So far two solutions have been proposed: to loosen the two-child policy and to increase the retirement age to 58 for women and 62 for men.
By ending the two-child policy the government expects to make up for the ageing population within the next 20 years. But this policy could create an uncontrollable boom in the Vietnamese population. When the government loosened the two-child policy in 2015 in a trial period, in the first 6 months of 2016 the third child birth rate increased remarkably by 7.5 per cent. Moreover, the resulting increase in demand for maternity leave, school enrolments and healthcare services among other things would be a burden for public finance as well as a source of social crisis.
Raising the retirement age has been proposed by the Ministry of Labour pending parliamentary evaluation in May 2017. While the policy is beneficial in utilising the work experience of the elderly while creating savings in the pension budget, it also means fewer job prospects and promotion opportunities for younger generations. It is also not in the interest of all the elderly, especially the 70 per cent of Vietnam’s labour force working in manual labour-intensive sectors such as agriculture, manufacturing and construction where working above the age of 50 can be dangerous and unproductive.
Despite these drawbacks, raising the retirement age is still considered by policymakers as one of the key solutions to the ageing population problem in Vietnam. But these are only temporary solutions. Complementary long-term solutions such as increasing labour productivity must also be examined.
Improving labour productivity is one effective way to make up for the ageing population. That means raising labour quality by increasing investment and improving education.
As Vietnam has specialised in manufacturing with its competitive advantage of a cheap labour force in the global supply chain, national higher education should be reoriented to focus more on vocational training rather than university degrees. The Vietnamese government has already taken action by simplifying the entrance exam to university. Previously, Vietnam’s national entrance exam was very difficult and only a limited number of the most talented citizens managed to enter universities.
But as living standards in Vietnam improve and more families can afford to send their children to university, universities have become more commercialised and entering university is no longer a rare achievement. The low quality of Vietnamese universities also means the majority of graduating students are unable to find an appropriate job. By simplifying entrance exams to deemphasise university degrees, the government has encouraged students to opt for vocational training. As a result, 2016 saw a remarkable decrease in the number of students applying for university.
Another supplementary policy is to have productivity-based rather than seniority-based salaries, which are common in Asian countries. This would address public concern about aged seniors doing less work for more pay than younger employees. Companies and government agencies would employ and appreciate the young while benefiting from the experience of the old. But this issue feeds the Communist regime’s dilemma between adhering to Communist principles and integrating into the capitalist culture of productivity for profits.
Another long-term solution involves improving the health quality of the elderly and encouraging economic activities suitable to their skills and physical capabilities. In Vietnam, 80 per cent of the elderly live with their children and 70 per cent lives with little savings or pension, especially in rural areas. And the proportion of healthy elderly in Vietnam is comparatively low — only around 5 per cent are in good health, whereas more than 70 per cent are reported to be in very weak physical condition .
By improving elderly healthcare and encouraging saving for retirement from a young age, the future elderly will be able to live more independently. This will help them to enjoy healthier and more joyful lifestyles as they get old and relieve the burden on society to take care of them.
But Vietnam doesn’t have the funds for an expensive ‘action plan’, and Vietnam’s institutional network is not yet sufficient to drive bottom-up change. Bottom-up change is only possible if there are enough community organisations, services, volunteer centres and senior research centres for the elderly to participate based on their willingness and interest. Unfortunately, such institutional networks are still underdeveloped in Vietnam due to the long-standing cultural ideology that children should take care of their parents in their retirement. Dealing with Vietnam’s aging population is both a public policy challenge and a cultural challenge.
It will take some time for the Vietnamese government to implement long-term and bottom-up solutions to improve labour productivity and services for the elderly. In the meantime, raising the retirement age and increasing the birth rate are considered more viable solutions by Vietnamese policymakers.
Linh Tong is Editor for the East Asian Region at Eurasia Diary, International Eurasia Press Fund.
Thanks for an informative analysis of the complex dynamics interacting in these demographic challenges that Vietnam faces. The ‘good news’ is that the country has some years in which it can work to mold changes in its policies regarding broadeninb and deepening its educational opportunities, increase its worker productivity,improve its healthcare, etc. I hope it can achieve this while preserving its strong familial ties. Other Asian countries that have lost some of those supportive networks, like Japan, are facing even greater demographic challenges.
Dear Richard, thank you very much for spending time writing this thoughtful comments. While in theory Vietnam has still some years to adapt, as you said, the aging population is coming like an unexpected tsunami to us. And the problem is that most citizens are not well aware of the issue while the government has tried to emphasize it. Also, limited budget (also “thanks to” corruption) will limit efforts on long-term solutions. You are absolutely right about strong family ties, which have already been demised in Vietnam, especially big cities. Interestingly, I used to debate with my colleagues on whether strong family ties is an inherent Asian culture, or just a sign of underdevelopment.
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The article is written in a very interesting and rather not complex way, which makes it easier to follow, even for those who are not really good at economics, politics etc. The demographic problem of the country is not something dealt easily and requires the consideration of many other key factors, such as cultural views and other factors, that has been addressed as well. Well done! Looking for more articles!
I agree with you that loosening the two-child policy is not going to solve the problem. The point is not to increase the young labor, but to improve labor productivity. Automation in manufacturing industry results in many workers losing their jobs. Therefore Vietnam should focus on education and improve the labor qualifications. Otherwise unemployment will rise. The analysis would be more comprehensive if you include this point.
Thank you for raising this point. I do agree that automation make people lose their jobs. I will focus on this issue in future articles.
Excellent article. The problem of getting skilled workers, aging population, automation is affecting all countries and there have been several articles in this website talking about these problems in Japan, India, China, and S. Korea. Of course, the top business leaders and politicians need to be blamed for creating a shortage of young people due to creating corporate malfeasance for the last 47 years with the end result that people have put off marriage and not having more than one kid.
Looking forward to reading more articles from you.