Only 21 percent of the workforce benefits from social insurance

By Lam Le   March 15, 2016 | 08:41 pm GMT+7

Although poverty has fallen, lower middle income workers are increasingly vulnerable as they are often excluded from social protection, according to the Viet Nam Human Development Report 2015.

The report was compiled by UNDP and the Viet Nam Academy of Social Sciences (VASS). It looks at Vietnam’s performance on the human development index (HDI), which measures aggregate achievement in terms of income, education and health.

Overall, Vietnam’s HDI has been impressive over the past 35 years.

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HDI trends for Vietnam, Indonesia, Malaysia, Philippines, Thailand and China, 1980 – 2014. Source: UNDP

In late 1980s, Vietnam lagged behind countries with similar development levels. From 1990 to 2010, the index rapidly improved, dubbing Vietnam a star performer, but the gap was never closed. Since the 2008 financial crisis, Vietnam’s performance has leveled off.

The report recommends inclusive growth, which means rapid, sustainable growth that leaves no one behind, as key to continue achieving overall progress in human development. Vietnam needs to shift greater focus to the poor and vulnerable lower middle income groups. The latter are not substantially over the poverty line, typically work in informal jobs, are urban migrants or small scale farmers.

Speaking at the report’s launch in Hanoi, Dr Pratibha Mehta, UN Resident Coordinator and UNDP Resident Representative, said that although poverty has fallen, vulnerability to shocks have increased for some parts of the population, e.g. the 64% of the workforce in the informal sector. This is likely to escalate as Vietnam becomes more globally integrated.

“Their opportunities for advancement and protections are limited. They are also underutilized, their inclusion and productivity is vital to Viet Nam’s development success,” said Dr Mehta.

The report provides specific policy recommendations based on analysis of data spanning 30 years. The three pillars that define inclusive growth are considered: productive employment, education and health care systems and a social protection system.

Regarding productive employment, Vietnam “is in danger of becoming stuck in an ‘assembly trap’ rather than progressing to high value production,” said Dr Mehta.

In response, Vietnam needs to maintain macroeconomic stability, increase economic efficiency, enhance connectivity and technological readiness and nurture innovation.

Despite spending 7 percent of GDP on education, participation in pre-primary and post-secondary education is very limited and mostly only accessible to upper income groups. Health care was also reported to be inadequate despite high spending.

The report suggests Vietnam improve the quality and access to pre-primary, higher education and vocational training, and undertake a comprehensive evaluation of its socialization reforms prior to any further expansion.

Vietnam has made good progress in building a contributory social insurance system. However, the main beneficiaries are those who can afford to participate and workers in the formal sector. Only 21 percent of the workforce benefits from social insurance while social assistance covers only 10 to 15 percent of the population, mainly the poor or most vulnerable groups. Therefore, lower middle income groups who lack spare income to insure and invest in a better future for their families are ineligible for any form of protection.

According to the report, Viet Nam needs to secure a floor level of cover via universal health insurance, a self-financed social insurance system and expanded social assistance based on life cycle entitlements.

Vietnam is currently developing its Social and Economic Development Plan for the 2016-2020 period and preparing for the implementation of Agenda 2030 for Sustainable Development.

Professor Nguyen Xuan Thang, VASS president, said that the findings and recommendations of the report are valuable contributions to the above processes.

The Global Human Development Report 2015 on the world of work complements the Vietnam report. According to the global report, unpaid domestic work can be as vital as paid jobs for human development. It also draws attention to the threats of the digital revolution. While it has the potential to transform livelihoods, is also threatens a new divide between the highly skilled and well paid and the low skilled trapped in poverty.