Vietnam’s Labour Productivity among Lowest in the Region despite Growth

May 14, 20189:49 am1067 views

Despite showing notable growth last year, the latest Vietnam Annual Economic Report released on Tuesday (May 8) indicated that Vietnam’s productivity remains among the lowest in Asia. While the nation’s productivity level is rising, it does not increase as fast as the wages that would lead to an economic imbalance.

The average productivity increased by 36 percent from VND38.64 million per worker in 2006 to VND60.73 million ($1,660 to $2,600) in 2017. This level is still below when compared to other neighbouring countries in the region such as Japan, South Korea, China, Singapore, Thailand, Malaysia, the Philippines, Indonesia and Cambodia, according to researchers from the Vietnam Institute for Economic and Policy.

The stark contrast was pointed out by the General Statistics Office, suggesting that Vietnam’s recent labor productivity is only 1/18th of Singapore, 1/16th of Malaysia, and 1/3 of Thailand and China.

Vietnam’s labour productivity was also lower than Cambodia’s in several sectors such as manufacturing, construction and transportation-storage-communications. The country’s productivity ranked second lowest of the countries reviewed, and was only higher than Cambodia in agriculture, electricity-water-gas and wholesale-retail-repair, the report found.

If Vietnam wants to surpass neighbouring countries such as Cambodia in terms of productivity and economic growth, the researchers said that the country would need stronger reforms, VN Express International reports.

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The report mentioned about the connection between labour productivity and wage growth. As for now, Vietnam’s minimum wage stays from VND2.76 to 3.98 million ($121-175) per month. The wage could vary depending on each region. The wage growth of 6.7 percent was noted to exceed labour productivity growth of 5 percent between 2004 and 2015. If the pattern continues, researchers are concerned that it could create an economic imbalance in the future.

The study also presented issues regarding the country’s young workforce that affected productivity. According to the data, 60 percent young labourers with lower and upper secondary education are working in the informal sector such in a family business, which are generally considered areas of low productivity, precarious employment, and unstable incomes.

Further, the report also noted that almost half of young Vietnamese workers have a qualification mismatch as 33 percent are not qualified for what they do. While some 70 percent of young workers do not own social insurance, wages continue to increase rapidly.

Vietnam is currently riding on a wave of high growth, and some researchers forecast that GDP growth will reach 6.83 percent this year, exceeding the National Assembly’s target of 6.7 percent. However, there is the possible risk of inflation exceeding 4 percent due to pressure from price adjustments for public services and petroleum, they added.

Read also: Fewer Women in Higher-Paying Roles Lead to Gender Wage Gap: Study

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