1. National and international background

COVID-19 pandemic breakout has been widespread across the world, exerting severe impacts on the global economy in 2020. The world’s economic growth is predicted at -4.2 percent in 2020 by OECD, an increase of 0.3 percent compared to the earlier forecast back in September.

According to the Asia – Pacific World Employment and Social Outlook Report 2020 by the International Labour Organization (ILO), it is estimated that the economic backlash of the COVID-19 pandemic wiped out some 81 million jobs in 2020. Working-hour losses are also influenced by the millions of persons moving out of the labor force, or into unemployment as job creation among the countries in the region collapsed. The regional unemployment rate could increase from 4.4 percent in 2019 to somewhere between 5.2 percent and 5.7 percent in 2020.

Labour and employment statistics have shown that unemployment rate in Quarter IV in some countries has noticeably decreased compared to that in Quarter III. To name a few, Canada, the US and China have seen the unemployment rate in November 2020 at 8.5%; 6.7%; 5.2%[1] respectively.

In Viet Nam, notwithstanding the severe impacts by COVID-19, original and thorough measures carried out at various levels have been taken to prevent macro-economic downgrade and fiscal policy, helping to stabilize the economy and resilience, resuming the situation in the new normal context. Gross domestic product (GDP) in quarter 4 increased by 4.48% over the same period last year, which is the lowest growth rate of all quarters 4 in the period of 2011-2020. GDP of 2020 increased by 2.91%. By quarter 4, industries that were heavily affected by COVID-19 have shown signs of bouncing back. Compared to the previous quarter, total retail sales of consumer goods and services increased by 6.4%, tourism revenues increased by 5.4%. Even though the labor and employment situation in Quarter IV has seen some positive changes, labor-employment and income indicators of the workers in Quarter IV in particular and throughout the year 2020 are still in decrease compared to that of the previous year.

2. COVID-19 impacts on labor and employment

There are 32.1 million people aged 15 and higher nationwide negatively affected by COVID-19

As of December 2020, there have been 32.1 million people aged 15 and higher nationwide negatively affected by COVID-19. These include those who lost their jobs, went out furlough/took a time of work alternately, had reduced working hours, suffered income reduction, etc; in which those with income decrease account for 69.2 percent, those with staggered working hours/layoffs and rotating leave at 39.9 percent, and those having to quit working or stop their economic activity at 14 percent.

Most severely affected by the COVID-19 epidemic is the service sector with 71.6% of workers affected, followed by industry and construction with 64.7% of workers affected. Meanwhile, the rate in the agriculture, forestry and fishery sector is 26.4%.

Labour force[2] continues to rise in line with the recovery stage in Quarter III. However, the number has yet to resume its original point before the pandemic

The labour force aged 15 and higher in Quarter IV/2020 has reached 55.1 million people, an increase by 563.8 thousand to the previous quarter. Yet the number still fall short of 860.4 thousand of people in comparison to the same period of the previous year. This, again, has demonstrated the recovery tendency of the labour market after a record fall in Quarter II of 2020.

COVID-19 pandemic has changed the seasonal pattern of the labour force across quarters of the year. In previous years, like in the period of 2016 – 2019, it is common to see the number of working people in the first quarter of the year decreasing, before gradually increasing in the latter quarters and eventually pitching in Quarter IV. In 2020, the labour force starts to reduce in the quarter I, drastically decrease in Quarter II, and gradually recover in Quarter III and Quarter IV. Even though recovery has been seen, the labour force in Quarter IV has yet to reach the original number when the pandemic had not broken out. The number of people entering the labour force is at 200 thousand people lower than that of Quarter I.

Compared to Quarter III 2020, labour recovery in Quarter IV in rural areas has been seen as quicker than that in the urban areas. Meanwhile, the recovery pace among male workers has caught up with that among female ones. Compared to the previous quarter, labour force in rural areas has increased by 1.4 percent – an increase by 1.1 percentage point higher than that in urban areas. The number of male and female workers both increase by 1.0 percent.

Generally in 2020, the labor force aged 15 and higher reached 54.6 million people – a decrease of 1.2 million people compared to 2019. In the period of 2016-2019, the average annual labor force increases by 0.8%. In the context of a similar growth rate as in the 2016-2019 period and there is no COVID-19 epidemic, Viet Nam’s economy will have 1.6 million more workers. In other words, the COVID-19 pandemic may have deprived 1.6 million people of the opportunity to enter the labour market.
COVID-19 has pulled many into unemployment while driving some among them into the resort of informal work
In Quarter IV of 2020, the number of employed people aged 15 and higher is nearly 54 million, decreased by 945 thousand people compared to the same period of the previous year. Among them, the employed people in urban areas is 17.6 million – a decrease of 90.2 thousand people. That in rural areas is 35.9 million – a decrease by 854.3 thousand people compared to the same period of the previous year.

Although the employed population in Quarter IV of 2020 increased sharply compared to the previous two quarters, its sharp decline in Quarter II has kept the number of employed aged 15 and higher in the economy for the whole year of 2020 lower than that in 2019.  The number of employed people aged 15 and higher is 53.4 million people, a decrease of 1.3 million people compared to 2019 (corresponding to a decrease of 2.36%). This fluctuation is in stark contrast to the annual employment growth trend for the 2010-2019 period. During this period, the number of employed workers continuously increased over the years, with an average annual increase of more than 600 thousand people. The reduction in employed workers as of 2020 is unprecedented in the past decade. Out of the 1.3 million unemployed people mentioned above, 51.6% are women and most of them are in the working-age (76.2%).

Quarter IV of 2020 has seen 20.9 million workers having informal jobs[3], an increase by 233 thousand people to the previous quarter and 338.4 thousand people to the same period of the previous year. The rate of informal workers in Quarter IV of 2020 reaches 56.2 per cent, a decrease by 0.8 percentage point to the previous quarter and a 0.6 percentage point increase to the same period of the previous year.

For the whole year 2020, the number of informal workers is 20.3 million, an increase of 119.1 thousand people, while the number of formal workers is 15.8 million, a decrease of 21.1 thousand people compared to 2019. The rate of informal jobs in 2020 is 56.2% – a 0.2 percentage point higher than in 2019.
The dramatic increase of informal workers in 2020 is in contrast to its decreasing trend in recent years. In the period of 2016-2019 before the COVID-19 outbreak, the average annual increase of formal workers reaches 5.6 per cent, with that among informal workers at 3.6 per cent. The growth rate in the number of formal workers is 1.6 times higher than that of the informal, which leads to a gradual decrease in the proportion of workers with informal jobs over the years. However, COVID-19 pandemic in 2020 worsened the economy, with many businesses being forced to many measures including reducing labor cost (like applying rotation work, labor cuts, etc), recruiting seasonal workers or temporary workers to maintain operations. This leads to a decrease in the number of formal workers and an increase in the number of informal workers, ultimately leading to a rebound in the proportion of workers with informal jobs in 2020 after years of continuous decline.
It is apparent that COVID-19 has deprived many of formal work opportunities, leaving a part of them unable to obtain a new job, while some other having to resort to informal work of unstable and unsustainable nature.

COVID-19 not only deprives many people of formal work opportunities, but it also drives many of them into underemployment. The situation, however, has improved much in Quarter IV of the year 2020

To put Quarter IV of 2020 in particular, there has been a total of 902.2 thousand people nationwide suffering from labour underemployment. The number is much higher than that in the quarters of 2019. However, in comparison to the first, second and third quarter of 2020, the underemployment rate of working-aged workers has decreased sharply, from 3.08% in the second quarter to 2.79% in the third quarter and reaching 1.89% in fourth quarter. This proves that, although it is still adversely affected by the COVID-19 pandemic, the Vietnamese labor market has had positive changes, especially in the last months of the year when there was an increase in the demand for workers to produce products for holiday and new year events.

Generally, in 2020, the number of underemployed in working age is nearly 1.2 million people, an increase of 456.7 thousand people compared to 2019. The underemployment rate of laborers in the working-age group is 2.51 per cent, with 1.68 per cent of which is in urban area, and 2.93 per cent in the rural areas (in 2019, it is 1.5 per cent, 0.76 per cent, and 1.87 per cent respectively).

The underemployment rate of labor in working age in 2020 in the agriculture, forestry and fishery sector is at 4.68%, industry and construction sector at 1.50%; and service sector at 1.74%. (In 2019, it is 3.45 percent, 0.43 percent, and 0.87 per cent, respectively). Although the rate of underemployment in the agriculture, forestry and fishery sector in 2020 was highest compared to the other two remaing sectors, its proportion was significantly lower than the previous year (2020: 53.7%, previous years: 70%). This showed that due to the COVID-19 underemployment is not only prominent in the primary sector but also increasing in the secondary and tertiary sectors.

The majority of the underemployed are not technically or professionally trained. The higher level of professional and technical level the labour force possesses, the lower the underemployment rate gets. The underemployment rate in the age group 2020 of workers without professional and technical qualifications is at 2.87 percent; the primary level at 2.25 percent; the intermediate level at 1.58 percent; college at 1.52 percent; and university and above is 1.04 percent.

Compared to 2019, the monthly average income of the workers in 2020 decrease across all 3 economic sectors

The average monthly income of employees in the fourth quarter of 2020 is at VND 5.7 million VND, increased by 212 thousand dongs compared to the previous quarter and decreased by VND 108 thousand compared to that in the same period of the previous year. Normally, in circumstances without the COVID-19 outbreak, workers’ income in the fourth quarter increased quite high compared to that in the other quarters. In the fourth quarter of 2019, workers’ income was 5.8 million VND, an amount of 200 thousand dongs higher than that in the third quarter of 2019 and the highest compared to the other quarters of the year. In 2020, in the context of the widespread COVID-19 epidemic, workers’ average monthly income in the fourth quarter not only failed to maintain the annual growth rate, but it also decreased sharply compared to the first quarter of the year and the same period of the previous year.

In 2020, the average income of workers is 5.5 million dongs, a decrease of 2.3 percent compared to 2019 (an equivalent of VND 128 000). Workers in the service sector are most strongly affected in terms of income, with a decline at VND 215 000. They are followed by those in agriculture, forestry and fisheries with a decrease of VND 156 000. Those in industry and construction suffer from the lowest income reduction, at VND 100 000 per person per month.

The unemployment rate in the working-age in urban areas has decreased to the previous quarter. However, it still remains highest in comparison to the same period across the years from 2011 to 2020

The number of unemployed people at working age in the fourth quarter of 2020 is nearly 1.2 million people – a decrease of 60.1 thousand people against the previous quarter and an increase of 136.8 thousand people to the same period of the previous year. The working-aged unemployment rate in the fourth quarter of 2020 is 2.37%, a decrease of 0.13 percentage points from the previous quarter and an increase of 0.33 percentage point against the same period last year. The rate in urban areas was 3.68%, a 0.32 percentage point lower than the previous quarter and a 0.78 percentage points higher than the same period last year. COVID-19 pandemic has made the unemployment rate of the working-age population in the fourth quarter of 2020 the highest in comparison with the same period in the past 10 years.

The unemployment rate in 2020 will be 2.48 percent, a 0.31 percentage point higher than that in 2019. The number has it at 3.88% for the urban area, a 0.77 percentage point increase compared to that of 2019. Although it is higher than the previous year, the unemployment rate in urban areas in 2020 did not exceed 4.0%, meeting the target set by the National Assembly in Resolution No.85/2019/QH -14 on the Socio-Economic Development Plan for 2020. This, together with the GDP growth and other macro-balance indicators, can be seen as important evidence of the success of the Government in its attempt to the realization of “pandemic prevention” and “socio-economic development” at the same time.

At present, there is still a significant part of the labor force untapped, especially the young ones. The utilization of this group of workers becomes more limited in the context of the COVID-19 epidemic

Labour underutilization[4] is an indicator to measure the mismatch between supply and demand in the labor market, reflecting a surplus in labour supply. In a normal economic progress, there is always possibility of labour underutilization. The number tends to increase in situation of the labour market affected by socio-economic shocks.

The rate of labour underutilization in Viet Nam in the period of 2018-2019 fluctuated at 4.0%. The rate started to increase when COVID-19 pandemic broke out in the country, accounting for 4.6% in the first quarter and increasing to 5.8% in the second quarter. As socio-economic activities gradually revive in the last 6 months of 2020, the proportion of underutilized workers will drop to 5.3% in the third quarter and 4.3% in the fourth quarter. Generally, in 2020, the labour underutilisation rate is 5.02%, an increase of 1.2 percentage point compared to the same period last year, an equivalent of an increase of more than 614 thousand people.

Labour underutilization rate in 2020 in urban areas is 5.5 percent, higher than that in rural areas at 4.8 percent. That of female workers is 5.5 percent, higher than that of male workers at 4.6 percent. The majority of underutilized workers are those under 35 years old – an account of 56.5 percent to the total, while the workforce under 35 years old accounts for only 36.6 percent of the whole labour force. This shows that Vietnam still has a significant part of the labor force untapped, especially the young worker group. In the context of the COVID-19, the use of this group of workers is becoming more limited.

3. Conclusion

The COVID-19 pandemic has turned the Vietnamese labor market more turbulent, with more than millions of workers negatively affected by job insecurity, layoffs/rotating breaks, reduced working hours, and income. For the first time in 10 years, the Vietnamese economy in 2020 witnessed a serious decline in the number of people entering the labour market and the number of economically active people. The average income of workers is also in deficit. The indicators on the unemployment rate, underemployment rate and the rate of workers with informal jobs have all increased in contrast to the decreasing trend in recent years. However, with the Government’s determination and the unanimous efforts of the people, labour and employment situation in the last months of 2020 has significantly improved. This result contributes to both the realization of the epidemic prevention goal and the assurance of economic growth and national development.

Results from Labour and Employment Survey throughout the quarters in the year have showcased that COVID-19 has exerted negative impacts on workers in entering the labor market and income generation. As the COVID-19 pandemic is becoming more complicated, with a new variant quickly spreading, it is expected that the pandemic will bring about an unpredictable influence on the lives and production activities of the people. To actively respond to the pandemic to ensure proper control while promoting production, it is crucial that policies be conducted in a synchronous manner as follows.

Firstly, it is advisable to focus on solving difficulties for businesses, while improving the procedures to support businesses in approaching support schemes in a more convenient manner. This is also to stimulate the economy, as well as to stimulate the need for labor. These measures not only support businesses and workers out of bankruptcy possibilities, income loss and reduction, but they also serve as a springboard to promote business and production.

Secondly, it is advisable to carry out tailored and customized support package, with the diversification of vocational training and upskilling programs targeting different beneficiaries, especially female workers, non-professionally/technically trained workers, and informal workers. This is to ensure their social well-being and encouraging them to continue working and contribute to economic recovery and development.

Thirdly, there are now about 75% of workers in Viet Nam’s labor market who are not technically trained. This is a disadvantage to the country’s economy, considering that the pandemic is still spreading and Industrial Revolution 4.0 is happening globally. Low quality in labor force remains a hurdle to Viet Nam in adopting to and catching up with new technology trends and new ways of conducting businesses in the world. Thus, it is necessary that Viet Nam conduct training and re-training policies in the coming time to improve the quality of human resources in response to the requirement of economic development and growth.

[1] Trading Economics, updated on 30 November 2020.
[2] The labor force is the sum of employed and unemployed persons.
[3] Informal workers (also referred to as informal economy workers) refer to those who work in non-agricultural employment and those who work for agricultural, forestry and fisheries households with business registration, falling under one of the following four categories of work: (i) Family-contributing workers; (ii) Employers/owners and own-account workers involved in their own business production units in the informal economic sector; (iii) Salaries workers without labor contracts or with labor contracts but no compulsory social insurance contributions made by their employers on their behalf; (iv) Members of producer’s cooperatives without compulsory social insurance.
[4] Underutilized labor consists of the unemployed, the underemployed and a group beyond the labor force who wish to and are unavailable to work but did not actively seek work. Labor underutilization is the mismatch between those wishing to work but who do not have adequate jobs against the total labor force wishing to work in the economy.