Study of Unemployment rate in Vietnam

Study of Unemployment rate in Vietnam

Tran Ngoc Huyen Trang – IFF20-3

Abstract After the global economic crisis 2017-2021, Viet Nam economies experienced indirect and direct impacts on their economic, finance and banking system, and especially on unemployment rate. Unemployment is one of the important variables that need to be considered in order to understand the dynamics of the economy and thereby develop strategic plans to stabilize the economy as well as promote economic growth and development. Unemployment is considered a bad situation. The main purpose of this study is to examine the relationship between some macroeconomic variables and unemployment in Vietnam. First, the overall economic situation of the country is described that revealed some positive and negative aspects of the development of Vietnam’s economy. Statistical data from 2000 to 2021 of some macroeconomic variables on unemployment is collected to show us relationship between variables in order to construct econometric model. In order to examine the relationship between unemployment and some macroeconomic indicators like GDP, LR, GFCF, LF, INFL in Vietnam.  Overall analysis of the  unemployment rate in Vietnam is proceeded and forecasts are made.

Key words: unemployment rate in Vietnam; econometric models, forecasting, investment analysis, macroeconomics, COVID-19

I - Introduction:

In life, everything always has both positive and negative sides, of course the economy is no exception. The positive side of an economy is GDP growth, high per capita income or deep international integration... On the other hand, on the one hand, it has caused many heavy losses to the economy. In particular, during the Covid-19 epidemic that has lasted from the beginning of 2020 until now, unemployment has become extremely common and widespread in countries around the world. , including Vietnam. It can be said that in our country at the present time, the problem of unemployment is still very painful because the epidemic is still very stressful and the number of unemployed workers due to the impact is increasing day by day. This not only directly affects workers but also greatly affects economic, political and social issues of the country.

In order for everyone to be able to grasp the current unemployment situation in Vietnam, I have outlined the unemployment situation of workers in 2019 and 2020 with very specific and accurate data. When researching and working on this topic, I personally feel that our country is really great when it comes to providing timely support solutions to help workers get out of unemployment, especially during the Covid season. Therefore, I personally also want to propose some measures to help reduce this negative situation and stabilize the country's economy. Moreover, this situation will certainly have a strong impact on the socio-economic in general as well as on workers in particular. And of course everything happens for a reason and so does unemployment.

The effects of capital investments on employment is a complex and sensitive matter, because the impact on the economy (and thus on unemployment) depends not only on their volume but also of the establishment, the field concerned, the input modality and the existing conditions in the economy in which investments are made. In the case of foreign direct investment (FDI), the economic and social effects also depend on the motivation of investors and the investing business strategy. Net investments lead to enhanced existing activities in the economy, with positive impact on employment, while replacement investments of the worn fixed asset, representing that part of gross investments made of the depreciation fund, do not generate new jobs, their positive effect being materialized mainly in maintaining existing jobs. Similarly, Economic growth refers to increase in goods and services produced by an economy over time. It is conventionally measured as percentage of increase in real gross domestic product (GDP). Growth is usually calculated in real terms i.e. inflation adjusted terms to make it comparable nationally and internationally. The increase in GDP is supported increase in agricultural and industrial production. When there is economic growth in the country there should be increase in exports and imports as well. The increase in exports should result in increase in foreign exchange reserve in the country. The increase in income of the people should be able to increase the saving and capital formation in the country. Besides, there are some social indicators of economic growth, as well, like falling birth and death rates, increase life expectancy at birth and literacy rates.

In Vietnam, after the reunification day, especially since the implementation  of  economic  reform,  the  labor  force  has grown continuously in termsof scale and proportion over the total population. The sharp increase in the labor force together with  the  policies  of  innovation,  openness,and  development contributed  significantly  to  the  national  economic  growth over the past 30 years.

In order to examine the relationship between unemployment and some macroeconomic indicators like GDP, LR, GFCF, LF, INFL in Vietnam. The study employed annual time series data from the 00 world development indicator for period ranging from the 2000 to 2021. The model express the relationship between unemployment and other macro-economic indicators like inflation (INFL), gross fixed capital formation (GFCF), labour force (LF), literacy rate (LR) and gross domestic product (GDP) are represented follows:

UNEMP = f (GDP, INFL, GFCF, LR, LF)

We have Unemployment rate of total labor force from national estimate (UNEMP) is an endogenous variable.

And exogenous variables are:

LGDPt – indicates economic growth in terms of GDP per capita in current US $ during the time period t (indicator of economic growth).

LGFCFt – indicates Gross Fixed Capital Formation in current US $ during the time period t (as private domestic investment).

LLFt – indicates Labour Force, measured as the % of total population aged 15-64 during the time period t.

LINFLt – indicates inflation rate (as CPI) during the time period t.

LLRt – indicates literacy rate during the time period t (proxy of school enrolment secondary, % gross).

In order to evaluate the model we used data that was collected by The World Bank and thus is in public domain (https://data.worldbank.org/country/vietnam)

Following this introduction, we review the research related to this topic in Section 2. Section 3 presents the research methodology. Research results are presented in Section 4. Policy implications and conclusions are presented, respectively, in Section 5.