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Compulsory social security participation revealed preferences (English)

The study starts with a classification of the enterprises depending on their participation to the Vietnam social security. Among the enterprises that contribute, one striking feature is that on average the share in the wage bill of the contributions paid to the Vietnam social security is much lower than the contribution rate established in the law. Even if the enterprises that do not register their employees are excluded from the calculation, the average ratio is of 7.6 percent while the legal rate was in 2006 equal to 23 percent. The study, consequently, examine this issue before investigating the characteristics of the enterprises that do not register their employees. The paper shows that this low ratio is due to a wide practice by enterprises of paying contributions on lower wages than current wages. The paper investigates, furthermore, who benefit from the practice of avoiding registration and from the practice of under-reporting wages to social security. The results indicate strong evidence that employees in enterprises that are not registered to social security and in enterprises that under report wage receive higher net wages.


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    Thanh, Trung Castel, Paulette

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    Working Paper

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    East Asia and Pacific,

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    Compulsory social security participation revealed preferences

  • Keywords

    employee will re;minimum wage;net wage;average number of employees;amount of contribution;social security;social insurance benefit;average wage;social security benefit;labor productivity increase;Labor Market Mobility;social insurance program;state owned enterprise;lack of knowledge;public information campaign;share of woman;fixed effect model;social security policy;problem of leakage;transfer of resource;social insurance contribution;social security system;armed forces personnel;health insurance law;health insurance fund;number of workers;social security fund;sectors of education;share of labor;enterprise sector;state sector;minimum pension;short-term contract;short term contract;labor contract;average contribution;contribution rate;pension benefit;total wage;pension formula;urban districts;average revenue;income shock;Wage Bill;social right;sick leave;private enterprise;relative wage;participation rate;Work Injury;maternity leave;minimum level;replacement rate;income earner;system Financial;high wage;mandated benefit;perfect competition;negative relationship;labor income;formal sector;logistic regression;high share;public servant;social obligation;mandatory coverage;pension age;mandatory scheme;benefit equal;coverage rate;Pension Income;financing need;unemployment benefit;social contribution;social work;public capital;informal sector;positive relationship;financial implication;legal right;additional revenue;positive impact;financial concern;enterprise behavior;employee wage;public perception;public campaign;pension system;social implications;total tax;tax burden;old-age pension;employee hire;capital income;household survey;tax authority;future trends;econometric analysis;policy risk;institutional factor;tax authorities;gross wage;social taxes;short-term benefits;financial difficulties;total employment;reveal preference;



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Thanh, Trung Castel, Paulette

Compulsory social security participation revealed preferences (English). Poverty assessment ; social protection chapter : background paper no. 3 Washington, D.C. : World Bank Group.