Vietnam's labor productivity was lowest among the countries, including Cambodia: Report

By Quynh Chi - May 09, 2018 | 08:37 AM GMT+7

TheLEADERThe economic structure has not been shifted and investment resources are being shifted mostly into the old and low value-added sectors, which are reflecting a distortion in Vietnam's labor productivity, according to Nguyen Duc Thanh, Vietnam Institute for Economic and Policy Research's president.

Vietnam's labor productivity was lowest among the countries, including Cambodia: Report
Labor productivity of manufacturing and processing sector is still low.

According to the Vietnam annual economic report 2018 themed on understanding the labor market for productivity enhancement just jointly released by the Vietnam Institute for Economic and Policy Research (VIEPR), the Vietnam National University (VNU) and the University of Economics and Business (UEB), Vietnam's labor productivity has shown improvement but is still slow after ten years. 

Regarding international comparison, Vietnam's labor productivity is compared to Northeast Asia including Japan, South Korea, and China; and ASEAN nations including Singapore, Thailand, Malaysia, Philippines, Indonesia, and Cambodia. 

The report highlighted that Vietnam's labor productivity was lowest among the countries, including Cambodia, in the three sectors including manufacturing; construction; and transportation, storage, and communications.

Meanwhile, the manufacturing industry has low labor productivity, and the agriculture, forestry and fishery sector is still among the sectors with the lowest labor productivity in the economy.

According to experts, the improvement of Vietnam's labor productivity in the past ten years is due to the labor shift from low-productivity industries such as agriculture to higher productivity industries, which reduces labor productivity in productive industries. 

Besides, the leader of VEPR said that the adjustments in minimum wage results in a reduction in employment and profit rates. 

Moreover, when minimum wage increases, labor-intensive industries such as garment and textiles, wood products and furniture producers tend to introduce machines to replace labor.

The report shows that the case has led to a large proportion of young laborers working in the informal sector or other sectors not relevant to skills trained, thus they do not have opportunities to accumulate skills and tend to receive less social insurance. 

In order to enhance Vietnam's labor productivity, experts said that it should continue to create positive conditions to promote total-factor productivity (TFP) growth as well as policies to train and improve knowledge andskills for workers. 

Especially, there should be new technology innovations in production, application of technology to improve labor productivity in industries and at the same time invest more in research and technological improvement and purchase of technology from abroad if necessary. 

If Vietnam does not want to be surpassed by neighboring countries such as Cambodia on labor productivity in particular and economic growth in general, experts said that it should have stronger reforms to improve labor productivity of economic sectors.