More formal employment, but fewer protections in Vietnam
The ILO reports a 10 per cent drop in informal work in Vietnam, but many complain that workers in large, export-oriented companies still suffer from job insecurity and lower wages. Manufacturing employs some 17 million people. Set to come into force on 1 July 2025, Vietnam’s new trade union law remains controversial.
Milan (AsiaNews) – The International Labour Organisation (ILO) has dedicated one of its latest reports to the issue of combating the informal economy in the Asia-Pacific region, presenting and developing some of the innovative approaches adopted by different countries.
The general picture that emerges highlights some positive results, but also a slow process of change still affected by the recent pandemic.
The situation appears to be different in Vietnam. As the country marks the 50th anniversary of its reunification and the end of the American war, the rate of informality has decreased by approximately a 10 percentage point over the past decade.
This result should represent a victory for both the government and ordinary people, who in principle enjoy greater protection. However, if the local labour market is examined more closely, a much more complex picture emerges.
The labour market in Vietnam is divided into two main sectors: agriculture and manufacturing, with estimated 17 million people is employed in the latter, this according to the Washington Post.
According to Vietnam Briefing, employment in this sector increased from 18 per cent to 23 per cent between 2017 and 2023. In contrast, employment in the agriculture dropped from 40 per cent to 33 per cent over the same period.
By cross-referencing the findings in the report with these changes, it is reasonable to assume that the decline in informal employment is linked to this labour shift.
Agriculture is traditionally characterised by unregulated forms of employment, while manufacturing is dominated by large foreign companies, which, in order to operate in the country, are required to comply with labour regulations, including the formal hiring of employees.
Yet, are there real improvements in the working life of Vietnamese people and do formal contracts necessarily equate with more dignified conditions?
In fact, international associations have frequently complained about the country's manufacturing plants, a sign that better labour standards in Vietnam, as in many other countries in Southeast Asia, need more than cracking down on the informal sector. Action on formal regulations is also required.
It is well known that most of the companies that have invested in the country have been attracted by low production costs. Labour in Vietnam is cheap because the minimum wage guaranteed by law is below the necessary minimum.
Formally, the country is divided into regions and a guaranteed minimum wage in each. Region 1 (Hanoi, Ho Chi Minh City) has a minimum monthly wage of 4,680,000 VND (about US$ 202), while in Region 2 (surrounding rural areas), it drops to 4,160,000 VND (US$ 179).
By contrast, the average cost of living, excluding housing, tops 11,500,000 VND (US$ 475), an imbalance that violates Convention No. 131 of the International Labour Organization (ILO), which requires states to guarantee sufficient wages for a decent standard of living.
At the same time, job insecurity is widespread. Due to fluctuations in demand, employers hire fewer employees, to avoid overstaffing during periods of low demand, which would result in a higher cost.
When demand is high, however, these workers are forced to work overtime; if they refuse, they lose their jobs. This violates ILO Convention on Working Time (Industry) of 1919 (No. 1), which establishes a maximum limit of 48 hours per week as an international standard.
Finally, the lack of bargaining power represents yet another violation of workers' rights. In fact, in Vietnam, independent unions are not recognised in law. Existing unions are controlled by the Communist Party of Vietnam (CPV), and depend on employers for wages and benefits and consequently have no incentive to protect workers.
However, something might be changing. In order to continue trading with its main partners, United States and the European Union (along with China), Vietnam is now forced to adapt its domestic legislation.
A new law on trade unions comes into effect on 1 July 2025, and represents a small step forward, even if it does not address certain structural issues in Vietnam’s trade union system, most notably, it does not allow the creation of truly independent trade unions, an essential condition to uphold international labour standards.
The Vietnam General Confederation of Labour (VGCL) remains under government control and closely aligned with the interests of the CPV rather than those of workers.
Raising further suspicions about the actual desire for change is the arrest in April 2024 of Nguyễn Văn Bình and Vũ Minh Tiến, two senior officials with the Vietnamese Ministry of Labour and the VGCL who had fought for greater labour reforms and trade union independence.
According to Human Rights Watch, the government continues to describe independent labour organisations as “hostile forces” opposed to the Party and a source of social disorder.
It should also be added that US President Donald Trump's threat of tariffs risks provoking changes in Vietnamese trade strategies. If Vietnam shifts further towards China and most Asian countries, it will not likely adhere to the highest international standards in workers' rights.
That said, it is hard to predict developments in Vietnam’s labour markets against a background that is still very much in a flux.
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