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Phuong Truc Dang Duong

Chris Tanasescu

Advanced Reading and Writing 3B

December 31st , 2011

Unemployment Insurance in Ho Chi Minh City:

Implementation and Inadequacies

Introduction:

Unemployment is a chronic disease affecting the performance and living standards of

every economy, every living person on Earth. Not only does unemployment do harm to the

unemployed, but it also has severe effect on the community and the social resources of one

nation. Hence, the unemployment insurance has come to effect in various developed and

developing countries with the purpose to stabilize the social economy, the living condition of

the unemployed and finance the unemployed with a fund for vocational training as well as a

minimum expenditure for living.

As one of the emerging economy, each year comes witnessing approximately 1

million people added to the labour force of Vietnam. However, the ability of Vietnam

industry to attract and retain workers is limited. Besides, the industrialization and

modernization processes is another cause of a proportion of unemployment in Vietnam. The

unemployment insurance of Vietnam was approved in the 9th Meeting of the National

Assembly on June 25th, 2008 the and brought into effect on January 1st, 2009. Though the

new policy has provided the unemployed with a better chance of living, there are still

inadequacies resulted from either the procedures, the lack of responsibility of the employers

or lack of education and information of the unemployed.

The purpose of this research is to provide the reader with an overview of the

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implementation of Unemployment Insurance in Ho Chi Minh City – one of the most

dynamic city of Vietnam, the defects of the Unemployment Insurance implementation. I will

first briefly clarify the terms related to the issue such as “unemployed/employed”, “labour

force” and so on. I will also include the negative effects of unemployment and why we need

unemployment insurance. The second section includes the discussion about the dynamics of

unemployment in Vietnam and specifically Ho Chi Minh City. Later, I will elaborate upon the

processing application of unemployment insurance policy ever since January 1st , 2009 and

point out the insufficiencies in the process of applying the policy to reality and the causes.

The forth section will provide the reader with the possible solutions for the problem as the

conclusion.

Unemployment and the need for unemployment insurance

According to Robert H. Frank and Ben S. Bernanke in Principles of Macroeconomics,

the labor force of an economy consists of people who either have a job or is looking for one.

One person is unemployed when he or she has been without work for a period of time, is

available for work and is actively seeking for a paid job. A person considered to be employed

when he or she has a paid job, which could either be a part-time or a full-time job, or is on a

leave from a regular job. In other words, the total number of the employed and unemployed

in one economy is called the labor force (169–170). According to the Labour Legislation of

Vietnam, the age range for a female to be considered a member of the workforce is between

15 and 55 years old and for a male is between 15 and 60 years old. Unemployment rate,

which is calculated by the percentage of the unemployed over the total labor forces, is one of

the most important criteria for the performance of one economy.

Unemployment in Vietnam however is not a serious problem even when being

compared to an international system of classification. However, everything comes at a cost.

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First, being unemployed affects the workers themselves and their family. The long-lasting

unemployment can result in the lost of self-confidence and the depression in one individual,

which could later end up in suicidal behaviors. It also creates a burden for the family

financial status and increase the pressure put on other members due to the loss of one income

source.

Second, as the unemployment rate goes up, the rate of social crimes and social evils

have the tendency to go up. It is a fact that no matter whether one individual is with or

without a job, he or she still has to support himself, and in some cases his or her whole

family. Within a short period of time, the temporary solution is to turn to either friends or

relatives for a loan. However, the riposte doesn't work in the long run. At this critical point of

time, negative thinking is inevitable, especially for those with little education. People will end

up striving for money at any cost; even smuggling, stealing, robbing or selling drugs will be

fine. Hence, the cost for solving these social issues ascends and the gross domestic products

descends. It is not only as waste of money for the whole community but also a possible cause

for national budget deficits. More importantly, high unemployment will lead to the

inefficiency of the utilization of the work force (Frank and Bernanke, Macroeconomics 171).

Understanding the needs for a long-term solution to the chaos that joblessness would

cause to the economy, on September 29th, 2009 the National Assembly of Vietnam has

approved the Unemployment Insurance. In Vietnam, it is a part of Social Insurance, which

play a compensatory part for the loss of income due to job loss, pregnancy period, aging and

so on. The amount of money from the insurance is expected to meet the minimum

expenditure. The main source of funding is the monthly contribution of each workers during

their previous working period. One of the benefits of unemployment insurance is to provide

the unemployed with a lifebuoy. The money provided by the fund will enable him or her to

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maintain her life and search for a new job. This also helps maintain the demand for goods

within the economy. If the unemployment rate goes up, people will come up with a save-up

plan that includes cutting off all considered–to–be–unnecessary commodities such as

clothing, accessories, and entertaining services. Hence, a cutback in such industries due to the

demand deficit is ineluctable. By virtue of chain reaction, the whole economy, which is a link

of all industries, will be unsustainable. With the supply from the government, the unemployed

now are able to make ends meet without hurting themselves or the national economy.

Besides, unemployment insurance also creates a golden chance for corporations to

reform their workforce by laying off the unskillful workers and recruiting the new and more

skillful ones, if necessary. Among the most important reasons for the employers' hesitation in

make any changes is flinching at the negative reactions from their employees, which might

lead to social and political instability. Not only does the fund maintain the laid-off 's life, but

it also finances for further vocational training courses, which later will enhance his technical

ability to work.

The new policy that helps the unemployment surely is a gift to all the citizens of one

countries. It is expected that the policy will lay a steady foundation for social development.

However, drawbacks are going to be what we would encounter first when theory turns into

reality, especially in the implementation process in Ho Chi Minh City. Accordingly, it is

crucial to learn about the conditions for implementation, the dynamics of Ho Chi Minh City.

The dynamics of unemployment in Ho Chi Minh City

Ho Chi Minh City is well-known as the cultural and economic center of Vietnam. It is

also an ever-changing city with the greatest developing pace nationwide. To some extents, the

fast pace of the business in Ho Chi Minh city, especially since January 11 th 2007 when

Vietnam officially became the 150th member of World Trade Organization, has created both

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opportunities and drawbacks to the labour market. Each year, Ho Chi Minh City attracts

much as hundreds of thousands of people coming from other provinces to look for a change

of life. Everyday, there are always new corporations joining the business. However, the

connection between employers and employees is strong enough. As for the firms, the most

important criteria is the employees' skills and work efficiency. For the employees, the living

conditions, wages and the sustainability of the firm are the things that count. Hence, both

employees and employers are always seeking for better options. As a result, the rate of

workers changing their jobs continuously accounts for about 20% of the total workforce per

year.

Changing in workforce also points out one weakness of the authority of Ho Chi Minh

City: the poor management and inefficient estimation of the labor trend in the time to come.

The labor market of Ho Chi Minh City hasn't had structural and accurate tools for estimating

the approximate jobs needed or labor shortage. The consequences of these lack of

professionalism is the demand deficit and supply surplus in job market. There are jobs

available but the labors don't meet the demand of these jobs.

Besides, an important reasons accounts for unemployment is the quality of

workmanship. As reported in the “Convention on Assessment of Vocational Training and Job

Placement for Youth in 2006 – 2009” hold on August 21st, 2009 by the National Youth Union

of Viet Nam, the rate of the urban unemployed youth between 15 – 34 years old is 5,1% in

2006; 8,5% in 2007 and 9,3% in 2008. The rate of untrained labor in the urban area is 24% in

the year 2007.

Looking on the bright side, since June 12th, 2006 when the Relocation of Structure of

Economy Program was approved and carried into effect by People's Committee of Ho Chi

Minh City on July 27, 2006, the structure in Ho Chi Minh City has paid more attention to

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attracting human resources for the Service Sector and Industry Sector and less on Agriculture

Sector. As reported by The Job Placement Center of the City, within the period of 2007 –

2010, there have been 270.000 more jobs created per year. A better structure of city's

economy is expected to brighten the situation. Now that the city's business is ready for the

employees of any levels, especially those with skills. Moreover, starting from May 2010, the

Job Placement Center of the City, which is a part of the Ministry of Labors, Invalids and

Social Affairs, has arranged a fixed day, the 14th of each month, for the unemployed to

register their being unemployed and ask for help to find a new job suitable to their ability.

Though the authorities and those in power have been trying their hardest to improve

the situation, there were only 9435 unemployed registered for help in Ho Chi Minh in the

first quarter of 2010. What could be the reasons for the low registration numbers but the

inadequacies within the systems and the lack of information?

Unemployment Insurance: The implementation and inadequacies

One of the insufficiencies known is the time period and the location of registration.

Although the insurance came into effect on January 1st, 2009, there was a delay of

implementation due to the global financial crisis. Only until June, 2010 did the insurance

really come into reality. The office in charge of the registration is the Job Placement Center of

Ministry of Labors, Invalids and Social Affairs. Since June 2010, the center has established

six registration booths allover the city including the Headquarter of the Center. Apart from

the Headquarter, the other five booths were located in district 7, Binh Tan district, Thu Duc

district, Hoc Mon district and Cu Chi district, which were the location of many the industrial

zones and factories. Despite setting up so many booths, there was no clear information

concerned the suitable place for the workers. As a consequence, confusion among workers

happened. No one knew for sure where to turn to once they were unemployed.

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Second, the irresponsibility of the employers is also at fault. Statistics point out that

65% of the firms within the city has either fulfilled their responsibility or still one month

behind the submission deadline of the unemployment insurance fund. 25% of firms is one to

three months behind the deadline. The rest of them is more than 3 months late. As the matter

of fact, one the employees receive their monthly paycheck, a small ratio of the salary will be

submitted to the Unemployment Fund, along with the money from their employers. Late

submission of any kind will do great harm to their employees. Workers for those who were 3

months late will be left out of the registration list once they turned unemployed. Besides, the

wrong-doings during the registering procedures is another possible cause for delay.

Moreover, the shortage of human resources, along with the heavy work load of

registration, also contributed to the inadequacies. On January 20th, 2010, 3000 applications

were submitted for the Unemployment Insurance. 250 of them were qualified and in

February, 2010, some has received support from the Unemployment Insurance Fund.

Statistics from Department of Work pointed out that by the end of the first quarter of 2010,

there were 2051 workers in Ho Chi Minh qualified for monthly unemployment subsidy out of

7154 people nationwide. Workers were also provided the subsidy through ATM without any

extra cost. However, implementing vocational training for unemployed at this point of time is

out of the question. Up until now, the Job Placement Center has been receiving a great

amount of application and has to deal with the redundant procedures without much human

resources from within.

The three issues mentioned above are the most crucial at this time. It is

understandable how the problems arouse as Unemployment Insurance was just introduced to

Vietnam two years ago. Despite being newly-born, the policy has done wonders to

unemployed and their family. However, for the policy to be fully applied and solutions are

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needed.

Suggested solutions

There are three main parties involved: the corporation, the unemployed and the

government. Each party plays an important role in the process. For the government, the only

way to improve is to strengthen the management system. The policy needs to clarify both the

responsibility of the corporation and the procedure for registration. Moreover, punishment for

late submission must be mentioned as to protect the workers from the corruption of their

employers. Information should be provided by means of television advertising, leaflets,

banners posted in public places with clear instructions regarding registering locations,

documents needed. As for the employers, they need to obey the law and respect those who

work for them. Not only will it benefit their public image and reputation, but it will also

strengthen the bonds between employers and employees. They also play a crucial part in

supplying the workers with information and help applying for the Insurance. Besides that, the

employees should be the one to protect their own rights by learning and sharing information

and being proactive in registering for the Unemployment Insurance.

The Unemployment Insurance promises not only to lay a firm foundation for social

development but also enhance the living standards of one nation. The power of one country

doesn't merely depend on the Gross Domestic Products or the strength of military forces but

the happiness and contentment of the citizens. That is the true measurement of the

government's success.

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nghiệp.22 Dec. 2010

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cua-bao-hiem-that-nghiep/language/vi-VN/Default.aspx>

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2010

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Nhu cầu nhân lực và thông tin thị trường lao động thành phố Hồ Chí Minh, Lao động, việc

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