The Wage Labor Market and Inequality in Vietnam in the 1990s
Has the expansion of wage employment in Vietnam exacerbated social inequalities, despite its contribution to income growth? Gallup uses the two rounds of the Vietnamese Living Standards Survey (VLSS) to evaluate the contribution of wage employment...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2002/09/2031706/wage-labor-market-inequality-viet-nam-1990s http://hdl.handle.net/10986/19272 |
| Summary: | Has the expansion of wage employment in
Vietnam exacerbated social inequalities, despite its
contribution to income growth? Gallup uses the two rounds of
the Vietnamese Living Standards Survey (VLSS) to evaluate
the contribution of wage employment to inequality and income
growth over the period of rapid economic growth in the 1990s
following market reforms. If Vietnam sustains its economic
development in the future, wage employment will become an
ever more important source of household income as family
farms and self-employed household enterprises become less
prevalent. Observing the recent evolution of wage employment
compared with farm and non-farm self-employment provides
clues as to how economic development will change Vietnamese
society, in particular its impact on income inequality
within and between communities. The author shows that
standard methods for calculating income inequality can be
severely biased due to measurement error when decomposing
the contribution of different sectors, regions, or groups to
overall inequality. A new method for consistent
decomposition of inequality by income source shows that
despite the rapid growth of wages in the 1990s, wage
inequality fell modestly. Contrary to the results of
uncorrected methods, wage employment contributes a roughly
similar amount to overall income inequality as other
nonagricultural employment (household enterprise and
remittances, mainly). Agricultural income actually reduces
overall income inequality because inequality between
agricultural households is much lower than inequality
between nonagricultural households, and agricultural income
has a lower correlation with other income sources. Wage
employment has not been the locus of growing disparity
between the haves and the have-nots in Vietnam. A declining
share of agriculture as the economy grows in Vietnam means
that income inequality will rise, assuming that
within-sector inequality does not change. This rising
inequality, due to the shrinking share of agriculture, will
be difficult to avoid without giving up economic growth and
rapid poverty reduction in Vietnam. Historically, the
process of economic development has always brought about a
transition out of small farms and household enterprises into
wage employment as worker productivity increases and
non-household enterprises dominate the economy. |
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