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Labor shift from agriculture to industry and services in Vietnam: Issues and solutions

(LLCT) - In recent years, labor shift from agriculture to industry and services in Vietnam has gradually taken place in a positive direction, in line with the development trend of the economy. However, apart from the achieved results, there remain a number of problems that authorities must seek solutions in order to further promote labor shift from agriculture to industry and services to meet the requirements of international integration and the fourth industrial revolution.

Keywords: labor shift; agriculture, industry, service.

1. Some problems of labor shift from agriculture to industry and services in Vietnam

Over the past years, especially the 2010-2017 period, labor shift by sectors in Vietnam has taken place in a logical and progressive way: reducing the proportion of labor in the agricultural sector (from 49.5% in 2010 to 40.3% in 2017); increasing the proportion of labor in the industrial sector (from 21% to 25.7%) and in the service sector (from 29.5% to 34%)(1). Labor shifting by sectors is gradually in line with the economic restructuring and effectively exploits resources for economic development. The shifting of labor from agriculture to industry and services has increased labor productivity: labor of agriculture, forestry and fishery sector reduces by 1%, the labor productivity then increases by 2.1%; labor of industry-construction increase by 1%, leading to 8.89% increase in labor productivity. Similarly, labor of the service sector increase by 1%, resulting in an increase of 16.1% in labor productivity(2). However, at the request to quickly turn Vietnam into a modern industrialized country, labor shift from agriculture to industry and services is facing the following problems:

Firstly, the shift of labor from agriculture to industry and services is still slow

During 7 years (2010-2017), 9.2% of agricultural workers were shifted, the average annual reduction was 1.31%; industrial labor increased by 4.7%, the average annual increase was 0.67%; service workers increased by 4.5%, the average annual increase was 0.64%. The above result is lower than the 2000-2010 period when the average annual agricultural labor decreased by 1.56%, the average annual industrial and service workers increased by 0.79% and 0.87% respectively. According to Vietnam’s modern industrialized criteria, by 2030, the ratio of agricultural labor to the total social labor must be less than 20%(3). However, with the current transition process, it is difficult to achieve the above target.

Secondly, the technical expertise of the labor force in general and of the rural and agricultural workers in particular remains low.

By 2017, there was only 21.4% of the labor force nationwide having technical expertise(4), much lower than some countries in the region (61.5% in Singapore, 62% in Malaysia, 67% in the Philippines)(5). On the other hand, part of trained employees did not meet the market requirements both in terms of professional skills and soft skills (teamwork skills, critical thinking, creativity and foreign language skills etc.). The structure of human resources was unreasonable with the situation of “too many chiefs, and not enough Indians”.

In 2017, in rural areas, out of 31.62 million people in working age, 27.29 million people (86.3%) had not been trained, or were trained for short-term without certification; only 4.33 million people were trained with diplomas or certificates, including 15.9% (equivalent to 0.69 million people) received vocational training. Particularly in the agricultural sector, the proportion of trained workers aged 15 and above remains low, despite an increase from 2.4% in 2010 to 4.2% in 2017(6). Thus, by 2017, there was 95.8% of agricultural workers, equivalent to 38.61 million people, who had no technical expertise, causing great obstacles to socio-economic development in general and the shifting of labor from agriculture to industry and services in particular.

Thirdly, labor shift is not corresponding to the national economic structure

During the 2010-2017 period, labor shifting and economic restructuring were generally in the same direction, but still unreasonable. The national economic structure in terms of value in this period was service-industry-agriculture. However, the labor structure was agriculture-service-industry. In addition, economic restructuring took place much faster than labor shifting. In 2017, the added value of agriculture accounted for only 15.34% of GDP, but its labor accounted for 40.3% of the total social labor. Overcrowded labor in agriculture not only hinders the application of scientific and technological advances to production, but also proves the ineffective distribution of labor.

Fourthly, labor shift from agriculture to industry and services has not led to high labor productivity

In the past time, labor shift from agriculture to industry and services increased labor productivity in general, and in these sectors in particular, but still much lower than other countries in the region. In 2017, Vietnam’s labor productivity by purchasing power parity (PPP) reached US$10,232, equal to 7.2% of that of Singapore, 18.4% of that of Malaysia, 36.2% of that of Thailand, 43% of that of Indonesia and 55% of that of the Philippines(7). In agriculture, Vietnam’s labor productivity was higher only than Cambodia and much lower than other Asian countries. According to ADB’s Report of “Asian Development Prospects 2017”, Vietnam’s average agricultural production/labor was only two-thirds of that of Indonesia, less than half of that of Thailand and the Philippines(8).

Fifthly, labor shift from agriculture to industry and services is unsustainable.

While shifting to industrial and service sectors, most agricultural workers are not contracted nor entitled to social insurance or health insurance. Even when they are contracted, their social insurances may not be covered. Up to 90% out of 18 million workers doing non-agricultural jobs in the country are lack of technical expertise; over 76.7% do not have a written labor contract. Their daily working time is 2 hours longer than that of the formal sector, but their income is only two-thirds of that of the formal sector(9). Unstable jobs and low income led to a significant proportion of workers moving from non-agricultural to agricultural sector. According to Oxfam’s research published on March 29, 2016, many young people working in the agricultural sector went to urban areas to work as common laborers (Grab’s driver, Uber’s driver, shipper, porter, street vendor etc.) or worked at private enterprises, industrial parks for a short time, then returned to work as local farmers(10). Thus, low and unstable income, unsecured rights have led to the situation of labor shift back to agriculture, making the labor shift unsustainable.

2. Some solutions to promote labor shift from agriculture to industry and services

In the coming time, to overcome the above-mentioned issues and promote labor shift from agriculture to industry and services, it is necessary to synchronously implement the following groups of solutions:

Firstly, to improve the general education level and technical expertise for the workforce, especially rural and agricultural workers

* For the national workforce in general:

- Building a unified education and training strategy throughout the country with the first and foremost goal of quality. The Ministry of Education and Training as the governing body needs to build an operation strategy for the whole sector on the basis of taking the cause of renewing the economic growth model as a goal, thereby making a consistent strategy, avoiding experimental trial of unreasonable, costly and ineffective reform.

- Reforming the educational system, such as higher education, vocational training, and general education. High-school students should be equipped with basic knowledge of all fields for their life after graduation. The vocational training, college and university training need to go deeply into professional skills. Contents of training programs must be linked to the needs of enterprises and the economy. The quality of training must be consistent with the needs of society.

- Strengthening the forecast of human resources; regularly surveying and investigating the actual state of human resources at all sectors, levels and localities across the country; on that basis, calculating the quantity and structure of the industry to provide forecast and training support, ensuring the balance of human resources supply-demand for socio-economic development.

- Developing long-term and strategic plans for human resource development, forecasting quantitative and qualitative demand for human resources, occupational structure and qualifications by ministries, sectors and localities; coordinating with education and training institutions to adjust the training structure of human resources, overcome the current situation of “too many chiefs, not enough Indians”. Attaching importance to training and retraining to improve the quality of the current labor forces in qualifications, professional skills, foreign language skill as well as the sense of labor discipline.

- Encouraging enterprises to participate in training, making them one of the subjects in vocational training; promoting international cooperation and exchange in education and training.

* For rural and agricultural workers:

- Strengthening communication to rural and agricultural workers to raise their awareness of vocational training, selection of suitable jobs to have opportunities to find jobs or create jobs after training.

- Associating vocational training with job creation and career orientation. Vocational training institutions should actively link with business and production establishments and enterprises to understand their labor needs and orienting careers for trainees. In addition, vocational training institutions should issue vocational certificates to trainees, creating a legal basis for rural and agricultural workers to have more opportunities to find jobs after vocational training.

- Continuing to renovate the programs and content of vocational training to be appropriate and flexible, focusing mainly on teaching practice and implementation at production places. Priority should be given to training vocations with access to technology in rural areas. Vocational training should be associated with the national target program on new rural areas building in the 2016-2020 period and the Scheme of agricultural restructuring in the direction of increasing value and sustainable development in the 2016-2020 period.

- Implementing well the survey of vocational training needs of workers in rural and agricultural areas. On that basis, local authorities can categorize them into such groups as: laborers who continue to work in agriculture, laborers who participate in non-agricultural occupations, or laborers who will work as guest workers. Each category will have different characteristics regarding age, education, employment needs. Therefore, relevant agencies (Department of Labor, Invalids and Social Affairs, Department of Agriculture and Rural Development, Department of Planning and Investment, etc.) should inform vocational training institutions to adjust their appropriate training plans.

Secondly, the group of solutions to reduce agricultural jobs, and increase jobs in industry and services

- Continuing to promote economic restructuring towards industrialization and modernization

Promoting economic restructuring towards industrialization and modernization will facilitate the shift of labor from agriculture to industry and services. To that end, it is needed:

+ To promote the application of scientific and technical advances to agricultural production to improve productivity, reduce the number of laborers, create motivation to shift labor from agriculture to industry and services.

+ To invest more in industries and services, thereby changing the labor structure of the whole economy in the direction of increasing the demand for non-agricultural labor; strongly develop industry and service sectors in both rural and urban areas.

+ To continue developing export-oriented industries and services that use many common laborers such as textiles, leather shoes, processing, assembly and processing of agricultural, forest and aquatic products and tourism. These sectors can pull laborers from the agricultural sector to industry and services and solve the excess of labor in the rural areas today.

- To promote the process of rural urbanization, developing industrial parks and export processing zones; encouraging, restoring and developing traditional craft villages, developing handicrafts in rural areas; developing non-agricultural activities in rural areas such as construction, trade, production and business services, tourism.

- To further attract foreign direct investment. Foreign direct investment not only contributes to the state budget and GDP but also promotes the development of a number of key industries such as electronics-telecommunications, oil and gas, information technology, which increase employment in industrial area.

Thirdly, a group of solutions for sustainable shifting of labor from agriculture to industry and services

- Creating and managing the labor market well

 Improving the system of labor legislation and policies related to labor market such as the Labor Code, policies on wages, remuneration, social insurance, health insurance, unemployment benefits, vocational training and retraining for laborers and other policies such as housing, migration, immigration, household registration and civil status.

Completing the information system on labor market in a synchronous and updated way in conformation with international practices. Expanding and improving the operational efficiency of the employment service system, thereby, connecting labor supply and demand, making the labor market operate well and efficiently.

Enhancing the capacity of the state management officials on labor at all levels. Those officials provide advice on promulgation of mechanisms and policies for the labor market. Therefore, there should have professional training and retraining for such officials.

- Ensuring social security and protecting the interests of laborers when moving to non-agricultural sectors

Vietnam is a country with a transition economy, so the non-agricultural sector accounts for a large proportion, which creates many jobs for the economy. In order for laborers to be assured of shifting to this area, the State should implement social security and protect the rights of the laborers as follows:

+ Measures should be taken to promote the shift from informal to formal labor via incentive policies and solutions such as encouraging households and production and business establishments to register as enterprises.

+ Inspection and examination should be consolidated; strengthening sanctions against acts of intentionally violating current regulations on labor contracts, labor safety and payment for labor insurance.

+ Laborers should be encouraged to join in voluntary, flexible insurance premiums with respect to payment rates, methods of payment; supplementing short-term policies such as sickness, maternity, labor accidents; having a policy of reasonable contribution for middle-aged laborers who do not have enough years to pay social insurance premiums as required.

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Endnotes:

(1) The Economy 2017-2018 Vietnam and the World, p.82.

(2) Calculation from the Economy 2017-2018 Vietnam and the World, p.82, 84.

(3) Hien Luong: “Proposing 6 criteria of an industrialized country in the direction of modernization of Vietnam”, Ha Noi Moi online.

(4), (6) General Statistics Office: Statistical Yearbook 2017, p.143, 144.

(5) Vu Quang Vinh: The 4th industrial revolution and the issue of labor supply and demand of Vietnamese enterprises by 2020, Theater Publishing House, Hanoi, 2017.

(7) General Statistics Office: Socio-economic situation in 2018.

(8) Bao Van: “Vietnam’s agricultural labor productivity remains low”, Nhân Dân online.

(9) Nguyen Trang: “Many formal workers are being plunged into informal sector”, https://vov.vn.

(10) Ngan Anh: “Moving labor to industry and service sector is still slow”, Nhan Dan online.

Dr. Nguyen Thi Mien

Institute of Economics,

Ho Chi Minh National Academy of Politics

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