Vietnam is encouraging young people to get married earlier and have more kids to deal with the consequences of a rapidly ageing population. However, without proper measures to upgrade the skills of the workforce and enhance its productivity, Vietnam will not be able to find a sustainable solution to the problem.
Le Hong Hiep
15 June 2020
Vietnam’s emergence as a middle-income country in the early 2010s has brought with it a middle-income problem: falling fertility rates. According to World Bank data, Vietnam’s fertility rate has fallen precipitously since the country adopted market-based economic reforms in 1986, falling from 4.06 births per woman to 2.04 in 2018. To deal with this problem, Vietnamese Prime Minister Nguyen Xuan Phuc issued in late April Decision No. 588 to approve a programme aimed at maintaining a favourable total replacement fertility rate across different regions of the country.
The decision, among other things, calls for people to get married before 30 and bear children early, with women ideally having their second child before 35. It also proposes different policies to encourage and support couples to have two children, ranging from providing more childcare facilities to giving housing subsidies to couples who have two children. The decision also envisions certain measures – yet to be specified – to “tax” people who do not want to get married or have two children.
The decision stirred up lively debates on social media, especially regarding the idea of imposing financial duties on those who do not want to have kids. Yet, the most important effect the decision generated is to bring home the reality that although Vietnam is normally considered as a young nation with an abundant labour force, the country’s population is actually ageing. Without proactive steps to tackle the issue, Vietnam may face a grim prospect similar to what some of its Asian peers like Japan and South Korea are now struggling to deal with.
Vietnam’s population reached 96.2 million in 2019, with the number of people aged between 15 and 65 constituting 68 per cent of the total. Those under 15 and over 65 accounted for 24.3 per cent and 7.7 per cent of the population, respectively. Vietnam is therefore still enjoying the so-called “golden population structure”, which means every dependent person is supported by two or more working people. This “demographic dividend” presents an important economic development opportunity to Vietnam. A relatively large and young population make Vietnam into an appealing market and an attractive destination for international investors.
However, Vietnam is projected to exit the “golden population structure” in 20 years’ time, and experts have raised concerns about the prospect of Vietnamese people “getting old before getting rich”. In a way, the Vietnamese population has officially entered the “ageing phase” since 2011, when the share of the population aged above 65 reached 7 per cent. The ageing of the Vietnamese population will accelerate in the coming decades. According to a 2019 report by the Vietnam National Committee on Ageing, about one in five Vietnamese will be aged 60 and above by 2035, turning Vietnam into one of the only three ASEAN countries with the proportion of older persons in the population exceeding 20 per cent (joining the ranks of Singapore and Thailand).
Proactive measures to maintain a favourable total replacement fertility rate as proposed by Decision No. 588 are therefore important for Vietnam to slow down the ageing of the population and to address its socio-economic consequences, including the contraction of the workforce and the mounting pressures on the social welfare system. However, such efforts would likely meet with serious challenges.
Young people, especially those living in big cities, are finding it increasingly difficult to get married early and have more than one child. Increasing household expenses, especially in terms of housing and education, have made many young people delay their decision to tie the knot or to have a second child. The changing lifestyles and the increasingly liberal thinking among young educated women have made them value their personal freedoms and well-being over responsibilities to their family and society. Evidence from some developed countries also suggests that even financial incentives do not prove effective in getting young and educated people to get married and have more children.
Vietnam is projected to exit the “golden population structure” in 20 years’ time, and experts have raised concerns about the prospect of Vietnamese people “getting old before getting rich”.
As Vietnam’s “golden age structure” will not end until around 2040, it still has time to prepare for solutions to the impending silver tsunami. While encouraging young people to get married earlier and have more kids is necessary to maintain the size of the population and the workforce, it is a short-term measure that cannot solve the long-term impacts of an ageing population. A more important measure will be to raise the productivity of the workforce so that even with a smaller labour pool, the country can still provide enough support for the growing dependent population.
In this regard, providing greater access to education and training and upgrading the skills of the workforce are of utmost importance. For example, the 2019 census shows that 26 out of 100 people of high school age do not attend school. Meanwhile, only 39.1 per cent of the workforce have attained high-school or higher qualifications, and those who are trained and have professional certificates only account for 23.1 per cent of the workforce. Indeed, the lack of highly trained and skilled workers has long been a challenge for high-tech foreign investors looking to invest in Vietnam.
Without proper measures to upgrade the skills of the workforce and to enhance its productivity, Vietnam will not be able to find a sustainable solution to its ageing problem. More importantly, Vietnam will remain dependent on low-skilled, labour-intensive industries and fail to develop a more advanced, technology-driven economy necessary to drive growth in the medium to long term. If it fails in this transition, Vietnam will fall into the middle-income trap and its people will increasingly run the risk of “getting old before getting rich”.
Dr Le Hong Hiep is a Fellow at the Vietnam Studies Programme, ISEAS – Yusof Ishak Institute.
ISEAS Commentary — 2020/80
The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of ISEAS – Yusof Ishak Institute. No part of this publication may be reproduced in any form without permission.