Over the past two decades, Vietnam has made exceptional progress in reducing poverty. However, low-income workers remain vulnerable to economic shocks and to informal employment. To address these challenges, the government has implemented labor market reforms to improve wages and job security for millions of workers.

There are multiple contributors to poverty in Vietnam, with low wages and informal employment being the primary ones. Instability and limited access to benefits become inevitable for workers without contracts or social insurance, especially during economic downturns. By enhancing labor market policies, the nation aims to stabilize household incomes among low-income workers, particularly in manufacturing, agriculture and the informal sector.

The nation has increased its regional minimum wage as part of broader labor reforms and in 2022, the government approved a 6% increase. This initiative raised the earnings for millions of low-income workers. An increase in minimum wages helps workers cover basic living costs and reduces in-work poverty, especially for communities that depend entirely on wage labor.

Labor Code Reforms Strengthen Worker Protections

Vietnam’s updated Labor Code, which took effect in 2021, expanded worker protections by regulating working hours and improving the procedures against unfair dismissal. The reforms also improved collective bargaining rights and extended coverage to groups previously excluded from formal protections. Collectively, these initiatives are helping reduce labor vulnerability in Vietnam and ultimately improve working environments for low-income workers.

Access to social insurance is crucial for protecting workers from poverty caused by illness, unemployment or old age. Improved access to insurance can reduce financial insecurity and help workers recover more quickly from economic downturns without falling into poverty. That said, Vietnam has expanded social insurance coverage to include more low-income and informal workers, though inevitable gaps remain.

Challenges Remain for Informal Workers

Despite progress, informal employment remains widespread nationwide, especially among rural workers and migrants. Multiple factors continue to restrict the reach of labor reforms, including enforcement gaps and uneven compliance. Addressing these challenges is crucial and will require better and stronger enforcement and continued policy coordination to ensure that the reforms reach the most vulnerable populations.

Labor market reforms have already played an effective role in supporting low-income workers and reducing poverty nationwide. However, continued investment in fair wages, worker protection and the expansion of social insurance could further enhance Vietnam’s economic resilience and promote inclusive growth.

– Hana Abulkheir

Hana is based in London, UK and focuses on Politics for The Borgen Project.

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