Labor productivity of Vietnam in the context of integration

In Vietnam, according to the National Statistical Indicator System, labor productivity reflects the performance of labor, measured by the average GDP per employee during the reference period. Labor productivity indicators are often disaggregated by economic sector and economic type.

According to the General Statistics Office, labor productivity of Vietnam in the past time has significantly improved in the direction of increasing steadily over the years and is a country with a high rate of labor productivity growth in the ASEAN region but productivity Vietnam is still very low compared to many countries in the region. How to improve labor productivity for the economy is the problem posed?

Current situation of labor productivity in Vietnam

Productivity is a measure of how effective people and production units convert production resources to produce goods and services for society. Labor productivity (labor productivity) reflects the capacity to create wealth, the performance of specific labor in the production process, measured by the number of products or the amount of value generated in a unit of time, or the amount of time wasted labor time to produce a product unit.

In Vietnam, according to the National Statistical Indicator System, labor productivity reflects the performance of labor, measured by the average GDP per employee in the reference period. Labor productivity targets are often disaggregated by economic sector and economic type. Increasing labor productivity plays a decisive role in economic growth.

In recent years, Vietnam’s labor productivity has continuously increased, contributing significantly to the country’s socio-economic growth. Typically, in 2017, labor productivity contributes about 89% of GDP growth, higher than 66.3% in the period of 1990-2000 and 61.9% in the period of 2000-2012. Specifically, according to the General Statistics Office, the labor productivity of the whole economy at current prices in 2017 is estimated at VND 93.2 million / labor.

Calculated at comparative prices in 2010, the total labor productivity in 2017 increased by 6% compared to 2016, the average period of 2011-2017 increased by 4.7%/year. Generally for the 10-year period 2007-2016, labor productivity by purchasing power equivalent to 2011 of Vietnam increased by an average of 4.2% per year, higher than the average increase of Singapore (1.5% per year); Malaysia (1.9%/year); Thailand (2.5%/year); Indonesia (3.5%/year); Philippines (2.8%/year).

According to the General Statistics Office, Vietnam’s labor productivity has improved significantly over the years and is a country with a high rate of labor productivity growth in the ASEAN region, but Vietnam’s current productivity is still very low compared to many countries in the region.

At the same level in 2011, Vietnam’s labor productivity in 2016 reached USD 9,894, only 7.0% of Singaporean productivity; equal to 17.6% of Malaysia; 36.5% of Thailand; equal to 42.3% of Indonesia, equaling 56.7% of the Philippines. Notably, the gap in labor productivity between Vietnam and other countries continues to increase.

Regarding employment, the labor force aged 15 and over in the country in 2017 is estimated at 54.8 million people, an increase of 394.9 thousand people compared to 2016. Labor force in the working age of the whole country In 2017, it is estimated to reach 48.2 million people, an increase of 511 thousand people compared to the previous year. Labor force in working age in urban areas accounts for 33.4%; 66.6% in rural areas. Workers aged 15 and over working in economic sectors in 2017 are estimated at 53.7 million, an increase of 416.1 thousand people compared to 2016.

In which, employees working in agriculture, forestry and fishery accounted for 40.3%; industry and construction accounted for 25.7%; service sector accounted for 34%. The unemployment rate of labor in working age in 2017 is 2.24%, of which urban area is 3.18%; rural area is 1.78%. The unemployment rate of young people (from 15-24 years old) in 2017 is 7.51%. The underemployment rate of working age workers in 2017 is 1.63%.

The contribution of productivity of synthetic factors (TFP) to Vietnam’s GDP growth is still low. Compared with other countries, in the period 2001-2010, Vietnam only achieved 4.3%, while South Korea achieved 51.3%; Malaysia reached 36.2%; Thailand reached 36.1%, China reached 35.2%; India reached 31.1%.

The cause of labor productivity in Vietnam is low compared to other countries in the region, which are Vietnamese workers who only undertake the finishing stages according to the sample. The Vietnamese labor force is large but only ensures processing jobs, does not create branded products to supply to the market. In addition, Vietnam still considers cheap labor as an advantage of the economy, making it difficult to raise labor productivity. Besides, in the Vietnamese business community, there are over 90% of small and medium enterprises, low and medium production technology accounts for a high rate.

Vietnamese enterprises have not been deeply involved in the global supply chain, domestic enterprises have not yet connected to the global value chain of large transnational companies and corporations, so they cannot take advantage of the spillover knowledge, technology and labor productivity from companies and transnational corporations into domestic enterprises; Enterprises participating in export and import have 35% higher labor productivity than enterprises without this activity. In addition, the process of equitization of SOEs is not as expected, the allocation of resources of SOEs is limited.

On the other hand, the shifting economic structure is still slow, 40% of the labor force also works in the agricultural sector, and 60% of the workers work in the non-structural sector. Therefore, the first task to improve and improve labor productivity is to shift labor from agriculture to other regions and formalize non-structural employment.

Within each industry, service as well as agriculture sector, the shift from low value-added industries to high value-added industries also plays an important role in improving and enhancing labor productivity.

The quality, structure and efficiency of labor use are still low, the level of organization, management and use of resources is inadequate; limited management and enterprise management capacity; there are also some “bottlenecks” on institutional reforms and administrative procedures.

By the end of 2017, only 21.5% of the labor force in the whole country had been trained with certificates and certificates, of which rural areas were very low, only about 13%. The labor structure according to the training level is unreasonable, the shortage of manpower is the practical engineers, high-level technical workers. The connection of supply and demand in the labor market has many shortcomings.

Unemployment among young or unsuitable workers among jobs and training levels is still quite common. The exploitation and employment of workers who have worked and studied abroad returned to the country are still limited; The sense of compliance with labor discipline is not high; labor lacks soft skills, limited language skills. This is a big barrier to improving labor productivity.

Solutions to improve labor productivity in Vietnam

Firstly, perfecting the market economy institution, creating the most favorable conditions and business environment for businesses. Accordingly, it is necessary to focus on continuing to use global standards and good international practices in the modern market economy in designing, monitoring and measuring the results of institutional reforms and improving the business environment.

Solutions to institutional reforms, improvement of the business environment, should be directed towards developing markets, ensuring fair competition and increasing market competition to increase technical efficiency and distribution efficiency. and kinetic efficiency, which is the main driver of economic growth; At the same time, making business more liberal, more convenient, safer, reduced risk and reduced costs, etc; Increase profits for investors and businesses.

Policy documents such as the Government’s Resolution No. 19 / NQ-CP dated February 6, 2017 on continuing to perform the main tasks and solutions to improve the business environment and improve national competitiveness in 2017, orientations to 2020; Resolution No. 35 / NQ-CP dated May 16, 2016 of the Government on supporting the development of enterprises by 2020, etc. has been in this direction but needs to be implemented more aggressively, regularly monitoring and evaluating the Prime Minister. and the Government; at the same time, publicize and transparent the results of each ministry, branch and locality, etc.

Secondly, renovating the role, function and improving the effectiveness of the Government’s operation in the spirit of constructive government, in which emphasizing the role of creation to increase productivity, transform growth model, help the economy overcomes the middle income trap.

Accordingly, it is necessary to reform the apparatus, reform administrative procedures, build e-government, and improve the efficiency of the Government. The constructivist role must be expressed more clearly and more effectively in the aspects of promoting entrepreneurship, innovation of enterprises, infrastructure development, human resource development, creating favorable conditions to exploit the opportunity of the Industrial Revolution 4.0.

Programs and policies of the State should be effectively implemented such as the Prime Minister’s Decision No. 712/2010 / QD-TTg dated May 21, 2010, approving the National Program “Improving productivity. and the quality of products and goods of Vietnamese enterprises by 2020 “; Law to Support Small and Medium Enterprises.

Thirdly, improve the efficiency of using resources, especially resources allocated or participating in allocation by the State such as public investment, land, natural resources and state assets. In particular, focusing on strengthening the restructuring of public investment, overcoming the situation of spreading investment, corruption, waste and debt of basic construction to improve the efficiency of public investment; promote equitization, state investment divestment, governance reforms for SOEs; promote the arrangement, restructuring, and full autonomy, coupled with clear responsibility for public organizations and public service delivery agencies, etc.

Fourth, increasing intra-industry productivity, upgrading the value chain in industry development for all three sectors, agriculture, industry and services, thereby promoting intra-industry productivity. Industrial policies need to be coordinated and coordinated closely and synchronously to be highly effective and achieve specific objectives in the value chain upgrading of sectors, with emphasis on incentives and supporting the application of scientific and technological advances, promoting industry links and regional links.

Fifth, macroeconomic stability and create favorable conditions for increasing productivity. To restructure the state budget, with a focus on managing public debt along the direction of ensuring safety and sustainability; Tightening discipline and financial discipline – state budget; Consolidate and develop a healthy financial and credit system, focusing on effectively handling weak credit institutions, continuing to restructure credit institutions in association with handling bad debts of the economy copy and thorough, develop a more balanced financial market; Actively and flexibly administer and coordinate well monetary policies, fiscal policies and other policies, especially policies to adjust prices and charges managed by the State.

Sixthly, encourage businesses, especially small businesses, to innovate, create and support restructuring from low value-added activities to high value-added activities to increase human capital and increase research and development spending; Encouraging enterprises to invest in science and technology is an important factor to improve productivity and product quality, etc.

Productivity and Quality Office