Middle-class jobs key to economic recovery

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Middle-income Vietnam should keep spreading the wealth until it's middle-class

Laborers work at a garment factory owned by Singaporeans outside Hanoi. PHOTO: REUTERS

While Vietnamese people still feel uncertain about the country's economic outlook, they can hope that the rising middle-class workforce may play a role in reinvigorating their vibrant economy.

Vietnam's growth has slowed considerably since the onset of the global financial crisis in 2008. While the country has wrestled with macroeconomic instability, it continues to be highly reliant on external trade. Exports account for around 90 percent of gross domestic product (GDP) in Vietnam, a ratio significantly higher than its ASEAN neighbors Indonesia, the Philippines and Thailand. But with weak demand from its key trade partners, Vietnam's growth prospects remain tentative.

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How can Vietnam revitalize its economy? One approach could be to re-balance its economy towards stronger domestic consumption. This would help to offset volatility in export markets and foster growth that is more sustainable.

A critical step in bolstering Vietnam's domestic market would be to accelerate expansion of its middle class. Evidence from around the world suggests that being middle class is associated with better access to jobs with regular wages, greater investment in health and education and higher household consumption.

Findings from a recent study published by the International Labor Organization on economic class and labor markets in the developing Asia-Pacific region show that Vietnam's middle class workforce is growing.

From only 1 million middle class workers in 2000, they now total an estimated 13 million, or one-quarter of all workers. Despite this progress, however, around 17 million workers still earn too little to escape US$2-per-day poverty. Another 23 million are living just above the poverty line and remain highly vulnerable in times of economic, social or environmental crisis.

The key to furthering this momentum of middle class expansion is to create more quality jobs while increasing productivity and wages. It's about ensuring that the right polices and strong institutions are in place.

Measures to accelerate change in the country's economic structure are critical to that end. This would create new opportunities for the nearly 25 million Vietnamese workers to move out of low-productivity agriculture into better jobs in industry and services, where 4 out of 5 middle-class workers are based.

This would also require greater investment to improve access to and the relevance of education and training particularly for rural women and youth. With advanced skills and qualifications, the country's poor can better compete for the skilled jobs that offer higher wages.

By Phu Huynh*

*The writer is a labor economist at the International Labor Organization's Regional Office for Asia and the Pacific. The opinions expressed are his own.

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