Labour trends in Vietnam - urbanization

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Continuing on from my post on August 2, I wanted to keep looking at the key insights from this ILO study of the labour force in Vietnam. Lots of interesting stuff here.

URBANIZATION PERCENTAGES SOURCE: WORLD BANK

URBANIZATION PERCENTAGES SOURCE: WORLD BANK

One that piqued my interest was urbanization. On April 15, 2019, in the context of MMT, I talked a bit about urbanization, but I wanted to dive a little bit deeper now.

Where do we stand with urbanization in Vietnam?

  • In 2017, according to the World Bank, just 35%. So there is a lot of urbanization still to come.

  • In 1991, Vietnam was only 20% urbanized, and if we went back to 1960, it was just 15% urban.

  • Within ASEAN, Vietnam is similar to Laos and is only better than Cambodia. That seems strange to me. Vietnam is much richer than either one.

  • Malaysia is the most urban with 75% urbanization.

Looking ahead, urbanization is going to continue to be a major demographic change in the country.

  • The average annual growth of the urban labor force is 2.5% per year while the rural labour force rises just 0.4% per year.

  • Over the past few years, we have seen a significant decrease in the percentage of people working in agriculture. These are two sides of the same coin: there is urban migration to get away from agriculture jobs, but as farms consolidate (even at these nascent stages in Vietnam), that pushes urban migration.

  • At the same time as we are seeing all this urban migration, we are seeing more and more factories opening up, so manufacturing jobs. Again push and pull. More factories open up, means that more jobs pull people out of rural life. But also, factories come because they see that there are a lot of people.

One of the issues the report points out is that because most rural migrants are uneducated or under-educated, they face more difficulties finding a job.

In 2016, the unemployment rate of migrants was 9.3%; the unemployment rate among the youth migrants was up to 13.7%.

This probably overestimates the actual rate, because many of these migrants join the informal economy. But still, given that the unemployment rate was less than 2% at the end of 2017, there is a big discrepancy here.

This also means that these urban migrants are unlikely to push Vietnam to become a middle-income country. Education levels are low overall, but especially for the rural population. And that is going to take some time to fix.

Importantly, Vietnam, like China, has a residency system, so you can only get social services (including education) at your recorded residence. Updating your residence can be very expensive. In China, this effectively stops migrants from accessing services and moving up to the middle class. In Vietnam, they are making changes to at least the book itself (putting it online) in order to make it easier and more straightforward to update. There are still issues with accessing services, though, and this will likely cause problems for migrants’ ability to move up the economic ladder. Hopefully, with the system’s new database (expected in 2020), change will come faster.