WB: Vietnam needs to improve labor market
WB: Vietnam needs to improve labor market
The World Bank (WB) has called for Vietnam to continue improving its labor market and solve related issues to meet requirements for a more market-oriented economy.
In a section on Vietnam’s labor market in its report released on July 20, the WB suggests further transforming the labor market, including more proactive measures to strengthen the industrial relations system, balance labor market flexibility with sustained productivity growth, and manage social risks in a more market-oriented economy.
The WB said Vietnam’s industrial relations system exhibits the legacy of a centrally planned economy and faces growing challenges to adapt to its central function in a market economy.
In Vietnam, all trade unions fall under the umbrella of the Vietnam General Confederation of Labor. The confederation and its affiliated unions are tasked with a number of different roles which are not well aligned, thus resulting in conflicts of interest.
Enterprise-level unions are traditionally close to management. Even in the foreign-owned sector, senior executives and managers are often union members and hold top union positions.
Unions are tasked with representing workers’ interests vis-à-vis firms’ management and providing welfare services to workers. This last function is at times subsidiary to other duties of union representatives.
A sign of the weaknesses in Vietnam’s system of industrial relations is the country’s high number of spontaneous strikes. Such strikes have increased notably since the mid-2000s in Vietnam, though with considerable volatility from year to year and with the bulk of strikes in the foreign direct investment (FDI) sector.
The number of strikes has increased significantly in the 2000s, reaching a peak of over 900 in 2011, though almost no strikes occurred at State-owned enterprises (SOEs).
The WB said that improving Vietnam’s industrial relations system will be key to addressing a number of fundamental challenges in the labor market.
In the short term, Vietnam should continue to strengthen efforts to increase the capacity of unions through awareness campaigns, training in collective bargaining.
In the medium term, Vietnam needs to consider more proactive measures to strengthen its industrial relations system and promote harmony in the labor market. First, the confederation and its affiliated unions could bar company executives and managers from key union positions.
Second, Vietnam should continue to simplify regulations for resolving industrial relations disputes. Third, institutional reforms that allow the creation of firm-level works councils or labor-management councils as found in many European countries and South Korea could also be considered.
Fourth, it will be beneficial to be more proactive in developing labor mediation and arbitration systems which provide channels beyond the court system for resolution of labor disputes when workplace institutions are unable to resolve matters amicably.
In the long term, Vietnam needs to consider fundamental institutional reforms that could create an industrial relations system suited to the needs of a mature market economy.
One goal should be to develop collective bargaining where the interests of workers, employers and the state are more properly represented in a true bargaining process. This is a process which China, for example, has accelerated in recent years, starting from an institutional set-up not dissimilar to Vietnam.
In the long run, unions would become independent and concentrate solely on representing the interests of workers. The example of Singapore is one where a single national federation of trade unions has in recent decades focused strongly on its worker presentation role independent of government, but in a non-adversarial manner which has resulted in almost no strikes or lock-outs.
