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Agrarian transition in Viet Nam

V. Employment

Data collected from national yearbooks and household surveys yield important aspects of the employment profile of Viet Nam, the benchmark year being 1996 (table 15). Of the total population of 75.35 million, 48.5 million were counted as being in the labour force, or 64.4 per cent, the kind of ratio to be expected for a youthful population such as Viet Nam's. Subtracting from this the housewives, students and the elderly gives 35.87 million as the active labour force, of which 81 per cent were in the rural areas, mostly farmers. The state sector employed just over one-quarter of the urban labour force, but only 4.5 per cent of the rural, signifying a much smaller role of state farms.

Table 15. Labour force, unemployment and underemployment, 1996

(millions and percentages)

Unemployment was estimated at 2.7 per cent in the rural areas and twice that in the urban areas, the total coming to around 1 million workers. Another estimate (derived on the basis of the Viet Nam Living Standards Survey) put the number of unemployed at 2.5 million for 1992-93. The discrepancy can be reconciled from: (i) unemployment did indeed decline between the two periods in question, the first period being too close to the time when retrenchments from the state sectors were carried out; and (ii) different definitions of unemployment are being used. For example it is known that the definition of unemployment has been changed from the normal "unemployment over the last seven days" to "unemployment over the last four weeks". The new definition of unemployment would necessarily give a lower estimate of unemployment compared to the more conventional definition.

However defined, open employment is now a feature of the Vietnamese economy and several structural factors have contributed to this. The liberalization reforms necessarily implied shedding surplus labour from the state and public enterprise sectors. Over 1 million workers were retrenched in the first three years of reforms. Demobilization released nearly three-quarters of a million soldiers on to the job market, 200,000 migrant workers returned home in the early 1990s from the former Soviet bloc and the Gulf countries owing to the break up of the Soviet Union and the Gulf War, and 65,000 refugees and asylum seekers ("boat people") were repatriated from neighbouring countries.

Figure 3. Employment status: Rural-urban, and paid employees, self-employed workers, family workers, 1996

Equally disturbing as the emergence of open unemployment is the fact that a significant proportion of those who are nominally "employed" are actually underemployed. Thus almost a quarter of the total employment time in 1996 was estimated as "surplus". The predominant family-oriented nature of the Vietnamese economy explains this, it being common in such economies that family members are accommodated on the farms or informal businesses somehow. This feature of the Vietnamese labour market is illustrated in figure 3. Of the total labour force, only 17 per cent were counted to be in paid employment, which by elimination, as shown in the diagram, refers to paid employment in large units. The rest of the workers were thus in family units, either as family helpers ("household jobs") or on their own ("self-employed"). The rural/urban distinction is noteworthy. In the urban areas over two-fifths of the workers were in paid employment compared to only one-tenth in rural areas. But even then a majority of urban workers were engaged in non-wage employment in family units, most of which were undoubtedly in the informal sector category. This conclusion is reinforced by data from the Viet Nam Living Standards Survey which showed that only 33 per cent of the urban workers were engaged in large-scale units and as much as 45 per cent were in small-scale units, mostly as family workers.

The employment profile depicted above for 1996 should be supplemented by a time series to show the enormous changes it has undergone as a result of the economic reforms. Table 16 serves this purpose.

Table 16. Employment by type of ownership, 1984-96, selected years

The biggest change is in terms of the relative roles of the private and state sectors. Employment in the former increased from 23 per cent of the labour force in 1984 to 37 per cent in 1996, implying a rate of growth of 7.1 per cent per annum. A part of this, it must be noted, was simply a reclassification of some cooperative employment as private sector employment upon a dismantling of some of the cooperatives. Thus the most drastic real change in the employment structure was the decline in state sector employment. After increasing until 1988 it began to fall, such that in 1996 it stood at only 69 per cent of its peak level. As noted before, over 1 million workers were retrenched from government service and state-owned enterprises in just three years between 1988 and 1991, equivalent to almost one-quarter of the total urban labour force in 1988, this comparison being relevant since most of the retrenchment came in the urban areas. Many of the retrenchees joined the growing urban informal sector, so that to that extent some of the growth in private sector employment shown in table 16 was real enough.

Agriculture -- and the rural sector in general -- will continue to have to play a major role in job creation over the next few years. This is shown by the simple projection in table 17.

Table 17. Employment projections and scenarios, 1996-2000

(millions and percentage)

With the labour force growing at around 3.3 per cent per year, 1.2 million new workers have to be accommodated in the job market every year, or 6 million for the five years projected in table 17. Additionally 1 million jobs have to be created to eliminate existing unemployment. Most of the burden of this job creation will have to fall on the agricultural sector because of its sheer predominance in the economy. For example, even with a high growth of 7 per cent in the non-agricultural sector -- i.e. over twice the rate of the labour force -- agriculture would still have to generate half of the 7 million new jobs required. Such a heavy burden on an already overcrowded agricultural sector underlines the need for diversification of employment and income sources in the countryside. A second inference from the projections is that the small-scale sector will have to bear the brunt of employment creation in the urban areas, the reason again being its predominance in the urban labour force. Thus, as shown in the table, after agriculture has played its role in employment creation, 4.2 million new jobs will still have to be found in the non-agricultural sector. Of these, even if one half are in the rural areas, 2 million jobs have to be created in the urban areas. The sheer disparity in the size of the large-scale and small-scale sectors shows that a majority of the new jobs will have to be in the small-scale sector; for example, the absorption of over 1.5 million workers in the urban small-scale sector would still require a growth of 5.3 per cent per annum in the large-scale urban sector which in turn would require a growth in output of at least twice that much based on past elasticities. Such calculations are simply projections and likely scenarios and therefore should not be taken literally, but what they do demonstrate is that: (i) agriculture will have to accommodate nearly two-fifths of the new labour force, even on the most optimistic scenario for non-agricultural employment; (ii) the rural non-agricultural sector will have to play its role in employment creation; and (iii) in the urban areas, on past trends for the large-scale sector, most new jobs will have to be created in the small-scale sector.

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