added and job quality and generate Vietnam prepares for the opportunities brought linkages between economic segments to share the through the mega-trends, they have potential to good jobs more broadly. The last three proposed grow even more. Thus, the policy challenge is to strategies are intended to prepare workers and get foster the creation and growth of enterprises that FIGURE 5.1: Policy for Better and More Inclusive Jobs Creating More Good Jobs in the Modern Sector • Lower the barriers to growth of domestic small and medium enterprises • Develop knowledge-intensive sectors • Modernize the agro-food industry Enhancing the Quality of Existing Jobs JOBS in the Traditional Sector • Diversify into high-value crops & local value chains • Link household enterprises to SMEs Connecting Qualified Workers to the Right Jobs • Build worker skills for today’s and tomorrow’s jobs • Provide information for job search • Provide auxiliary services to open job opportunities 125 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T are conducive to job creation, create high value (i) Level the playing field for the private sector jobs, and position Vietnam for even more as the by loosening government controls over mega-trends are realized. Three policies areas are factors of production (land, domestic input proposed. markets, capital); reconsidering the virtual monopoly held by SOEs in certain sectors; First, lower the barriers to growth of domestic and strengthening the overall business small and medium enterprises. Although SOEs environment. and MNC firms are large (in terms of number of workers), domestic SMEs are the primary source (ii) Further facilitate firms’ market entry and exit of contracted employment. Unlike SOEs and FDI- by further simplifying business registration owned firms, they expand for several years after (Vietnam’s process is still more tedious than birth. While they are less productive and have the regional average and than most other lower quality jobs (in terms of wages and social lower-middle income countries) and making benefits) than SOEs or MNCs, they are more bankruptcy proceedings faster and less likely to share their gains with their workers by complex (thereby leaving the most productive using productivity improvements to expand their firms to continue, thrive, and potentially workforce and sharing a greater portion of profits grow). with workers. Women have disproportionately benefitted from employment in SMEs. (iii) Engineer links between local SMEs and MNCs by providing SMEs with information on The shift toward greater globalization, auto­ industry standards and how to meet them, mation, and the rising consumer class can create the quality of goods and timeliness of delivery a greater demand for domestically-produced from prospective suppliers, credit options, goods and services. The growth in FDI will and a supplier’s database with information continue to play a significant role, particularly as about secondary markets for the specialized Vietnam moves toward a Next Generation FDI goods that the MNC is seeking to purchase; Strategic Vision (Box 5.1). Additional policies providing systematic matchmaking services can be taken to enhance SMEs to meet those new between buyers and sellers; and helping SMEs opportunities: to upgrade their capacity. BOX 5.1: Next Generation FDI Strategy Vietnam’s FDI strategy has served it well since the early 2000s. Attracted by low labor and energy costs and generous tax incentives, FDI flows reaching more than US$12 billion in the year 2016, employing more than two million workers, primarily in low-value manufacturing across a range of sectors. Global trends may lead to a decline in labor-intensive FDI globally. With automation, reshoring, MNC supply chain de-risking, and a host of other factors, FDI will likely begin to seek out more knowledge-intensive supply-chain partners. This shift in global FDI strategy can also move Vietnam in a new direction in terms of its relationship with FDI. As Vietnam’s workforce becomes more educated, its consumer class expands, and its domestic sector develops, it can ask more from FDI. Namely, Vietnam should aim to attract FDI that • Pays more through jobs that are higher valued-added per worker • Increases local skills development, technology transfer, and R&D • More efficiently uses resources (land, energy, raw materials) • Creates opportunities for local entrepreneurs and investors as part of GVCs and not to displace local investors and SMEs • Increases the competitiveness of all business in Vietnam But Vietnam is a diverse country, and the reach of FDI, as well conditions to “move up” are regionally specific. In this context, the new Vision would (i) continue to attract FDI in basic agriculture, manufacturing, and services in less developed provinces, and (ii) attract higher-value manufacturing and services in Hanoi, HCMC, and other leading provinces. Source: T&C PPT. 126 C H A P T E R 5 - T H E PAT H WAY T O F U T U R E J O B S Second, encourage enterprises to move into and caps would facilitate greater regional knowledge-intensive service exports in regional integration for Vietnam within ASEAN. and global value chains. Vietnam’s unskilled labor has gotten it far through low-skilled assembly in (v) Build the human capital needed for a growing number of industries. But the slowing knowledge-intensive service exports by labor force expansion, growing consumer class relaxing emigration regulations and allow that will spend more on services, growing foreign professionals in the service industries automation in the workplace, and solid education to move to Vietnam; participating in base of its youngest citizens suggests that Vietnam regional markets for Vietnamese firms to is positioned to expand its provision of services learn from foreign leading companies - this linked to GVCs. Other regional competitors show would require Vietnamese companies to that Vietnam’s GVC service exports should be at explicitly align their products and services least double of its current value of 7 percent of with regional value chains and to build into GDP. Vietnam also needs to upgrade its service their own trade agreements opportunities for exports, complementing current travel and Vietnamese professionals to receive on-the- transport with a growth in commercial services. job training –and developing Vietnamese Additionally, Vietnam may consider moving into service professionals who can compete to the value chains where the manufacturing process highest international standards. is high skilled. To develop its export-oriented services, Vietnam would need to: Third, facilitate the development of the agro- food system. Domestic food chains are already (i) Streamlining the logistics regulator y an important source of employment in rural e nv ironme nt and up g rade domestic areas, being the largest share of average income infrastructure to improve connectivity. in rural households. However, these chains are not as well organized or as lucrative as they could (ii) Support links between exporting firms and be, thus constraining their potential to generate domestic input-supplying firms through the more and higher quality jobs outside of Vietnam’s creation and sharing of information on urban centers. Given the opportunities presented industry standards and practice and through by a rising Asian consumer class, urbanization, publicly provided matching services to bring emerging regional value chains, and automation, together potential foreign and domestic food chains could be a lucrative source of new firms. jobs. Efforts to support this direction include: (iii) Foster R&D and innovation. This will require (i) Encourage investment in agro-food processing, legislation or incentives to attract private food logistics, and modern retail by reducing investment or public subsidies to bolster the cost of domestic enterprises in the Vietnam’s meager R&D infrastructure and agro-food system, leveling the playing connect local facilities with national or field between SOEs and private agro-food international partners who have knowledge processors, entering further trade agreements of local and global markets. The Law on to increase the access of Vietnamese products High Technologies also needs to be revised to to international markets, implementing agro- encourage R&D in a much broader range of food incubation programs for emerging and sectors. start-up SMEs, and upgrading skills for the service jobs that are particular to the agro- (iv) Lift formal restrictions on service trade. The food system. current regulatory framework puts Vietnam at a disadvantage in service exports. For (ii) Encourage financing to upgrade food market example, lifting foreign equity limitations infrastructure at the local level by upgrading 127 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T the sanitation, logistics, hygiene standards, job sectors cannot be ignored. Two policy areas and facilities of wholesale and urban wet are proposed to better integrate family farms and markets, and encouraging credit agencies household enterprises into the modern enterprise to provide preferential lending rates and sector. repayment schemes to attract public-private investments. Encourage the agricultural sector to diversify into high-value crops and local value chains. (iii) Strengthen public and private sector capacity Since farmers keep the profits from their efforts, to ensure safe food for both domestic and enhancing agricultural productivity will improve international markets by strengthening the quality of jobs in the agriculture sector, which public control measures for food safety; still account for more than half of the jobs in the requiring private companies to adopt economy. This may be through mechanization or HACCP (Hazard Analysis and Critical better farm practices, but also by diversifying to Control Points), traceability, and other food meet the demands of the rising Vietnamese (and system management systems; implementing regional) consumer class as well as urbanization. regulations and providing technical support Wealthier and more urban consumers create to ensure safe food practices across the a demand for a more varied food basket as well spectrum of small to large food processing, as for processed food, which may add value handling, and distribution enterprises, and to certain crops. The movement out of rice developing Vietnamese brands and trade could particularly benefit rural female-headed promotion. households, which are disproportionately engaged in rice production as well as ethnic minorities who (iv) Provide incentives to encourage food heavily rely on agriculture as their main income industries to invest in cities close to the source. In addition to promoting growth in agricultural production base and areas with primary agriculture, attention should be given to: underemployment to foster the creation of inclusive jobs. Such investments are (i) Adopt policies and programs to accelerate shifts particularly needed in the upland provinces in agricultural land use, especially from mono- of north Vietnam and the Central Highlands crop rice to mixed farming or high value crop where they would create employment production by further loosening restrictions opportunities for Vietnam’s ethnic minorities. on the use of rice-land, improving irrigation services, developing more flexible irrigation Reform Area II: Enhancing the infrastructure suited to growing various quality of jobs in the traditional crops, and supporting farmers in acquiring sectors the new skills needed to cultivate high-value crops. Although structural transformation continues to modernize Vietnam’s economy, Vietnam has a (ii) Enable (small) farms to achieve economies large stock of jobs in low-value added activities, of scale and, thus, greater productivity namely family farming (and related primary and higher earnings by encouraging the production) and household enterprises. Today growth of Vietnam’s nascent land rental they comprise more than 60 percent of all jobs and, market, consolidating titling to reduce land if they continue to contract at the rates observed in fragmentation, facilitating joint production the past 8 years, they will still comprise more than by small and medium-sized producers and half of all jobs by 2040. They are overwhelmingly strengthen cooperatives, and using regulatory the source of employment for ethnic minorities, and market-based measures to increase the older workers, and the less educated, thereby being adoption of sustainable agricultural practices. intricately linked to poverty reduction. Thus, these 128 C H A P T E R 5 - T H E PAT H WAY T O F U T U R E J O B S (iii) Provide family farmers with professional make the necessary investments or upgrading development services by developing a broad to do business with SMEs. range of private technical, advisory, and financial services for Vietnamese agriculture, (ii) Further ease the process involved in registering and developing dedicated programs to a business and communicate more clearly support agro-entrepreneurship, particularly the benefits of registering by launching for women who currently benefit from fewer market and community-based information extension services than men. campaigns and registration platforms and providing registration services to enhance (iv) Foster stronger and more consistent links managerial competence through one-stop- between primary producers and the agro-food shops located in commercial centers where system by strengthening farmer cooperatives household enterprises operate. and expanding their provision of a broader range of commercial and marketing services; (iii) Provide extension services to promising providing public financing and technical household enterprises. Similar to extension assistance to encourage the formation of services for farmers, household enterprise agricultural clusters; strengthening animal owners would benefit from learning new health and pest surveillance services and business skills, technologies, and business enforcing regulations governing the use processes to enhance the productivity of their of agro-chemicals and antibiotics; and enterprises. These would be most effective integrating primary producers into the food if provided on-site, such that the enterprise safety program. itself is the classroom for learning to solve practical challenges. Second, facilitate business linkages between household enterprises and SMEs. Although (iv) Encourage development and adoption of household enterprises are the source of 10 technology to link household enterprises with million jobs –and another 3 million informal the larger economy. wage employees – they are a silent and generally forgotten source of jobs. While household Reform Area III: Connecting enterprise owners largely prefer to continue Qualified Workers to the Right Jobs running their small firms, they would like to access wider markets to increase earnings and decrease Workers do not have the skills for today’s income risk. This sector also is a lucrative source or tomorrow’s jobs and a myriad of factors of income for rural households, though ethnic further limit their acquisition of and success in minorities have very little success in running their those jobs. While Vietnam’s youth are globally own businesses. Given how isolated household recognized for secondary school test scores that enterprises are from SME production chains, the rival those of European students, most of Vietnam’s linkages are not naturally occurring. Policy could labor force has, at best, secondary school and help: limited skills. The skills shortages are noted today and will be exacerbated as mega-trends begin to (i) Facilitate information flows to household affect the jobs pictures. This may be due to poor enterprises by public initiatives that provide information about job openings, poor information household enterprises with information on about worker quality, time constraints that limit industry standards and how to meet them job options, income constraints that prevent in key sectors that serve local markets; the moving to more appropriate jobs, or a range of quality and timeliness of delivery required by other issues. Three policy areas are presented. SMEs; and credit options to enable them to 129 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T First, build worker skills for today’s and Second, get the right workers into the right jobs. tomorrow’s jobs through radical reforms to the As workforce growth slows down and firms need education and training systems. Today’s youth to be more competitive in the globalizing world, have a strong foundational set of skills, but the it becomes more important that the workers with workforce at large has low levels of education and the right skills are in the right jobs. But workers missing skills. The skills gap not only constrains have little information about how to prepare for output in today’s jobs, but it also threatens new the job market and to find the right jobs for their jobs as investors assess whether or not to invest in interests and skills. The mechanisms, on both higher value-added production processes (through the worker and the employer side are insufficient automation) or industry (through GVCs). Thus, and ineffective. Youth, older, and rural jobseeker Vietnam needs a two-pronged strategy: upgrade are at a particular disadvantage. To address these the skills of the current labor force to enhance shortcomings so that the labor market moves productivity in today’s jobs and prepare workers more fluidly, for tomorrow’s jobs by: (i) Create a Labor Market Information System (i) Facilitate development of a broader set of skills by collecting special surveys to identify by experimenting with and evaluating models labor demand, and produce and disseminate that teach socio-behavioral skills; establishing user-oriented, regionally-specific, gender- a system to evaluate student acquisition disaggregated information; of a broader range of skills; and providing incentives for work-place experience. Give (ii) Design an integrated job search strategy that special attention to expansion of secondary builds on private initiatives, directing public curriculum to include socio-behavioral skill resources to incentivizing private provision and digital literacy; and extension services for of services to hard-to-employ populations managers. (older workers, women, ethnic minorities, migrants) (ii) Develop learning modalities for a lifetime of learning by recognizing and giving incentives Third, provide auxiliary services to facilitate to expand on-the-job training; strengthen, labor force participation and labor mobility. expand, and co-finance short course training; Even if people want to work, work in different and curate information for adult-driven jobs, or enhance skills, life may get in the way. The training. increasing dependency ratio due to aging may particularly affect women’s opportunities to work (iii) Transition from an education/training service or will result in working in lower quality jobs. The toward a skills development system by bringing costs of labor mobility may trap workers in jobs employers into the process, implementing that they are not well suited for. And workers may the higher education and training autonomy not have the time or financial resources to take plans, shifting the public sector role to that time away from work to learn new skills. For the of oversight (monitoring and evaluation) and workforce to be agile and to stay ahead of changes financial incentives that reward outcomes. that will be brought on from rapidly shifting jobs resulting from globalization and changing (iv) Develop a National Skills Development consumer trends, a range of non-labor related Strategy that is driven by labor market skills supports will be important: demands, and designed to including a greater emphasis on modular learning, short courses (i) Develop a comprehensive long-term care to agilely respond to new labor market system to assist in independent living well demands, and public-enterprise partnerships into the older years in the provision of services. 130 C H A P T E R 5 - T H E PAT H WAY T O F U T U R E J O B S (ii) Provide services and incentives to encourage foreign firms and enhance productivity gains in people to work longer by modifying the more traditional family farming and household health system to provide more primary care enterprises. It is also expected to scoop up those services and strengthening the quality of potentially left behind – young people entering the health care workforce, and providing the labor force (who, in fact, tend toward these incentives to encourage people to stay kinds of jobs), women (who engage deeply in engaged in the economy through providing the FDI sector), and rural households (who are job search services tailored to older workers, increasingly diversifying into non-farm jobs and giving vouchers to employers who hire older who would benefit from aid to diversify crops) – workers, creating retraining schemes targeted with supplemental supports to ease the transition, to those whose education ended long ago, particularly for the left behind (older workers, and increasing the retirement age, as has been ethnic minorities). done in most modern (and aging) countries. The trade-offs emerge more clearly in the policy (iii) Facilitate labor mobility and skills upgrading decisions. Trade-offs can be considered among by expanding unemployment insurance, different aspects of the jobs puzzle providing learning grants to adult learners, • By timeline. Perhaps the biggest choice is disseminating information about the whether to focus on improving jobs today or relaxation of the ho khau law, and aligning to focus on jobs for the future. Today’s jobs severance pay laws with global norms. would require upskilling a broad labor force who are largely out of school, supporting Trade-offs and Institutional productivity enhancements in traditional Considerations household enterprises and family farms, and seeking FDI in low-skilled assembly jobs. The exact nature of jobs policies takes many Future jobs will require XXIst century skills, forms. While the government plays the lead (or moving toward services and up value chains, only) role in some policy areas, there may be a preparing for automation, and forging new need for the government to do more. This will be trade partnerships. However, by strengthening the case in areas such as simplifying procedures to today’s jobs, tomorrow’s jobs and workers will register a business, relaxing restrictions on land be better able to take on the new challenge. For use, or expanding the unemployment insurance example, a more professional and productive system. In others, areas, the government will household enterprise sector will be ready to need to shift its role to setting and enforcing integrate into future domestic value chains. “rules of the game” and letting market forces This is not to suggest abandoning the future play a stronger role, such as reviewing the role of jobs market, but instead to find a balance SOEs, re-branding Vietnam’s product offerings, between investments in today’s and tomorrow’s and turning over the design and provision of skills jobs. development services to education and training institutes. And in yet others, the state may need • By size of the jobs market. By definition, to retreat to functions more typical of a mature higher productivity should occur by reducing market economy. the number of workers. A good job from the firm perspective is not necessarily so from the The overall reform direction points to better jobs worker’s point of view, who may lose her job. for (almost) all. The higher-level strategy is a win However, the current experience in Vietnam for all – greater engagement into local, regional, shows that productivity enhancements, and global value chains and better integrating the particularly in domestic firms, are crowding sectors of Vietnam’s economy will both expand in jobs, rather than forcing a choice between the quantity of jobs in better-paid domestic and productivity and jobs. The data suggest that 131 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T this may not be the case once firms reach the young through a stronger education system higher levels of productivity, but in the short or to educate older workers through short run, both sides of the market benefit. VET courses and adult learning? Should a priority be given to teaching ethnic minorities • By sector. With value chains, there will need Vietnamese language – so they have access to a to be support and generate linkages between world of learning and work – or focus on XXIst sectors – where the agriculture sector become century skills for the high achievers integrating more tightly tied to manufacturing and into modern firms? Should preference be given services in domestic and international value to guiding women on a greater range of career chains. Thus, choosing between sectors would choices or improving job-search tools for the be a losing strategy: balancing support to all population at-large? The answers are not clear, three is more jobs friendly and economically but a range of actors can help. First, let the justified. private sector do what it can do, saving public resources for supervision and to fill holes • By firm ownership. The preferential conditions created by market failures. For example, long- for access to land, credit, electricity, and other term care services for the elderly and higher inputs that have been enjoyed by the SOE and education and training institution autonomy FDI enterprises may have been necessary to can be handled by the private sector. Second, attract investment to Vietnam, particularly firms can be incentivized to play a role that when the domestic sector was too immature to may have been costly to government, such as efficiently utilize these inputs. But the domestic vouchers for hiring older workers rather than sector is strong, indeed, being the main source public money spent to retrain them. Third, of contract wage labor in Vietnam and creating some less expensive public action – provision jobs more rapidly than the other sectors. of information, small nudges through financial Thus, it may be time to reconsider the current or other incentives – can be more cost-effective preferential treatment by leveling the playing than government programs. field. Perhaps the biggest challenge is to define the • By region. The sectoral integration also requires exact actions that need to be taken and to turn a choice between urban and rural. Though these priority reform areas into reality. The trade-offs start to emerge more clearly: to current jobs strategy - that better jobs will emerge encourage investment in secondary cities for from solid economic and sectoral development the manufacturing and services associated strategies – has had success. This report argues that with agro-value chains or to invest in transport greater gains are possible through a deliberate jobs and logistics so these processes can be done strategy that focuses on our eight policy reform more efficiently in urban areas, as is largely areas. The report only proposed reform areas, the structure today. This report argues for the not specific reforms. To achieve the strategies former – to invest in secondary cities – since proposed in this report, it will be necessary to (i) more labor will be available with automation undertake a detailed analysis of existing legislation of agriculture, since production capacity is and practices within each policy area to identify increasing in these zones as rural household successes, gaps, and implementation failures, (ii) are already moving into off-farm jobs, and for craft new legislation and new processes, together equity reasons with a system to monitor implementation and success, and (iii) intense political debate and • By demographic group. The policy trade-offs negotiation to implement the specific policy are perhaps the starkest when it comes to who reforms. will receive the preferential policy treatment. Should public resources be spent to educate 132 C H A P T E R 5 - T H E PAT H WAY T O F U T U R E J O B S This process will only be successful if the jobs In closing, Vietnam’s jobs future is bright. reform agenda is led by a strong champion It can continue its current path and reap jobs within government. Unlike sector-specific rewards from the current system, but this will reforms, a successful jobs agenda requires the diminish as global trends erode some of Vietnam’s engagement of a wide range of government and comparative advantage and certain groups remain non-governmental actors. The leadership for left behind. It can reform on the margin in an this agenda needs to operate above the sectoral effort to keep up with changing global trends, ministerial level, in the form of a supra-ministerial though this will be difficult as the global economy coordinating. It would champion the issue becomes increasingly crowded by new entrants. across government and across society; lead the Or Vietnam can make some big investments now development of a shared vision for better jobs, – in its domestic firms, its labor force, regional together with quantifiable targets for future jobs and global trade networks, and even in integrating and monitoring progress toward them; engage its own economy – to leap forward to higher and hold accountable a range of government and economic status and better jobs for all its citizens private sector actors; and lead the whole process regardless of age, gender, or ethnicity. toward a shared future jobs vision. 133 V I E T N A M ’ S F U T U R E J O B S : L E V E R A G I N G M E G A - T R E N D S F O R G R E AT E R P R O S P E R I T Y – M A I N R E P O R T SUMMARY OF POLICY DIRECTIONS Policy Selected Policy Actions Long-term goal Reform (by 2035) areas Short-term Medium-term (within the current five-year plan) (in future five-year plans) Lower the Put together a task force to develop an Investments in logistics, finance, Job growth in barriers to action plan to level the playing field for marketing, and other professional domestic SMEs growth of private domestic firms vis-à-vis SOEs services to support manufacturing exceeds 5 percent per domestic and foreign firms. The plan should be expansion. decade, underpinned small and designed to build the political will to by strong links Establish structures to enable medium implement the necessary reforms to between a dynamic effective dialogue between large enterprises. make this happen. private sector and public sector firms and SMEs within MNCs. Give relevant information on quality specific sectors to link SMEs with Creating More Good Jobs in the Modern Sector standards to local suppliers with the larger firms, especially MNCs or potential to provide services or goods exporters. to MNCs. Also, expand the accreditation system on quality standards into key sectors with the potential to expand exports. Encouraging Streamline the regulatory environment Broaden the Law on High More and higher enterprises for logistics and upgrade domestic Technologies to encompass a value-added jobs in to move into infrastructure to foster the creation of broader range of knowledge- the exports sector knowledge- logistics services companies. intensive, exportable services. through doubling intensive services as a share Support linkages between exporting Lift all remaining formal restrictions segments in of total exports and firms and firms producing domestic on service trades such as foreign regional and shifting toward inputs. equity limitations and caps. global value commercial services chains export industries. Facilitating Upgrade food market infrastructure Provide incentives for the food Better paid and safer the (such as wholesale and urban wet industry to encourage them to invest jobs in agro-food development markets) through public or PPP in provincial cities that are closer to processing. of the agro- investments. the agricultural production base and food system areas with underemployment. Strengthen public food safety measures and support the adoption by private Support labeling, certifying, and companies of HAACP, traceability, other control systems that will make and other food system management it possible to rebrand Vietnamese processes. agriculture as a sustainable source of global and regional supply. Encouraging Adopt policies and programs to Support the development of a broad More well-paid the accelerate shifts in agricultural land use, range of private technical, advisory, and safer jobs in in Improving the Quality of Existing Jobs in the agricultural especially from mono-crop rice to mixed financial, and other demand-led primary agriculture sector to farming or high-value crop production. services for Vietnamese agriculture, and less seasonal diversify into including agro-entrepreneurship. variability in these job Strengthen existing cooperatives to high value- opportunities. realize economies of scale among small Support the professionalization added crops Traditional Sectors and medium-sized farms. of farmer cooperatives and their More entrepreneurial provision of a broader range of youths staying in commercial services. agriculture. Facilitating Provide SMEs with information on Open one-stop (virtual) shops Household business industry standards, quality standards, where household enterprises can enterprises that links and the importance of timely delivery as go for registration, information, and buy from and sell between well as credit options. technical assistance. to domestic SMEs, household thereby increasing Introduce market-based and Provide extension services to enterprises profits and reducing community-based information the most promising household and SMEs risk. campaigns and registration platforms. enterprises. Encourage development and adoption of technology to link household enterprises with the larger economy. 134 C H A P T E R 5 - T H E PAT H WAY T O F U T U R E J O B S Policy Selected Policy Actions Long-term goal Reform (by 2035) areas Short-term Medium-term (within the current five-year plan) (in future five-year plans) Building Develop a plan with financial incentives Define a new role for MOET and A demand-driven, worker to encourage the private sector to MOLISA in overseeing M&E and flexible, market-based skills for provide, guide, and advocate for a more providing financial incentives to skills development today’s and appropriate skills development sector. the private sector to encourage the system. tomorrow’s delivery of demand-driven education Integrate a broader range of skills into jobs through and training services. the primary, secondary, and tertiary radical Connecting Qualified Workers to the Right Jobs curricula. Develop a system of continuous reforms learning through demand-driven to the short courses and skills upgrading education for adults. and training systems. Providing the Design, produce, and disseminate labor Design and implement a Labor Comprehensive and information market information tailored to different Market Information System (LMIS) widely accessible needed to users. for systematic data analysis and LMIS. place the managing dissemination platforms. Assess the current job search system, A private sector- right workers including the effectiveness of the Design a job search assistance driven job search into the right Employment Support Centers. strategy that includes private sector system that is widely jobs services supplemented by public accessible, with Employment Support Centers with public sector support an expanded remit to serve the targeted to excluded needs of vulnerable populations. groups. 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Vietnam Systematic Country Diagnostic, Washington, DC: International Bank for Reconstruction and Development/The World Bank. 141 HONG DUC PUBLISHING HOUSE Vietnam Laywers Association Hong Duc Publishing House • Address: 65 Trang Thi Street, Hoan Kiem District, Hanoi • Email: nhaxuatbanhongduc@yahoo.com • Tel: (84 24) 3 9260024 – Fax: (84 24) 3 9260031 Publishing responsible: Bui Viet Bac, Director Content responsible: Khuat Duy Kim Hai Editor: Khuat Duy Kim Hai Cover Designer: Hong Duc Publishing House Print 200 copies in English, size 20.5cm x 28.5cm at INSAVINA Address: 22B Hai Ba Trung, Hoan Kiem, Hanoi Publishing permit: 288/QĐ-NXBHĐ Publishing registration plan: 686 - 2018/CXBIPH/08 - 11/HĐ ISBN: 978-604-89-2981-7 Compeleted and archived in 2018 142