Shrinking Opportunities: Social Mobility and Widening Inequality in Vietnam

This contribution is published as part of the UNRISD Think Piece Series, Overcoming Inequalities in a Fractured World: Between Elite Power and Social Mobilization, launched to coincide with a major UNRISD Call for Paper Conference by the same name. In this series, experts from academia, advocacy and policy practice engage with the topic of inequality by critically exploring the various causes of deepening inequalities in the current context, their implications for sustainable development, and strategies and mechanisms being employed to reverse them as part of the global conversation on inequalities leading up to the review of Sustainable Development Goal 10 at the UN High-Level Political Forum in July 2019.

Rising inequality is threatening Vietnam’s continued socio-economic development. Young people have fewer opportunities for higher earnings and improved social status than a decade ago. These trends make it harder for Vietnam to meet its commitments to achieve the SDGs and stand in contrast with its past experiences of inclusive growth. Our research shows how social mobility can provide a window into understanding mechanisms of inequality, especially among youth and disadvantaged social groups such as ethnic minorities. For many young people, industrial-led development is not delivering on expectations of greater social mobility.

Andrew Wells-Dang is Senior Governance Adviser and Vu Thi Quynh Hoa is Head of Advocacy and Campaigns at Oxfam in Vietnam.

Two sides of economic success

The recent negotiation of the EU-Vietnam Free Trade Agreements, as well as the February 2019 US-North Korean summit in Hanoi, have put Vietnam’s economic transformation in the spotlight. Beginning from the late 1980s, the market-based reforms known as Doi moi or “Renewal” were characterized by rapid economic growth and widespread poverty reduction. In barely a generation, Vietnam has gone from one of the world’s poorest countries, with frequent food shortages, to a lower middle-income economy that is a leading exporter of rice, seafood, coffee and other commodities. The official poverty rate fell from 58 percent in the early 1990s to less than 10 percent today (World Bank 2018). The transition to a market economy has made Vietnam the fastest-urbanizing country in Asia.

For the past dozen or so years, however, Vietnam’s economic track record has featured growing inequalities in income, opportunity and participation. This shift has coincided with an increasing emphasis on export-led industrialization, rather than agricultural and small business development as in the past. Growth in gross domestic product (GDP) has remained high at an average of 6-7 percent per year, but these gains are not distributed as equally as during the early years of reforms. The benefits of economic growth are increasingly accruing to the richest 10 percent of the population (Kozel 2014). As a result, income inequality has risen: the Palma ratio (which measures the ratio between the income share of the richest 10 percent and the poorest 40 percent of the population) increased from 1.48 to 1.74 between 1992 and 2012 (Oxfam 2017). In some provinces, the income gap between the richest and poorest 20 percent is as much as 21 times. Vietnam’s 210 super-rich individuals (with assets of over USD 30 million) now earn enough in one year to lift 3.2 million people out of poverty (Figure 1). Poverty, while reduced according to national statistics, is concentrated among marginalized groups in society, such as ethnic minority farmers, female-headed households, migrants and people with disabilities. If these trends continue, Vietnamese society risks becoming increasingly divided between a prosperous elite and social groups left behind, contrary to the aspiration of Sustainable Development Goal 10 on reducing inequality.

Figure 1. Global Growth Rates of the Super-Rich, 2006-16 and Forecast to 2026

Source: Knight Frank 2017, p. 14

Declining social mobility

As part of Oxfam’s global Even It Up! campaign, we’ve sought to understand changes in inequality and social mobility by studying its effects on the lives of young people belonging to three broadly-defined groups of Vietnamese: rural farmers, industrial workers in cities and peri-urban areas, and urban white-collar workers (Oxfam 2018). By “social mobility”, we mean a change over time in the social status of an individual, a household or a group, showing how opportunities have transformed into economic and social outcomes. Although perceptions vary, the fundamental aspects of social mobility are centred around education, occupation and income. Social mobility can refer to a change in the socio-economic status of an adult compared to his or her parents (inter-generational social mobility) or over the course of a life cycle (intra-generational social mobility). National and international studies show that countries with high levels of upward income and occupation mobility tend to have lower poverty rates.

Our research on social mobility used the bi-annual Vietnam Household Living Standards Survey (VHLSS) as a source for quantitative analysis of changes in social mobility over the 2010-14 period as compared to changes during 2004-08. This was combined with qualitative interview and focus group data from research Oxfam conducted in an independent pro-poor policy monitoring project from 2010-16.

Overall, social mobility declined in 2010-14 compared to 2004-08 (Figure 2). In the earlier period, almost all social groups, notably the Kinh-Hoa ethnic majority, showed high levels of mobility from the poorest income quintile to higher quintiles. These increases were mainly due to wage growth, including increases in the minimum wage. In 2010-14, by contrast, upward mobility declined among all ages, genders and regions. The only slight increase was among ethnic minorities (EM groups) who started from the lowest level of mobility. The limitations to social mobility are contributing to greater economic inequality, which then creates an uneven playing field that leads to greater obstacles to mobility.

Figure 2. Intra-Generational Social Mobility in Vietnam, 2004-14


Source: Oxfam 2018, p. 33.

For instance, in 2012, Vu (a pseudonym), a young single man, followed friends from his home village in north-central Vietnam to migrate to work in a seafood processing company in the south, earning a monthly income of about 5 million dong (USD 210). A few months later, he moved to work in a garment factory. Although he could save some money to send home to his parents, it couldn’t bring a higher standard of living, and after three years in the south he returned to his village.
Vu said, “I don’t think that going to the south as a worker is making my way up. People heading to the south come back to the village after several years, not bringing much but just enough to cover the family’s work... Here people must own a large area of land to move upward. If each youth has 2-3 hectares of land for bamboo and acacia planting, then life will be better." (Oxfam 2018, p. 32)

Breaking the Vicious Circle?

For young Vietnamese like Vu, industrial work is not necessarily superior or higher-status than agricultural work or other jobs. In either case, most migrant workers can earn enough to live above the poverty line: the question is whether poverty reduction can be equated with social development. Factory workers face difficult working conditions; farmers must deal with challenges of debt and a changing climate. Low wages, disparities in education quality, and social stereotypes all make it harder for youth to break through into a higher income group or improved social status. Young people are worried about inequalities of opportunity that affect the hope for a better future and can also lead to inter-generational poverty. The risk is that these barriers are self-reinforcing. The widening divides between rich and poor, city and countryside, are hard to reconcile with Vietnam’s egalitarian traditions and hard-fought unification.

The optimism of some international donors about Vietnam’s prospects (for example, World Bank 2018) should thus be tempered by greater attention to the distribution of the benefits of growth to various social groups. Changes in social mobility demonstrate how inequality affects young people in particular. In addition to SDG 10 on inequality, social mobility is also linked to five other goals: SDG 1 on reducing poverty, SDG 3 on good health and well-being, SDG 4 on quality education, SDG 5 on gender equality, and SDG 8 on decent work and economic growth. The Vietnamese government is committed to measuring progress towards SDG targets in cooperation with international and domestic civil society organizations. To achieve sustainable poverty reduction and social development, Vietnamese leaders and citizens need to understand the reasons why certain groups in society have been left behind and identify what can be done now to keep improving lives from one generation to the next.

REFERENCES
Knight Frank. 2017. The Wealth Report. 11th edition. London: Knight Frank LLP. https://content.knightfrank.com/research/83/documents/en/the-wealth-report-2017-4482.pdf.

Kozel, Valerie. 2014. Well Begun, Not Yet Done: Progress and Emerging Challenges for Poverty Reduction in Vietnam. Washington, DC: World Bank. https://openknowledge.worldbank.org/handle/10986/20074.

Oxfam. 2018. Social Mobility and Equality of Opportunity in Vietnam: Trends and Impact Factors. Hanoi: Oxfam. https://vietnam.oxfam.org/policy_paper/social-mobility-and-equality-opportunity-vietnam-trends-and-impact-factors

Oxfam. 2017. Even It Up: How to Tackle Inequality in Vietnam. Oxfam Briefing Paper. Hanoi: Oxfam.
https://www.oxfam.org/en/research/even-it-how-tackle-inequality-vietnam

World Bank. 2018. Climbing the ladder: poverty reduction and shared prosperity in Vietnam. Washington, DC: World Bank.
http://documents.worldbank.org/curated/en/206981522843253122/Climbing-the-ladder-poverty-reduction-and-shared-prosperity-in-Vietnam.