Has Vietnam Got it Right? Looks like it.
A simple examination of the key demographic and socio-economic variables for Vietnam is quite interesting and positive in nature.
The success of a country – where success is judged as improving the wellbeing of the population over time – is a function of many things, but does include:
Having a well-balanced population age profile – not too young or too old
A controlled population growth rate so that services and facilities are not subject to sudden excess demand and hence falling quality (frequently a result of poorly managed immigration)
High levels of population participation in the labour force including for both genders
Steady improvement in the infra structure and fixed capital investment ‘behind’ each worker which facilities their productivity
A good standard of education and where appropriate an improving standard of education of the workforce – which attracts fixed capital investment (see the point above) and the ability of the worker to enhance their productivity. (Note for some countries the standard of education is at a point where further improvement is hard to achieve – you can have only so many Ph.Ds.!)
An evaluation of Vietnam on these criteria reveals a consistent good score on them resulting in positive forecasts in terms of real household income growth and number of households with a gross income over US$20,000 pa.
Population age Profile.
This is shown in Figure 1. What is evident from this chart is that no single age group is dominating the growth aspects – although the oldest segment (65 years plus) is the fastest growing it is a small percentage of the total population. Otherwise the age profile of the population is quite well balanced with a dependency ratio of a very low .69 (because of high propensity to be employed as discussed later).
The total population (96.5 million in 2018) is growing, but at an acceptable 0.7% pa and this is mainly due to increased life expectancy (hence the growth of the older population) as total births are in decline. It is projected to reach 104 million by 2028.
There were 1.55 million births in 2018 and this is projected to decline to 1.3 million in 2028 – primarily as a result of a declining birth rate (per thousand women of child bearing age) as the number of women of child bearing age is seen as being stable at around 26 million through to 2031 after which they decline slowly in number. For the record, Vietnam’s birth rate per 1000 is currently 60 per thousand women aged 15 to 49 years and declines to 50 per thousand by 2028
Figure 1: Total population by Age Group: 2018 to 2028
The stable, but declining, number of births means the education system is not overwhelmed and can focus on improving quality rather than expanding quantity. In contrast, there are some countries in the world that need to expand their education facilities by a third just to ‘stand still’ in terms of number of school places let alone lifting the quality or depth of the education system.
In terms of education Vietnam is well ahead of China, India, Indonesia and Thailand in the proportion that have completed at least lower secondary (47.5%). While Vietnam is not outstanding in term of the number of adults with higher education (Upper secondary, Vocational or Tertiary) it has a solid completeness in terms of basic education and this will work to its medium term advantage in that a greater proportion of current enrolments are equipped to move on to upper secondary as it becomes available. This compares with, say, India where only 13.6% have completed Lower Secondary meaning there is a relatively narrow funnel feeding up to the higher levels of education. For Vietnam the base is broader.
The working age population of Vietnam is currently 67 million and is projected to be 70.6 million by 2028 and 72 million by 2038. Working age in this instance is defined as 15 to 64 years of age reflecting the reality that few older persons are working beyond 64 years. This will change as life expectancy increases and work becomes more intellectual than physical in nature – i.e. movement to a service economy as a result of greater affluence and education, but that will probably be post 2028.
Using the 15 to 64 age range, the working age population as a proportion of the total population is currently 69% declining marginally to 68% by 2038 which means a high proportion of the population can be engaged in production. Globally this compares with an unweighted average of 63%. So marginally above average.
Propensity to be employed
This availability of workers is one thing, the issue is, are they in work? In the case of Vietnam, the answer is very much so. For males it has been at over 80% for the last decade and is currently 88%. For females it 81%. The global average for male’s propensity is 72% for females it is 54%. Overall it means that 59% of the total population of Vietnam is working.
Figure 2: Workforce Size and Trend
Vietnam’s total employed labour force is projected to grow from 57 million now, to 63 million by 2028. However, household formation is growing faster (as the society moves from family households to empty nester households as a result of ageing) so the average number of workers per household drops marginally from 2.4 persons to 2.08. This means that household incomes increases will lag slightly behind wage increases.
However, with such a high propensity to be employed it means that the number of dependants per worker is very low by global standards. It is 0.69 dependants per worker in 2018 and will decline slightly to 0.65 by 2028. This means household income per capita is effectively increased.
Accumulated Fixed Capital Investment
The next positive component of the Vietnam story is the trend and level of the ‘drivers’ of worker productivity. That is ‘Accumulated Fixed Capital Investment per worker’ and education. Education we have covered earlier in this article.
Accumulated Fixed Capital Investment per worker (AFCIpw) is Fixed Capital Investment per annum over the last ten years depreciated 10% pa (i.e. the first year’s value is zero by the 11th year) divided by the number of workers. It is a good (and stable) measure of the resources available to the worker (and generally accompanies – but lags – improvements in education.) For Vietnam it is currently US$4,570 per worker and is projected to reach US$8,886 in a decade which is a growth rate 3.9% per annum. This assumes that annual total Fixed Capital Investment continues at 26% or more of GDP.
Figure 3: Projected Accumulated Fixed Capital Investment per Worker and GDP per worker (2018 USD values)
Impact on GDP
The combined impact of growing Accumulated Fixed Capital Investment per worker and improving education means that productivity per worker has, and probably will continue, to increase. For the past decade it grew at 4.6% per annum. Based on the trends in Accumulated Fixed Capital Investment per worker and education we expect it to grow at 5.8% per annum for the next decade. That combined with a growing number of employed persons (from 57.0 million to 62.9) means that total GDP is expected to show good growth as well – at 6.9% per annum through to 2028. This compares with 6.2% pa for the decade 2008 to 2018.
Figure 4: Historic and Projected real Total GDP, Fixed Capital Investment and share of GDP invested in Fixed Capital.
What this means for Household Incomes
This indicates that average household income will lift from US$7,420 in 2018 to US$11,510 (median from US$6,113 to US$ 9,973). Under that forecast the number of households with a gross income in real 2018 US Dollars will increase from 762,000 to 2.7 million. That is an annual compound growth rate of 13.5% pa.
Figure 5: Historic and Projected Trend in Average Household Income and Number of Households with a Gross Income over US$20,000 pa in 2018 US$
This Insight was prepared using our on-line database.
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The data for all 109 countries runs from 2005 to 2043.