VietNamNet Bridge – Nguyen Ba Ngoc, deputy director of the Labour Science and Social Affairs Institute, speaks to Hai Quan (Customs) newspaper about proposed measures to increase labour productivity.

How would you comment about labour productivity in Viet Nam?

Labour productivity is one of the criteria used to measure the economy's effectiveness. However, the labour productivity of the Vietnamese people has been at the bottom among countries in the region. Redundancy in numbers and the poor quality of labour productivity has caused an imbalance in labour structures, as well as increasing unemployment rates among worker groups with higher skills and qualifications.

By the end of the first quarter of 2014 there were 162,400 people with university qualifications, and more than 79,000 people with college degrees, who were unemployed throughout the country due to the low quality of labour productivity, despite rapid increases of the labour supply in the context of the country's "golden population structure" (which means that for every two people or more working, there is only one dependent person).

For me, there are many existing shortcomings in Viet Nam's labour market, such as the low skill of workers, slow change of labour structures, job shortages and an imbalance in the labour supply and demand. It is remarkable that there is a contradiction between job quantity and quality, especially between increasing levels of minimum wage and low labour productivity.

In principle, wage increases must be lower than the increase in labour productivity in order to ensure the development. However, labour productivity hasn't been increased, but has been in a decreasing trend for a long time in Viet Nam, while the average minimum wage increased 26.8 per cent yearly during the period from 2006-10.

What are the reasons for this situation?

There are many reasons affecting labour productivity in the country, including science and technology. Viet Nam has focused heavily on producing contracts or raw production, and applying outdated science and technology, in which added values belonged to foreign enterprises.

For example, many well-known trademarks hired local enterprises producing garments. For the same products, local enterprises receive 10 per cent of the product, while the remaining goes to foreign enterprises. The reason, obviously, has been the low skills of Vietnamese workers who can only take on low value-added stages of the production process.

Local labourers also have no industrial working habits and a weak ability to work in groups.

Does this mean that Viet Nam is losing its advantage in attracting investments?

The environment for attracting investments has been seen as a strong point in the country due to its political stability, many tax incentives and especially cheap price of labour sources. However, the advantage of the low price of labour is losing its attraction to foreign investors. That's why investors have to think about labour productivity. Quantity and operation scales of Vietnamese enterprises have increased rapidly. But, in fact, local enterprises have only been able to use about 40 per cent of the labour productivity of the human resources they own.

What measures are being considered to increase labour productivity?

It will be necessary to increase labour productivity if Viet Nam wants to escape from the middle-income trap and to strengthen the competitive ability of the country's economy. Thus, Viet Nam must invest in science and technology. Renovating technology and improving added values would also be measures to increase labour productivity.

In addition, we should pay special attention to the reform of education and vocational guidance for labourers, with an aim to meet the demand of markets.

During past decades, the country's economy has developed based on exploiting low-cost labour and natural resources, increasing labour intensity and capital investment. We haven't paid full attention to the instability in the increase of labour productivity that led to the low level of the nation's competitive ability.

Thus, we have to restructure each sector and the country's economy, as well as reform investment structures and policies on using human resources, which aim to train skilled human resources that meet the country's demand for economic development, industrialisation and modernisation.

VNS/VNN