Reforming Policies to Transit Rural Labor Effectively in the Context of the Fourth Industrial Revolution in Vietnam

Reforming Policies to Transit Rural Labor Effectively in the Context of the Fourth Industrial Revolution in Vietnam

Published: 2020.09.29
Accepted: 2020.09.24
29
Vice President
Vietnam Academy of Agriculture Sciences (VAAS).
Research Officer
Vietnam Academy of Agricultural Sciences

ABSTRACT

Vietnamese labor has experienced a sharp transition in recent years, especially in the context of the fourth industrial revolution. In the agricultural and rural areas, labor tends to shift to higher value-added sectors. This transition led to an accelerating decline in the share of labor in the agricultural sector from 49.5% in 2010 to 40.3% in 2017, while that of the labor force in the industrial sector increased from 21% to 25.7% and services increased from 29.5% to 34%. Agricultural labor  has also changed from cultivation to husbandry, and service and business sectors actively contributed to the development of agriculture and rural areas. National policy institutions play an important role in promoting rural labor transition. However, several ineffective policies need to be renewed to improve the efficiency of the labor transition to the industrial and service sectors that require appropriate skills and expertise. In the context of the fourth industrial revolution and the application of advanced technology to production, workers are required to be trained to meet the labor market requirement. The innovation of policies and institutions, strengthening the capacity of workers, especially professional workers, help them to have the necessary conditions to be ready to switch to other industries and fields with higher added value. This is an important basis, to ensure economic and social stability that is needed in the current context.

Key words: Labor transition, rural, employment policy

CURRENT SITUATION OF AGRICULTURAL AND RURAL LABOR TRANSITION: SHIFTING LABOR FROM AGRICULTURE TO INDUSTRY AND SERVICES

The transition of rural labor in Vietnam is currently experiencing an appropriate change: laborers in agriculture have sharply decreased, while its counterparts in the industrial and service sectors are experiencing an increase in the number of laborers. The proportion of employed labor in the agriculture, forestry and fishery sector has been continuously decreasing over the years, from 53.9% in 2009 to 46.3% in 2014 and reaching 35.3% in 2019, respectively. For the first time, the number of laborers working in the service sector is higher than the number of laborers working in the agriculture sector in 2019. This transition of labor has made an important contribution to the distribution and making optimal use of local resources for economic development by increasing labor productivity in both agriculture and industry and services. Labor productivity in agriculture increased by 2.1%, industry by 8.9% and services by 16.1% (GS, 2019).

Vocational training plays an important role in restructuring labor in rural areas. In 2016, the number of employees receiving primary vocational training for less than three months reached 78.3% of the plan. Particularly, the number of employees on social security and policies is composed of 48,923 people; the number of laborers performing agricultural restructuring: 77,266 people; some of them have new jobs and improved production efficiency when doing previous jobs: more than 100,000 people. In 2017, an additional 290,430 workers were trained in agriculture associated with regional conditions. Of which, 20% of the employees are engaged in hi-tech agricultural production and 10% are trained in agriculture to ensure local social security. In 2018, the number of employees receiving agricultural vocational training was more than 120,000, reaching 41% of the plan. In particular, training from the central budget allocated to localities is composed of 64,000 people, in which 20,000 people were trained by the enterprise cooperation program, 5,000 people by the agricultural restructuring program, and 39,000 people by the social security policies. The number of labors trained from the source of socialized budget of about 33,500 people. Many workers have participated in high quality vocational training courses, such as safe vegetable cultivation, fruit cultivation, hi-tech melon cultivation, mushroom production, and seafood processing under VietGAP standards. In addition, there is also a large workforce trained by vocational companies and organizations to use machine tools for post-harvest production and processing. As a result, many rural agricultural workers have new jobs that contribute to increasing their incomes. In some localities, many businesses have succeeded in employing well-trained workers, bravely applying high technology in agricultural production, bringing high economic efficiency.

CHALLENGES TO AGRICULTURAL AND RURAL LABOR TRANSITION

The qualifications and skills of workers in rural areas are still low

Labor mobility between sectors and economic regions in Vietnam is also facing certain difficulties and challenges due to low levels of skills and skills of rural workers leading to difficulties in labor transition (Mantsios, 2010). Employers take more time to train workers to meet the needs of the job. Vocational training in the field of agriculture and rural areas is still limited, and failed to meet the needs of the jobs, leading to the rate of labor restructuring that is not completely equivalent to the rate of economic restructuring. This causes inefficiencies in economic restructuring. This trend will continue in the near future as labor productivity in non-agricultural sectors is often larger than in agriculture sector and rural labor force itself does not meet the qualification requirements. The qualification for labor market in other sectors is therefore limited leading to low possibility of joining the non-agricultural labor market. In 2019, there were 76.9% of employed workers without technical and professional qualifications, the rates in urban and rural areas were 60.7% and 84.84%, respectively (GSO, 2019).

The country currently has about 10 million farmer households with more than 30 million workers but only 17% are trained through extension training program. Of the nearly 17 million young people in rural areas of the country, 12% graduated from upper secondary schools and only 3.11% had intermediate or higher technical qualifications. According to the General Statistics Office (GSO, 2019), there were still 21.6 million workers working in agriculture, forestry and fishery, while the labor productivity of this area was only 35.5 million VND/labor/year, equal to 38.1% of the overall labor productivity of the economy, while only 21.5% of trained workers have degrees and certificates, of which rural areas are very low, only about 13%.

Low labor productivity in rural areas

The transition of labor from agriculture to industry and services has increased labor productivity in general and of these industries in particular, but is still much lower compared to other countries in the region (McCaig and Pavcnik, 2013). However, the productivity of labor in the rural and agricultural sector is still much lower than other sectors, as a result, the income of labor is lower than other sectors. Annual labor’s income at current prices was estimated at 92.1 million VND, equivalent to US$4,100 /labor/year, increased by 5.9% compared to 2016; higher than the average increase of 4.5% in the period of 2011-2016, and much higher than the increase of 3.45% per year on average of the period of 2006-2010. The rate of productivity growth is lower than the average GDP growth rate of about 6.21% over the same period, lower than the average real wage growth of about 12.59% per year. In Vietnam, it became more expensive, which directly affected the competitiveness of the economy. Vietnam's labor productivity calculated by purchasing power parity reached US $10,232, equaling only 7.2% of Singapore, 18.4% of Malaysia, 36.2% of Thailand, 43% of Indonesia, 55% of the Philippines. As for agriculture, labor productivity is only higher than Cambodia and much lower than other Asian countries. According to the Asian Development Outlook (2017), Vietnam's average agricultural productivity per labor is only two-thirds of Indonesia and less than half that of Thailand and the Philippines.

Unsustainable rural labor mobility

The majority of agricultural workers are moving into industry and services without labor contracts, social insurance, health insurance or signing contracts but not paying insurance. Of the more than 18 million workers working in informal non-agricultural jobs nationwide, 90% do not have technical expertise, over 76.7% do not have a written labor contract, working time is usually two hours more than the formal sector but only two-thirds of the official income. Low-income and unwarranted jobs have led to a significant proportion of the labor shifting from non-agricultural to agricultural sectors (Imbert, 2013). According to research conducted by Oxfam on March 29, 2018, many young people working in agriculture pointed to urban employment as unskilled workers or workers in private enterprises and industrial parks for a while, then back to farming in the locality. The phenomenon of temporary seasonal migration to urban areas is quite common. Thus, it is the low income, insecurity, and unqualified rights that lead to labor shifting back to agriculture, making labor mobility unsustainable (Anh, 1999). Many people either work on other non-farm jobs or migrate away to find jobs. However, they consider agriculture as a livelihood and its "insurance card” is inherently ingrained in the minds of many rural people.

Impact of the 4th industrial revolution

The Fourth Industrial Revolution has affected the transition of the labor market and many other industries.  Thanks to the application of modern machineries, technologies and techniques have significantly reduced the labor force. According to the International Labor Organization, 86% of textile and garment workers in Vietnam are at risk of losing their jobs due to companies adopting new technologies, minimizing the use of unskilled labor in advanced production technology lines. Therefore, the government should have an effective strategy for training and enhancing skills of labor to help them to adapt to the requirement of the fouth industry revolucion. At the same time, the strategy should also take account into training new skills to help them transit to other sectors smoothly.  According to the report of the World Economic Forum (2018) on the readiness for the future of the 2018 production, Vietnam is ranked among the countries that is not yet currently ready for Industry 4.0, ranked 90th in technology and 70th in innovation in human capital, out of 100 countries. In agriculture 4.0, it is required to have a highly skilled and skilled labor force, proficiency in the application of scientific and technological advances to create economic efficiency. The renovation of training methods and human resource development for modern agriculture is an urgent requirement for all industrial levels. In order to meet the goal of building prosperous agriculture, wealthy farmers, modern and civilized rural areas, the quality of human resources and rural labor in our country needs to be trained simultaneously in order to improve markedly and create breakthrough changes in both quantity and quality (Dollar et al., 2004).

Commitment of free trade agreements

After the comprehensive and progressive Agreement on Trans-Pacific Partnership and EU-Vietnam Free Trade Agreement come into effect, labor costs are expected to increase. These agreements are beneficial because they improve market access for Vietnamese exporters. However, the government needs to focus on labor reform, technical skills and corporate governance to fully realize the benefits of the agreements. Labor rights are one of the key terms in both upcoming agreements. They require members to accept and maintain the rights as stated in the 1998 International Labor Organization Declaration on their laws, institutions and practices. Although Vietnam has taken a few steps to meet its requirements through institutional and legal reforms, more enforcement is needed, creating conditions for workers in Vietnam to have more opportunities to access the international labor market, contributes to improving professional qualifications and income of employees (Tran and Nørlund, 2015).

RENEWING POLICIES AND INSTITUTIONS TO PROMOTE SUSTAINABLE RURAL LABOR TRANSITION

The State policies focus on the contents to promote employment creation; perfecting institutions and policies on employment and labor markets in accordance with the country's socio-economic development orientations in the context of integration and the fourth industrial revolution; create jobs for female workers, support businesses that use many female workers; support young people to start-up a business; strengthen the integration of gender equality content, pay attention to job creation for female workers, especially in rural areas through the National Target Programs and the Vocational Education - Employment Target Program and occupational safety and sanitation stages; improve the effectiveness of vocational training in association with job creation; socialize vocational training, encourage businesses to participate in vocational training for workers, especially older female rural workers; prioritizing loans for job creation with regard to projects on job creation for youth and rural women from the National Employment Fund; strengthening information and propaganda on the guidelines and policies of the Party and the State on vocational training, supporting job creation and sending laborers to work abroad for female and young laborers in parallel with education, raising awareness about gender and gender equality (Teerawichitchainan et al., 2010). The Government policies to attract investment and develop industry and encourage startups in recent years have created positive shifts among industries in the economy. With the current pace of labor restructuring, the Resolution No. 23/NY-TW dated March 22, 2018, on the orientation to formulate national industrial development policies by 2030, vision to 2045. By 2030, the rate of labor in industry and service sector will reach over 70%, which can exceed the set targets.

Innovating policies for training and retraining rural labor force

The government should pay much attention to improving the quality and efficiency of vocational trainings. These trainings have to be based on the surveys and forecasting vocational training needs of rural laborers. The investment of public sectors should also focus on strengthening material facilities, vocational training equipment for state vocational training institutions, especially facilities at district level to develop the contingent of lecturers, vocational training managers and direct support for rural laborers to participate in vocational training. The government needs to formulate and consolidate planning, training and retraining of administrative cadres for agriculture and rural development. The employment policy needs to encourage young and technical officials working in agriculture and rural areas.

The policy should be prioritized for enhancing vocational training for rural workers, creating favorable conditions for labor restructuring. The Prime Minister's Decision No. 1956/QD-TTg dated November 27, 2009, on approving the national project "Vocational training for rural labor until 2020" opened a new direction for the development of rural labor training and new rural development program. The basic objective of the project is to strive for vocational training which on average is about one million rural laborers/year, improve the quality and effectiveness of vocational training and generate jobs to increase the income of rural labor. This project also contributes to restructuring labor and economic structure, serving the cause of industrialization and modernization of agriculture and rural areas. The project not only focuses on supporting vocational trainees but also upgrading facilities of vocational training institutions, taking care of lecturers, developing vocational training centers and employment promotion.

Policy encourages training institution to proactively improve the quality of undergraduate and postgraduate training program to generate qualified experts who can approach the international qualifications in the field of hi-tech agriculture, organic agriculture. This policy also contributes to supplementing the source of qualified staff in localities and research institutions, agricultural cooperatives and enterprises. It is also necessary to enhance exchange, learning, exchange and international cooperation for vocational training in the context of the fourth industrial revolution. This cooperation help workers acquire advanced knowledge from developed countries, applied practical applications in production. In addition, the vocational training should be associated with practice and based on the market demands and orders of the business. The training program must catch up with the world’s agricultural production trends. It must have innovative content and methods by promoting the application of information technology, digital technologies and precision agriculture to improve the capacity and quality of labor, teachers and managers.

Innovating policies to develop traditional craft villages in rural areas

The government should issue new policies to develop traditional trade and handicraft villages associated with rural tourism. Policies should also prioritize to develop agricultural services such as soil preparation, irrigation, and plant protection, applying advanced technologies in post-harvesting, preserving, processing and transporting in traditional handicraft villages. Because traditional trade villages represent cultural symbol values and contribute positively to growth and transformation of economic structure in rural areas, it is necessary to pay attention to developing cooperation models in handicraft villages, increasing the mechanization of production processes and rural electrification. To develop household economy in the traditional craft village, farmers need to be encouraged to join a unified organizations and cooperation to expand production and take advantage of the business scale. The investment policies must be prioritized on product protection, expansion of capital mobilization forms such as equitization of cooperatives, creating favorable conditions for laborers, organizations and economic sectors to contribute capital to develop production and business activities.

Innovating policies to encourage an effective linkage of “four stakeholders” in agricultural production

The fourth industrial revolution requires a closer linkage and cooperation of the four stakeholders, consisting of farmers, entrepreneurs, scientists and state. This cooperation will create a more favorable condition to apply advanced sciences and technology in agriculture sector, creating breakthroughs in productivity, quality and competitiveness of agricultural production. There is a need to develop markets for agriculture, forestry and fisheries is aimed to serve as a basis for effective restructuring of agricultural production and rural economy. Based on the planning of economic development in rural areas, there is a need to formulate a plan to develop each type of services in the countryside such as agricultural services; commercial services; and technical services. It is of crucial importance to improve capacity related to the research and forecast of market information for farmers and businesses based on the linkage among “four stakeholders.” Most farmers are still familiar with small, fragmented production methods and slow access to market information. Several agricultural labors are limited in awareness of the responsibility to comply with legal provisions, so they are easy to violate contracts in the process of linking production and markets, they need to be linked and cooperated with other parties to improve their production efficiency. For entrepreneurs, they must play a role as "leaders" facilitating this effective linkage among “four stakeholders” by establishing production areas, supplying input materials and purchasing products for farmers, promoting brands of agricultural products. Similarly, scientists have an important role to play in creating and introducing "high quality" inputs with reasonable costs and advanced technology. Scientists also help farmers to improve their capacity in production, process and preservation of agricultural products to satisfy the diverse demand of consumers. The State creates an appropriate legal corridor, ensuring the close and effective "3 parties" linkage. Reasonable mechanisms are needed in resolving disputes in linkages between houses, especially production and consumption contracts between enterprises and farmers. Appropriate sanctions are needed to support the settlement of purchasing contract disputes between businesses and producers. For cases of damage caused by force majeure, specific policies are required to support damages to associated parties. Now with agricultural products, if there is a good connection, instead of selling as raw materials, stakeholders should find ways of processing and preserving to create a balance between supply and demand and adjust selling prices. Conversely, when purchasing power declines, there must be marketing measures to stimulate market demand. In order for the model of "4 stakeholders” linkage to be effective and creating jobs with high incomes for labor, it is necessary to have tax-free policies, development programs, and loans with appropriate incentives, training qualified human resource of the “4 stakeholders” serving agricultural production towards sustainable development.

Innovating mechanisms to encourage foreign investments in agricultural production and rural development

The government should reform policies for encouraging foreign direct investments (FDI) in agricultural and rural areas. The government promulgated the Law on Foreign Investment in Vietnam and the Law on Domestic Investment Promotion with relatively open regulations. These legal regulations created a "wave" of foreign investments into Vietnam. The network of industrial parks and economic zones has formed throughout the country. Industrial parks located in both urban and rural areas have contributed to creating jobs and economic restructuring in rural areas. However, FDI attraction in agriculture accounts for a low proportion of the total registered FDI capital in Vietnam. The highest value of FDI in agriculture was recorded in 2008 with the total of US$236.6 million accounting for 3.3% of the total newly registered FDI. However, there is a sharp decline in FDI in agriculture sector until 2015. In recent years, FDI attraction in agriculture has tended to increase in both quantity and proportion of the total registered FDI in Vietnam. In 2015, newly registered FDI in agriculture reached US$241.2 million, accounting for 1% of the total FDI in Vietnam. In 2017, FDI increased to US$394.9 million, accounting for 1.1%, an increase compared to the lowest year in terms of number at US$87.5 million in 2012 and in proportion at 0.4% in 2013. The main reasons for low foreign investments in agricultural development and job creation in rural areas are as follows: i) There are always potential risks in agriculture production because of unstable markets; ii) Strategies, orientations and preferential policies in attracting FDI have many shortcomings due to complicated administrative procedures and the role of authorities at different levels to create linkages between farmer households and businesses still faces difficulties; iii) Agricultural production in Vietnam is small production, fragmented, scattered, small-scale land and land use rights belong to households; iv) The professional level of agricultural workers is very low, while infrastructure for agricultural production and rural areas is still limited.

CONCLUSION

The movement of agricultural and rural labor in Vietnam in the context of the fourth industrial revolution is facing many difficulties and challenges requiring innovative policies. Agricultural and rural workers are facing many difficulties, challenges, qualifications and professional skills of workers who do not meet the requirements of many industries and services leading to low productivity. Because of the low capacity of labor force, the shift of agricultural and rural labor into higher value-added fields is only temporary, so it does not create sustainable income and long-term prosperity in the rural area. Requirements for workers' qualifications, international integration process and the fourth industrial revolution, the government needs to renovate policies and institutions to promote, strengthen training and retrain rural labor force by developing traditional craft villages in rural areas, encouraging cooperation among “four parties” in agricultural production and foreign investments in agricultural production and rural development. In addition, it is also important to combine forms of training and retraining at a higher training level of provincial colleges and agricultural colleges. Industrial and service vocational training for rural workers should be promoted for young people, students who have just graduated from high school to help them prepare conditions to switch to non-agricultural sectors. With this workforce, special attention should be paid to vocational training, foreign languages, and communication skills to meet the increasing labor demand in terms of quantity and quality requirements. The form of training is mainly through local vocational training institutions, while there is a lack of participation of enterprises contributing to improving knowledge and capacity for communal officials and rural workers. In addition, it necessary to establish a standardized requirement for rural labor associated with the requirement of enterprises to accelerate the rapid and sustainable rural labor transition process, increase incomes, and create a common prosperity for rural areas in the context of the fourth industrial revolution.

REFERENCES

Anh, D. N. 1999. Market reforms and internal labor migration in Vietnam. Asian Pacific Migration Journal, 8, 381-409.

Asian Development Bank, 2017. Asian Development Outlook 2017 Update: Sustaining Development Through Public-Private Partnership. Lightning Source Incorporated.

Dollar, D., Glewwe, P. & Agrawal, N. 2004. Economic growth, poverty, and household welfare in Vietnam, The World Bank.

GSO 2019. Population and Housing Census in Viet Nam.

Imbert, C. 2013. Decomposing the labor market earnings inequality: The public and private sectors in Vietnam, 1993–2006. The world bank economic review, 27, 55-79.

Mantsios, G. Vietnam at the Crossroads: Labor in Transition.  New Labor Forum, 2010. SAGE Publications Sage CA: Los Angeles, CA, 67-76.

Mccaig, B. & Pavcnik, N. 2013. Moving out of agriculture: structural change in Vietnam. National Bureau of Economic Research.

Teerawichitchainan, B., Knodel, J., Loi, V. M. & Huy, V. T. J. J. O. C. F. S. 2010. The gender division of household labor in Vietnam: Cohort trends and regional variations. 41, 57-85.

Tran, A. N. & Nørlund, I. 2015. Globalization, industrialization, and labor markets in Vietnam. Journal of the Asia Pacific Economy, 20, 143-163.

Comment