Employment — VietEcon

Following up from my posts last week on MMT, one of the main reasons (as far as I know) that people want MMT and control over their monetary and therefore fiscal policy is so that governments can reduce unemployment. But Vietnam may not really have a problem with unemployment .

Of course, there are some issues in Vietnam.

Youth unemployment: First, while the unemployment rate is low (2.1% in 2018), the youth unemployment rate is significantly higher at 7.3%.

Public employment: The State is actually a big employer at 9.6% of total employment. That probably doesn’t count employment in public enterprises, which add another 10 percentage points (according to the ILO). So about a fifth of the total workforce works for the government in some way, if these statistics are correct.

VULNERABLE EMPLOYMENT - PERCENTAGE OF TOTAL EMPLOYMENT. SOURCE: WORLD BANK, CHART BY VIETECON.COM

Vulnerable employment: A large portion of employment is vulnerable. This is when people are employed by their families or are self-employed but work alone. This figure is actually pretty high at 55.8%, although it has fallen a lot over time. The fall has been the greatest out of the larger South Asian countries (see chart on left), and the figure is approaching Thailand and Indonesia.

Rural employment: Since the rural population is still pretty high (65%), and agriculture is important (16%), that drives down unemployment. Basically, as my economics teacher told me a long time ago, unemployment basically doesn’t exist on a farm: You don’t have a job, you work in the fields. There has been massive urban migration since 1989 - the population was 80% rural then and has fallen to that 65% figure in a short time. This will likely continue, especially because of better earnings in cities. And I would assume that farming will be more consolidated over time, as we have seen all over the world.

Growing population: Finally, Vietnam is a young country. Around 1.6m people enter the labor force every year, and those people need a job. In addition, Vietnam is becoming more educated, but there is a risk that the jobs wouldn’t be appropriate for college-educated workers. We see this a lot in the Middle East, where lots of people graduate from college and have no job opportunities, except for very crappy unskilled jobs that they don’t want.

What does this mean all together. The Vietnamese government actually seems to be taking care of its population pretty well, mainly through direct or indirect employment. This is one of the main advantages of MMT, universal employment. But Vietnam is pretty close to that, helped by fairly de-consolidated agriculture. Over time, we are going to see more urban migration, consolidation with agriculture, and finally greater tertiary education for young people. To be able to deal with that, the government needs to provide employment of some sort, either through their own programs or the private sector. Right now, the big influx of FDI has been a big part of it, but will it continue. Also, should it continue, if it really doesn’t help upgrade the economy. More about this tomorrow.