Vietnam labour policies and its impact on rural wages: an experience from hired farm labourers in the Red River Delta

Purpose. The purpose of this article is to understand how Vietnamese policies for labour impacting on wage of rural labourers in agricultural sector. To do that, the paper particularly pays attention on analyzing wage of hired farm labourers in the Red River Delta region, the rice basket of Vietnam. Methodology / approach. Analyzing the above-mentioned impact of Vietnamese policies was performed by using data surveyed from 150 hired farm labourers in the Red River Delta of Vietnam. The survey on wages of rural labourers was conducted in Bac Ninh, Thai Binh and Hai Duong which are the three typical agricultural production areas in the Red River Delta in 2019. In this survey, the author interviewed 150 people who work as hired labourers in rice cultivation in Bac Ninh, clam farming in Thai Binh and pig raising in Hai Duong. The sample was randomly drawn among farm households which hire labourers in these provinces. This sample was divided into 2 groups of female and male labourers. The main purposes of this survey were to gather both qualitative and quantitative data on hired labourers including: age, gender, education level, money wage, wage in kind and other remunerations that they received from employers. Information relating to their participation in social insurance and vocational training were also collected like: number of years involving in social insurance; money that they used to purchase social insurance; frequency and time spending in vocational training courses. The personal interviews using a standard questionnaire with open and close questions were implemented separately with male and female hired farm labourers. They were interviewed in different places to ensure that their responses do not affect others. After checking for missing values, the author used the following methods: frequency distribution with mean and standard deviation for a description of respondents; cross tabulation and T-test were also used to test for differences in proportions and significant difference between groups; a linear regression model was applied to examine impact of wage regulation, social insurance and vocational training policies on wage of hired labourers in agricultural production (dependent variable was average money wage per month, it was estimated by sum of money wage and other remunerations that a labourer gets each month; independent variables were age, gender, education level and dummy variables which represented labourers’ participation in mentioned labour policies). Results. Among policies relating to agricultural sector, the ones about minimum wage and vocational training statistically impact the most on labour wage. Longer time of vocational training brings an additional 3 USD to a labourer’s monthly wage. Being supported by the policy of minimum wage, labourers can achieve higher wage when negotiating with employers. The author found that wage of a labourer who is aware of this policy is about 5 USD higher than that of others. Meanwhile, social insurance policies do not impact on wage of rural farm labourers. It is stated in the Labour Code that a part of social insurance fee of a contracted labourer is paid by his/her employer. However, hired agricultural labourers usually are excluded, because they mostly work under verbal agreements which are not specified by the Code. This loophole in the Labour Code need to be corrected in the future. Originality / scientific novelty. Despite the fact that industrialization process is rapidly developing in recent years, rural labour force still contributes a remarkable proportion in the Red River Delta region of Vietnam. The transferring skilled and young labourers from farm to off-farm sectors, from rural to urban areas leads to the existence of un-skilled and old-age labourers for agricultural production. This labour force is working in the poor condition with unstable and low wage jobs. However, they are not much concerned by labour policies and there is still a gap in research on their wage. Therefore, this study takes the advance to shed the light on the impact of labour policies on wage of rural farm labourers as well as to propose recommendations to adjust labour policies regarding this issue. Practical value / implications. The author identifies that attending vocational training and understanding of minimum wage will increase the chance for labourers to obtain higher wage.

Inflation? It’s Import Prices and the Labor Share!

Recognizing that inflation of the value of output and its costs of production must be equal, we focus on a cost-based macroeconomic structuralist approach in contrast to micro-oriented monetarist analysis. For decades the import and profit shares of cost have risen, while the wage share has declined to around 50% with money wage increases lagging the sum of growth rates of prices and productivity. Conflicting claims to income are the underlying source of inflationary pressure. Inflation affects income (labor’s spending power) and wealth. Monetarist theory around 1900 concentrated on the latter (Bryan and the “Cross of Gold)” leading to the standard Laffer curve. It was replaced by the Friedman-Phelps model which has incorrect dynamics (labor payments do not fall during an expansion – they go up). Samuelson and Solow introduced a version of the Phillips curve that violates macroeconomic accounting. Rational expectations replaced Friedman but was immediately falsified by output drops after the Volcker shock treatment around 1980. There followed a complicated transition from rational expectations to inflation targeting, anchored by economists’ misunderstanding of the physical meaning of ergodicity and ontological blindness. It did not help that the real balance effect is irrelevant because money makes up a small part of wealth. Rather than issuing veiled threats of disaster if its policy advice is not followed, the Fed now announces inflation targets which it cannot meet. Contemporary structuralist theory suggests that conflicting income claims set the inflation rate. Firms can mark up costs but workers have latent bargaining power over the labor share that they can exercise. Import costs and policy repercussions complicate the picture, but a simple vector error correction model and visual analysis suggest that money wages would have to grow one percentage point faster than prices plus productivity for several years if the Fed is to meet a three percent inflation target. The results pose a Biden policy trilemma: (i) the only path toward a more egalitarian size distribution of income is through a rising labor share (money wage growth exceeds price plus productivity growth), (ii) which would provoke faster inflation with feedback to rising interest rates, and (iii) the resulting asset price deflation likely facing political resistance from Wall Street and affluent households.

A formal assessment of new-developmentalist theory and policy*

ABSTRACT We develop a formal framework that endogeneizes the productive structure of a small open peripheral economy as the outcome of a problem of technical choices. We subsequently examine the main theoretical theses and policy prescriptions of the New-Developmentalist approach to economic growth. We argue that: a) not only does the pattern of specialization depend on technical conditions, but also on income distribution; b) in an economy without rents, the level of the money wage-nominal exchange rate ratio is univocally determined once the rate of profits is known, and shows an inverse relationship with it; c) if differential rents are considered, the level of the rate of profits can be set independently of the money wage-exchange rate ratio; d) the level of the exchange rate that ensures normal profitability of the primary sector need not coincide with the current-account equilibrium rate; e) the effective exchange rate need not gravitate around any of these two former levels, which must be rather seen as minimum thresholds of the effective rate; f) the unpleasant distributive consequences of exchange-rate depreciation can be partially avoided by means of export duties that do not raise primary-commodities production costs.

MODELS AND MATHEMATICS: HOW PIGOU CAME TO ADOPT THE IS-LM-MODEL REASONING

The paper investigates how Arthur Pigou came to adopt the reasoning essentially based on the working of the IS-LM model and to admit that money wage cuts are neutral to employment under the liquidity trap. This occurred through his involvement in the controversy with John Maynard Keynes in 1937–38. In the first instance, Pigou used a simple model to oppose Keynes’s assertion on such neutrality. Pigou (and Keynes too) applied verbal logical analysis to the model to derive his conclusions. Submitting a paper to the Economic Journal, Nicholas Kaldor analyzed Pigou’s model in mathematical terms and asserted that Pigou derived inconsistent conclusions from his model. Kaldor’s method eventually convinced Pigou, Keynes, and Dennis Robertson (who participated in the debate in correspondence). The paper thus argues that the controversy was concluded when one form of model analysis replaced another; specifically, when mathematical analysis replaced verbal logical analysis. This study provides a case study to the first category of Mary Morgan’s two functions of economic modeling: models as an object to inquire into and models as an object with which to inquire.