Informal labourers account for 60 percent of the workforce

The informal sector was the first economic sector to grow and also grow at the fastest pace since Vietam embarked on the Doi Moi (Renewal) process in the mid-1980s. This economic sector also played an important role in pulling the Vietnamese economy out of difficulties in the early 1990s. It has attracted labourers made redundant by the restructuring of State-owned enterprises, while generating jobs and income for a large number of labourers in the context of economic reform.

With the specific characteristics of small scale and flexible operations, the sector requires less investment capital and fewer other resources. Therefore, it plays an important role in poverty reduction.

Most recently, when the Vietnamese economy was affected by the global economic and financial crisis, the informal economic sector has proven its dynamism, absorbing tens of thousands of workers who lost their jobs in the formal economic sector, thus preventing employment and income shocks for society.

Aware of the significant role played by the informal sector in employment, income generation and poverty reduction over the past time, Vietnam has continuously supplemented and completed its legal system and policies to support the sector and protect rights of informal labourers.

Given the small number of labourers in the formal sector, the informal sector is expected to continue to be an important component of Vietnam’s economy in many years to come. Therefore, the Vietnamese Government will continue to supplement and complete the legal system and policies, focusing on social security, vocational training, workplace hygiene and safety and market access for labourers in the informal economic sector.

Other characteristics of informal labourers are unstable jobs, no labour contracts and low income (with average monthly income of only 2.5-2.5 million VND ), long working hours (about 47.3 hours per week, higher than the average of 43.8 hours). Besides, businesses in the informal sector almost always have small or micro scales (with fewer than ten labourers) and have no business registration. They usually do not pay social and health insurance premiums as well as allowances and other social welfare benefits for labourers.

Labourers in the informal economic sector have to face poverty regularly. Their limited capacity, knowledge and economic conditions have hindered them from gaining certain positions in society.

However, the sector still plays an important role in socio-economic development, attracting a large number of labourers. The sector is dynamic and transformable although it is vulnerable. Therefore, it is necessary to roll out solutions to increase social welfare in the sector, with social insurance as the pillar.

Social insurance participation in informal sector remains limited

Article 34 of the 2013 Constitution stipulates citizens’ social security rights, but so far informal labourers’ access to social security policies, especially social insurance – a sustainable social welfare solution, remain limited.

More than one decade after the enforcement of the voluntary social insurance policy, just close to 300,000 workers have joined it, or nearly 0.6 percent of the total workforce in the informal sector and 0.4 percent of the nation’s workforce, a modest figure.

Resolution No.15 and Resolution No.21 on strengthening Party leadership on social and health insurance policies affirmed the following viewpoint: “Expanding and refining social and health insurance policies with a roadmap suitable with the country’s socio-economic development, developing social and health insurance systems in alignment with social services to better meet public demand, creating favourable for all people to join and enjoy benefits of social and health insurance.” The resolutions set the specific goals of effectively implementing social and health insurance policies and mechanisms, expanding voluntary social and health insurance coverage and achieving universalisation of health insurance. Vietnam aims to have 50 percent of the workforce join social insurance, 35 percent of the workforce join unemployment insurance, and over 80 percent of the population join health insurance by 2020. The resolutions also outlined the directions for revising policies in the field, which should aim for expanding State support for those who participate in social and health insurance, especially voluntary social insurance for farmers and informal workers, health insurance for welfare policy beneficiaries, near-poor households, farmers, students and people in especially poor and mountainous areas.

With nearly 18 million jobs in 2017 (exclusive of those in farming sector), the number of jobs in the informal sector remains huge and is yet to fall. Workers in informal sector often do not have labour contracts, social insurance, do not join trade unions and have contacts with other economic sectors, and thus they are not protected by labour law and social security policies. Therefore, social insurance for labourers in general and those in the informal sector in particular is both a goal and a solution to achieve social equality in social welfare policies, ensuring that all people can join and enjoy social insurance entitlements in accordance with the law.

Social insurance, a sustainable social security measure

In general, social insurance means the guarantee to fully or partially offset reduction or loss of income due to sickness, child birth, workplace accident, occupational diseases, retirement or death, on the basis of the labourer’s contributions to the social insurance fund. It is viewed as a sustainable social security measure for the following reasons:

Firstly, social insurance covers most of the content of the social security policy. The full implementation of social insurance requirements equals to the full implementation of the International Labour Organisation (ILO) recommendations. In Vietnam, compulsory social insurance today covers the following areas – sickness, maternity, workplace accident and occupational disease, retirement, and survivor allowance. The voluntary social insurance covers retirement and survivor allowance while the unemployment insurance covers unemployment benefits, support for vocational training and job placement, and health insurance.

Secondly, the coverage scale and funding of social insurance is fairly large, which guarantees that the employees have an alternative source of income when he/she suffers full or partly loss of earnings due to certain reasons. In other words, social insurance can be seen as the first safety net that protects employees from risks related to employment and income. Moreover, the social insurance ensures livelihoods for not only the insured but also their family, so people covered by social insurance account for a majority of beneficiaries of social security system.

It is estimated that as of the end of 2017, over 13.81 million people were covered by social insurance, representing 25.2 percent of the workforce, including 13.9 million compulsory social insurance holders and 291,000 voluntary social insurance holders. About 11.4 million people have participated in the unemployment insurance scheme.

The social insurance fund has paid social insurance benefits to over 9 million people and monthly unemployment insurance allowances to more than 650,000 people (1). Among over 11 million elderly across the country (aged 60 and over), the number of people who receive pensions and social insurance benefits accounted for about 27 percent while the number of people who get regular social support made up 14.5 percent, or 1.6 million.

Excluding nearly 1.4 million revolution contributors and their close relatives who are receiving monthly benefits, about 58.9 percent of the elderly do not get pensions or social support, thus having to work for livelihood or live off informal social security network, such as their children or other relatives.

Thirdly, social insurance is the backbone of the social security system, as it is the component in which payments are based on collection. The social insurance fund is contributed by different parties and used to pay for labourers in case of incidents. The fund is operated on a stable and long-term manner. This is the firm foundation for the social insurance system and a difference between social insurance and other social security policies. The social insurance fund is sustainable as it is sponsored by the State.

Fourthly, social insurance policies have contributed to regulating other policies in the social security system. The system includes social insurance, social support, preferential policies and other social services which serve different subjects, have different methods and contents of operation. However, they have close connectivity, support and supplement each other as they all pursue the goal of stabilising the life of every member of the society. The development of social insurance will help increase the number of its beneficiaries in society. Therefore, the State can focus resources on helping other disadvantaged people and tackle other risks in society.

Fifthly, social insurance policies contribute to economic stability and growth and socio-political stability – an important factor to ensure long-term and sustainable social security. Social insurance helps labourers feel secured to work and have responsibility for their work, thus contributing to raising labour productivity, and gross domestic product (GDP). Moreover, the idle part of the social insurance fund is re-invested in the economy to increase capital for development.

Sixthly, through the employers’ payment of social insurance premiums for employees, the relations between employers and employees are enhanced, and conflicts and contradictions between the two sides are minimized, thus contributing to social stability. In addition, social insurance also helps ensure political stability, as it fulfils several targets set by the State. Social insurance policies applied in difference groups of people ensure the equality in social insurance policies and in implementing these policies.

Synchronous solutions in need

It is necessary to develop a rational social insurance policy with the focus on a set of comprehensive solutions in order to achieve the target of having 50 percent of the workforce join social insurance scheme by 2020 in line with the spirit of the 2013 Constitution’s Article 34 which regulates that citizens are guaranteed the right to social security.

First, more drastic communication measures should be carried out on voluntary social insurance policy, with the involvement of all-level administrations, sectors and mass organisations like Vietnam Farmer’s Union, Vietnam Cooperative Alliance, youth union and women union, among others. They must work closely to make all people understand the preeminence of the policy and know about the participation procedures.

The Vietnam Social Insurance must play the a more active role in promoting popularisation work via the mass media, training workshops, conferences and collaboration with relevant sectors.

Meanwhile, state-owned organisations must set aside annual expenditure to accelerate the popularisation of social insurance policy.

Second, administrative procedures in public service providers must continue to be streamlined. In particular, the social security sector should maintain the one-door mechanism, apply information technology into administrative transactions while improving capacity of the staff so that they can give better services to those who join the social insurance scheme.

Third, it is vital for the social insurance sector and relevant ministries like Ministry of Labour, Invalid and Social Affairs and the Ministry of Finance to build a project on supporting labourers’ involvement in voluntary social insurance. The project must focus on media work, improving social insurance staff’s capacity as well as support in paying social insurance premium.

Fourth, more efforts should be channelled into studying demand and capacity to join social insurance of labourers in particular and the people in general, in order to help complete related policies to attract more participants in the voluntary social insurance.