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Số 54 Nguyễn Chí Thanh, Đống Đa, Hà Nội
  

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Report on the impact of the Covid-19 on labour and eployment situation in Vietnam
 

1. Global and national economy background

The pandemic of acute respiratory infection caused by new coronavirus (COVID-19) occurring from January 2020 has affected socio-economic development of countries all over the world. International organizations and financial institutions claimedthat global economic growth in 2020 would fall into the most serious recession overthe past several decades. Accordingly, the International Monetary Fund (IMF) dropped its global growth forecast 1.9 percentage points lower than the forecast in April 2020, to the contraction of 4.9%; the World Bank predicted that the global growth will be negative 5.2%, the largest decline since the Great Depression of the 1930s.The COVID-19 has had negative impacts on the labor and employment, so that nearly half of the global workforce have been at risk of losing livelihoods as stated by the International Labor Organization[1]. Data on the labor situation showed that unemployment has been rising in most countries around the world, particularly in the major economies such as Canada, the U.S., and China with the corresponding unemployment rate in May 2020of 13.7%, 13.3%,and 5.9%, much higher than the same period last year[2].

In the country, besides the advantages from positive growth in 2019, the macro economy has been stable but faced many difficulties and challenges. The complicated and unpredictable situation of COVID-19 has resulted in slow growth in almost all economic sectors and activities, record-level dramatic decline of labor force, andthe high-rise unemployment. Gross domestic product (GDP) in the second quarter of 2020 increased by 0.36% over the same period last year, which was the lowest growth in the period of 2011-2020.Of which, some economic activitieshave been hit hard by the COVID-19 such as the total retail sales of consumer goods and services decreased by 4.6%; revenues from accommodation and catering services declined 26.1%; transport of passengersdropped 44.4%,etc. The labor force decreased by more than 2 million persons compared to the previous quarter and the same period last year, the unemployment rate of the working age populationin urban areas has been the highest overthe last 10 years (4.46%).

2. Impact of the COVID-19 on labor and employment situation

In the whole country, 30.8 million persons aged 15 and over were negatively affected by the COVID-19

As of June 2020, there were 30.8 million persons aged 15 and over in the country negatively affected by the COVID-19, including those who hadlost their jobs, had to be layoff/to take work off in turn, had to reduce their work hours, and had their income reduction, etc. The effects of income reduction accounted for the highest proportion with 57.3% of the total number of affected people (equivalent to 17.6 million persons).

Of the total 30.8 million persons affected, 28.7 million persons were employed; 897.5 thousand personswere unemployed and 1.2 million personswere outside the labor force (inactive in economic activities).

The service sector has been hardest hit by the COVID-19, with 72.0% of affected workers, followed by the industry and construction sector with 67.8%; the percentage of affectedworkers in the agriculture, forestry and fishery sector reached 25.1%.

The labor force has been falling to the record low level; femaleworkforcehas been heavily affected over male workforce in the context of COVID-19

The labor force aged 15 and over in the second quarter of 2020 was 53.1 million persons, decreasing by 2.2 million personsover the previous quarter and by 2.4 million personsover the same period last year. This year has showed the record low level in the labor forcesso far. Specifically, the labor force in the second quarter of the years in the period of 2012 - 2019[3] continued to increase compared to the previous quarter (except for 2016, the labor force in the second quarter decreased by 43.5 thousand persons compared to the previous quarter), as well as continuously increased over the same period last year (except for 2015, the labor force in the second quarter decreased by 7.1 thousand persons over the same period in 2014); meanwhile, the second quarter of 2020 marked a decline of more than 2 million people in the labor force - an unprecedented decrease over the past decade.


Figure 1:The labor force in the first and second quarter of years
in the period of 2011-2020

Unit: Thousandpersons

 

 

The reduction in the labor force was mainly in rural areas and the female workforce. The labor force in rural areas decreased by 4.9% over the previous quarter and by 5.6% compared to the same period last year, which was higher than the decline in urban areas; the female workforce decreased by 4.4% against the previous quarter and by 5.4% over the same period last year, which was higher than the drop of the male workforce.

Figure 2: Reduction in the labor force by sex and area

Unit: %

 

For both groups of the labor forcein working age and out of working age, the female workforce was always more severely affected than the male workforce in the context of far-reaching impact of COVID-19 in the Viet Nam labor market. In the second quarter of 2020, the female workforce in working age decreased by 4.9% over the previous quarter and by 5.5% compared to the same period last year, higher than the drop of the male in working ages (a decrease of 3.9% q-o-q and a fall of 3.6% y-o-y). Relating the out of working ages group, while the female workforce recorded a decrease of 1.8% compared to the previous quarter and 4.9% compared to the same period last year, the male workforce out of working age even increased slightly (up 0.8% from the previous quarter and up 1.4% over the same period last year).

Figure 3: Increase/decrease in the labor force in working age
and out of working age by sex

Unit: %

 

The labor force participation rate in the second quarter of 2020 was 72.3%, decreasing by 3.1 percentage points over the previous quarter and by 4.1 percentage points compared to the same period last year. The labor force participation rate in the urban areas was lower than that in the rural areas in all age groups, of which the largest difference recorded in the group aged 15-24 (urban: 45.3%; rural: 60.1%) and the group aged55 years and over (urban: 28.1%; rural: 50.9%). Compared to the same period last year, the labor force participation rate decreased in all age groups; of which, the group aged 55 years and over in urban areas witnessed the deepest decrease in the labor force participation rate (a drop of 10.3 percentage points), while the decline in other age groups in urban areas was below 3.0 percentage points and the corresponding reduction in rural areas was only 3.8 percentage points. This indicated that the COVID-19 has reduced labor market supply in all age groups, especially those in the group aged55 years and over in urban areas.

The employed workers have witnessed the largest dropin the last 10 years

The number of employed population aged 15 and over in the 2nd quarter of 2020 was 51.8 million persons, a decrease of 2.4 million persons against the previous quarter and dropped by nearly 2.6 million persons year-on-year. It has been the largest drop in the past 10 years[4]. Of which, the labor force decreased mainly in rural area and female workers, the number of employed population in rural area decreased by 1.8 million persons compared to the previous quarter and nearly 2.1 million persons over the same period last year; the employed female dropped by 1.2 million persons compared to the previous quarter and a year-on-year decrease of 1.5 million persons. Wage workers declined by nearly 1.2 million persons compared to the previous quarter; the vulnerable workers (self-employed and family workers) decreased by 1.1 million persons compared to the previous quarter.

In the 2nd quarter of 2020, the number of employed persons decreased in equivalent to the reduction of the labor force. This shows that the Covid-19 impactedmajority of the workers losing their jobtemporarily to leave the labor market amid disease spread within the community, especially in April 2020, when social distancing measures were practiced seriously and thoroughly. Some economic activities recorded a sharp year-on-year drop in the number of employees, such as the manufacturing (down 324.6 thousand persons); the accommodation and catering services (down 156.9 thousand persons); the education and training (down 122.7 thousand persons); the wholesale and retail trade and repair of motor vehicles and motorcycles (down 120 thousand persons).

Labor in some occupations witnessed a sharp fall compared to the previous year as follows: unskilled group reduced by nearly 1.5 million persons, equivalent to nearly 8%; the group of craft and related trades workers decreased by 515 thousand persons, equivalent to a fall of 6.6%; the number of employees in the middle-level qualification group fell by 322 thousand persons, equivalent to a decrease of 16.5%.

The informal workers in the mining and quarrying, education and training, activities of households as employers of domestic personnel witnessed the biggest drop

In the 2nd of 2020, the number of informal workers[5]was 19.5 million persons, a decrease of 516 thousand persons compared to previous quarter and reduced by 634 thousand persons against the previous year. This is a vulnerable group in the labor market when the economy is hit by shocks. Compared to the same period last year, the number of informal workers in the mining and quarrying witnessed the biggest drop (down 36.2%), followed by the education and training, activities of households as employers of domestic personnel (each sector reduced by 17.9%).

In addition to the feature of vulnerability to labor demand shocks, informal workers are paid lower than formal workers. The average monthly income of informal workers in the 2nd quarter of 2020 was 5.1 million VND, 1.6 times lower than the average monthly income of the formal workers. Especially, amid the Covid-19, the average monthly income of informal workers reduced even more than that of formal workers, with the year-on-yearrespective reductions of 8.4% and 4.7% compared to the same quarter of preceding year.

The number of underemployed persons increased

In the 2nd quarter of 2020, the number of underemployed persons aged 15 and over was nearly 1.5 million, an increase of 363.9 thousand persons compared to previous quarter and up 726.6 thousand persons against the previous year. In comparison to the previous quarter, the number of underemployed maleswas higher than that of the females: an increase of 250,000 underemployed males and 113.9 thousand underemployed females; compared to the same period last year, the corresponding figureswere 412.4 thousand underemployed males and 314.2 thousand underemployed females.

Table1: The increase in the number of underemployed persons in the Q2 of 2020 compared to the previous quarter and the same period last year

Unit: Thousand persons

Over the previous quarter

Over the same period last year

Aged 15 and over

363.9

726.6

Urban

182.8

218.2

Rural

181.1

508.4

Male

250.0

412.4

Female

113.9

314.2

In working age

292.0

648.4

Urban

166.6

199.4

Rural

125.4

448.9

Male

226.3

393.3

Female

65.7

255.0

Out of working age

72.0

78.2

Urban

16.2

18.8

Rural

55.7

59.5

Male

23.8

19.1

Female

48.2

59.1

Nearly half of the underemployed persons in working age in the Q2 of 2020 worked in the Agriculture, forestry and fishery sector, accounting for 48.2%. The underemployment rate in the Agriculture, forestry and fishery sectorwas 5.03% which was 2.2 times higher than that of the Industry and Construction sector and 2.4 times higher than that in the Service sector.

By occupation categories, underemployment rate in working age of the “low-level” category accounted for the highest share with 4.73%, which was 1.7 times higher than the same period last year; followed by the "middle-level" category with the rate of 2.59%, which was 2.8 times higher than the same period last year.

 By technical qualification, underemployment rate in working age of the persons without qualification accounted for the highest share with 3.43%, 2.1 times higher than the same period last year; the primary level groupwitnessed the underemployment rate of 2.74%, 3.6 times higher than the same period last year.

The average monthly income of workers in Q2 2020 has recorded the decrease for the first in five years.

The average monthly income of informal workers in the 2nd quarter of 2020 was 5.2 million VND, a decrease of 525 thousand VND against the previous quarter and reduced by 279 thousand VND against the previous year. This is the first year the employee’s income in the Q2 year-on-year decreased over the past 5 years (down 5.1%). Meanwhile, the average monthly income of employees in the Q2 of 2019 compared to the same period of the previous year jumped to 16.6%.

The average monthly income of the male employees was 1.4 times higher than that of female employees (6.1 million VND and 4.3 million VND, respectively); the average monthly income of the urban employees was 1.5 times higher than that of the rural employees (6.7 million VND and 4.5 million VND, respectively).

The average monthly income in the Q2 of 2020 in the Service sector recorded a year-on-year decrease of 7.3%, the deepest decline among 3 economic sectors; the Industry and Construction sector decreased by 5.1%; the Agriculture, forestry and fishery sector reduced by 2.8%. 

Figure 4: Average monthly income of employees by economic sector

Unit: Thousand VND/month

 

 

Among the 21 economic industries, there were industries recorded the deepest drop in monthly average income in the Q2 of 2020 compared to the same period last year as follows "Arts, entertainment and recreation" (down 19.2%), “accommodation and catering service” (down 18.3%), “transportation and storage” (down 12.8%), “wholesale and retail trade and repair of motor vehicles and motorcycles” (down 9.1%).

In comparison to the same period last year, the average monthly income of employers witnessed the highest year-on-year decrease, down 17.3%; self-employed employees reduced by 7.6%; wage workers dropped by 2.8%.

The higher qualification the workers possess, the lower their income reduced. Compared to the same period last year, the average monthly income of employees qualified at universityleveland higher increased by 0.5%, meanwhile the income of employees qualified at primary level recorded the most decrease (down 8.3%); the income of employees qualified at intermediate level fell by 7.2%; the income of the college level reduced by 3.3%.

 

Figure 5:Percentage of increase/decrease in average monthly income of trained employees by qualification compared to the same period last year

Unit: %

 

The unemployment rate has been the highest in the last 10 years, of which the unemployment rate has increased the most in the labor group with low qualification

The unemployment rate in the working age in the 2ndQuarter of 2020 was 2.73%, particularly, the unemployment rate in the working age in the urban areas was 4.46%, the highest figure in the last 10 years,1.36 percentage points higher than that in the same period last year. 

Figure6: Unemployment rate in the working age in the 2nd quarter of the period 2011 - 2020 by urban and rural areas

Unit: %

  

The unemployment rate in the working age of the workers qualified at intermediate level and over in the 2ndQuarter of 2020 witnessed a decrease in comparison to the previous quarter and an increase compared to the same period last year. While the unemployment rate in the working age in the 2ndQuarter of2020 of the workers with low qualification (at primary level) or workers without qualification both increased in comparison to the previous quarter and the same period last year. This shows that when the economy is in shocks, the workers with low or no qualification face more difficulties in job opportunities than the workers with intermediate or high-level qualification.

Figure7:Unemployment rate in the working age by qualification

Unit: %

 

Labour underutilization rate has started to increase in the event of Covid-19 pandemic

Workers who have a need to work but do not have enough work (also called labour underutilization) include unemployed, underemployed workers and a group of workers outside the labor force that needs to work but not seeking a job or seeking a job but not ready to work immediately.

Labour underutilizationrate is the the ratio of workers who have a need to work but their needs of job are unmet fully compared to the total labor force that needs to work in the economy. This is an aggregate indicator that indicates the "mismatch" between the supply and demand of labor in the market, reflecting the labor redundancy. In the context of normal economic development, the rate of labour underutilization always exists but remains stable. This rate often rises when the market suffers from socio-economic shocks.

The results of the labor force surveysconducted from 2018 to now show that the rate of labour underutilization in Vietnam has been around 4.0%. The rate of labour underutilization began to increase when the Covid-19 appeared in January 2020 in Vietnam, reaching 4.6% in the first quarter of 2020 and 5.8% in the second quarter in 2020. The rate of labourunderutilization in the second quarter of 2020 increased by 2.1 percentage points compared to the same period last year, equivalent to an increase of about 1 million persons.

Figure8: Rate of labour underutilization

Unit:%

  

The majority of labour underutilizationpersons are under 34 years old (52.6%), while the labor force under 34 years old only accounts for 36.5%. This shows that the proportion of young Vietnamese workers participating in the labor market is not high, but their "underutilized" level is much higher than that of workers in other age groups. As such, taking advantage of young and skilled workers is limited, especially in the context of the occurrence of the Covid-19 in Vietnam.      

Figure9: Age structure of the labor force and labour underutilization

Unit: %

 

 
 

 

3. Conclusions and recommendations

The Covid-19 pandemic that has occurred in Viet Nam since the end of January 2020 has affected the employment of 30.8 million people aged 15 and older. Both the labour force and the number of employed workers were declined over 2 million people which is the biggest drop in the last ten years.

Female workers and low-skilled or without technical qualification workers and informal workers have been most severely affected by the Covid-19 pandemic.

Workers in the Services sector have been most negatively affected among all three economic sectors.

The Covid-19 pandemic has exacerbated the status of labour underutilization in the economy. The rate of labour underutilization in Q2 2020 is 1.5 times higher than that of the previous quarter and of the same period last year. The majority of labour underutilization are young people, under 34 years of age.

Impacts of the Covid-19 were such that workers have had more difficulties in participating in the labour market and contributing their labour in supply chain of goods and services production for the society. Consequently, for workers themselves, their incomes have declined substantially from the pre-pandemic level. At the same period of last year, when the year-over-year growth rate of workers’ income of Q2 2019 was 16.6% compared to the same period of 2018, workers’ income in Q2 2020 has declined by more than 5% compared to the same period of 2019. The income of employers has recorded the strongest decline level among all statuses of employment.

In light of difficulties facing workers in getting access to jobs for generating income for themselves and their families, the Government has issued various policies to address such difficulties and provide relief support to enterprises and workers. Among these include the Resolution 42/NQ-CP dated 9 April 2020 of the Government on different forms of support to people affected by COVID-19. Concerning the implementation of the Resolution 42/NQ-CP, the labour, invalids and social affairs sector has implemented in a concerted and rapid manner the 62 trillion VND package to the targeted beneficiaries. As of 25 June 2020, sub-national authorities have made payments to about 11.2 million beneficiaries, totalling 11,320 billion VND[6].

To date, Viet Nam has gained remarkable achievements in the fight against Covid-19 as well as delivered the dual objective of pandemic prevention and control and economic development. Although the GDP growth rate in Q2 2020 has registered the record low level in many years, it still remains a positive growth rate that many countries across the world could not achieve. Nevertheless, the Covid-19 pandemic across the world is still getting increasingly complex, with a high likelihood of the second wave in many countries, which would continue to have negative impacts on the labour and employment as well as income of workers in Viet Nam. To help enterprises and workers to recover their production and contribute to economic growth, the following solutions are recommended for implementation:

(1) Strengthen the implementation of the financial relief packages as specified in the Resolution No. 42/NQ-CP of the Government in a timely, efficient and correct manner. According to the findings of LFS survey, 57.3% of persons aged 15 years and older have suffered income reduction due to Covid-19 and, as such, it is necessary to enhance effectiveness of disbursement of such packages so that they can overcome the pandemic.

(2) Conduct research to develop special support packages specific for vulnerable groups, including female workers and those without technical qualifications who are affected due to the unpredictability of the pandemic so that they can quickly overcome difficulties towards stabilizing their life.

(3) Strengthen the effective implementation of enabling policies in support of production and business entities to recover economic activities across all industrial sectors, especially those significantly affected by Covid-19 such as processing and manufacturing; wholesale and retail trade; accommodation and food service; transport,v.v...

(4) In the context of the uncontrolled pandemic of Covid-19 in the world and the upward trend of labour underutilization, the Government should put in place policies that encourage workers to upgrade their know-how and qualifications, in response to requirements by employers in the ‘new normal’ situation, and at the same time support employers to provide refresher trainings to their workers; encourage enterprises to apply entrepreneurial initiatives and science and technology innovations in order to fulfil potentials and embrace strengths, thus contributing to job generation and social security.

(5) Enterprises and workers should capture labour demand in the economy in the context of transformation of production modality in response to emerging requirements in the aftermath of Covid-19 in order to upgrade qualifications and competencies aligned with the labour demand in the society.

 



[2]Source: Trading Economics, updatedas of 15 June 2020.

[3]The labor force survey has been conducted quarterly since 2011.

[4]The number of employed population aged 15 and over in Q2 of the period 2012 - 2019 recorded a consecutive acceleration compared to the previous quarter (except for 2016, the number of employed in Q2 declined by 49.9 thousand persons against the previous quarter) and increased consecutivelyover the same period last year (except for 2015, the number of employed in Q2 year-on-year decreased by 308.2 thousand persons).

[5]Employment in the informal economy includes those who work in non-agriculture, forestry and fisheries  and business registered agriculture, forestry and fisheries, belong to one of the following four groups: (i) unpaid family workers; (ii) owners of establishments, self-employed worker in the informal sector; (iii) wage earners in the formal sector who are not entitled to enter into a labor contract or to be entered into a labor contract with definite term but not paid compulsory social insurance by employers; and (iv)  cooperative members who do not have a compulsory social insurance.

[6]Report by Ministry of Planning and Investment submitted to the Government dated 30 June 2020 concerning the implementation of the Resolution No. 01/NQ-CP, Resolution No. 42/NQ-CP, Resolution No. 84/NQ-CP, Directive No. 11/CT-TTg, socio-economic performance status in the first half and solutions for socio-economic development in the second half of 2020.

 
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