2021 Volume 6 Issue 1
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Factors Affecting Endogenous Income of Informal Laborers Suffering Economically Social Exclusion in Vietnam’s Northern Mountainous Area


, , ,
  1. Journal of Economics and Development, National Economics University, Hanoi, Vietnam.
  2. Faculty of Management Science, National Economics University, Hanoi, Vietnam.

  3. Faculty of Political Studies, National Economics University, Hanoi, Vietnam.
Abstract

Solving economically social exclusion has been a concern among developed countries; it is relatively new in developing countries, including Vietnam. Unless getting better employment, rural laborers cannot get rid of economically social exclusion status. The better of employable chances labor occupies, the higher endogenous income labor can earn. This paper uses Binary logistic to explore the factors affecting informal laborers' endogenous income suffering economically social exclusion in Vietnam's northern mountainous rural area. Questionnaires were designed to collect dependent and independent variables for Binary logistic regression; 725 rural laborers living in Tuyen Quang, Yen Bai, Ha, Quang Ninh Bac Giang province have been interviewed.

The finding reveals that all factors represent positive signs, of which the laborers’ qualification is the most important one. As laborers' endogenous income relies on employment, by reviewing current employment policies on supporting rural laborers, the paper points out several recommendations for better employment perspectives to the informal laborers in rural areas in the coming years.


Keywords: Income, Laborer, Rural, Policies, Factors.

INTRODUCTION

Vietnam used to be known as a low-income country with a household's poverty rate of around 50% in the 1990s. The Vietnamese Government launched Poverty reduction programs in 1998. Up to 2010, there were about 41 programs and projects related to poverty reduction (Mai et al., 2012); several programs are being deployed. These programs were performed simultaneously on three aspects: (i) Enhancing ability to access to health services, education, and vocational training; providing legal support, houses, and clean water, (ii) Supporting production development by offering preferential credit policies for several fields such as agricultural, forestry, fishery activities and labor export, etc., and (iii) Developing essential infrastructures for the most challenging communities. Besides, the governments also helped farmers produce and sell their products. Consequently, the poverty rate reduced to around 10% in 2010 (GSO, 2011), and these achievements improved the country's living standard. The poverty reduction programs in Vietnam are not sustainable; the re-poor rate is often high under economic shocks. Notably, as the Vietnamese Government released Decision 59/2015/QD-TTg, the new poverty line was established in 2016. The rate and status of individuals and households in the near-poverty line and falling into poverty have increased, especially in Vietnam's northern mountainous region.

Addressing social exclusion in an economic aspect has become the developed countries' main concern; it is also a new perspective in resolving poverty in developing countries. This paper explores factors influencing informal laborers' endogenous income, who are suffering economically social exclusion in Vietnam’s northern mountainous rural areas. The article will also discuss how to raise informal laborers' internal incomes in Vietnam’s northern mountainous rural areas.

Literature Review  

Social exclusion originated in France, refers to people who do not have access to economic development benefits (Yépez del Castillo, 1994). Social exclusion occurs where different factors combine to trap individuals and areas in a spiral of disadvantages. It is said that social exclusion is a broader concept than poverty. It encompasses low material means and the inability to participate effectively in economic, social, political, and cultural life and some characteristic alienations and distance from mainstream society. The social exclusion covers economic, political, cultural, and social issues (Figueredo & Haan, 1998). In the economic aspect, social exclusion involves the inadequacy of income and employment where the final indicator of jobs can be measured by income (Bhalla & Lapeyre, 2004). Therefore, encouraging labor to participate actively in the labor market is the best way for poor people to raise internal income, which holds the most crucial portion of households' income (Xu & Chen, 2017). Moreover, participating in the labor market helps the poor get out of their absolute poverty situation and enhances their social relations and political activities. These activities are indicators for tackling social exclusion in an economic aspect, as mentioned by Burchardt et al., (1999). According to Mai et al., (2012), the economically excluded people include those with income above the Quintile 3 but lower than the Quintile 4, by 60%; poor and near-poor people belong to this category.

In general, having a job means that workers have a higher income than those receiving subsidies from the State, community, and society. Employment gives workers social interaction, which they will find very difficult to achieve without a job. The working environment makes relationships between people and relevant institutions, such as trade or professional associations, more comfortable and convenient. However, having a job does not ensure that workers do not fall into social exclusion in economic aspects. Jobs such as waiters or telephones sellers in stores with low wages and unstable nature (those who work half a day and do not have long-term job security) do not guarantee a stable income. It increases the risk of suffering from social exclusion in the economic aspect.

For workers participating in the informal employment market in rural areas, under the pressure of social changes, to survive, these workers not only carry out agricultural activities but also participate in an increase in non-agricultural economic activities without having labor contracts (Islam & Pakrashi, 2020; Ren et al., 2020). Non-agricultural activities without a labor contract performed in countries with the transitional economy contribute between 20-70% to workers' real income (Mishra, 2018). In other words, to make ends meet, informal workers in rural areas, apart from working in agriculture, are also engaged in different industries' production, business, and services (Rahe & Hause, 2020; Rai, 2020). Besides, to the money amount achieved by workers' participation in the labor market, they also receive income from property leases, government subsidies, and support from family, relatives, etc. (Mohd et al., 2018). Therefore, people's general and rural workers' income is formed from two primary sources: endogenous and exogenous ones. The exogenous income is the source that the beneficiary receives from the support of relatives, family, and society. In other words, it is a source of income that the beneficiary does not have to participate in the labor market to achieve. Meanwhile, endogenous income is the source of income that employees receive from participating in the implementation of agricultural or non-agricultural economic activities (industry, services, etc.) (Pham & Riedel, 2019). Therefore, endogenous income is the income source that beneficiaries earn through compulsory participation in the labor market. This income accounts for about 90% of the total income of rural workers.

MATERIALS AND METHODS

This study used Binary Logistic regression to analyze factors affecting Vietnamese rural laborers' endogenous income suffering economically social exclusion.  Accordingly, the dependent and independent variables are defined as followed:

  1. The dependent variable is rural workers' income status under the influence of social exclusion in the economic aspect.  The dependent variable is measured on a dichotomous scale: their incomes under the near-poor line (coded as 1) vs. their incomes over the near-poor line (coded as 0)
  2. The independent variables include money spending on agricultural activities, educated qualifications of workers who are the household head, and the technology level that rural workers are using. Independent variables are continuous variables and ordinal variables.  

The Chi-square test was used with the following pairs of hypotheses:

H0: No correlation is found among variables.

H1: There are correlations among variables to test the correlation between dependent variables and independent variables in the model.

Test value c2 in the analysis will provide the testing significance (P-value). If the significance value is smaller or equal to a (initial significance value), the test has its significance, or in other words, the hypothesis H0 is disapproved, and all variables correlate with each other.

Binary logistic was used to analyze this case as follows:

 

LogPiPj=αij+βijX1+βijX2+…+εij

(1)

 

This study uses data collected through direct interviews with 725 respondents, distributed in 5 provinces, including Tuyen Quang, Yen Bai, Ha, Quang Ninh Bac Giang, to evaluate Vietnamese rural laborers' endogenous income suffering economically social exclusion. Before conducting the survey and direct interviews with research subjects, the authors had consulted with experts about the survey questions and methods to evaluate and process the survey data.

To collect data for dependent variables (endogenous income of rural workers), questionnaires were designed so that interviewees would fill up their endogenous and exogenous earnings. To ensure the accuracy of data collected for processing and analysis, when designing the questionnaire, the authors cross-checked information between the actual income of each worker with the position in the five quintiles that the respondents filled. These quintiles include poor, near-poor, middle, above average, and rich. According to the classification of the social exclusion in the economic aspect of the people proposed by Mai et al. (2012), the number of identified informal workers in Northern mountainous areas under the influence of social exclusion in economic aspect identified was 358 people, from which 59 were in the third quintile - the group with middle income (Table 1).

Table 1. Number of economically social exclusion in Vietnam’s northern mountainous rural area

 

 

Quintile 1

(rich)

Quintile 2 (above average)

Quintile 3 (middle)

Quintile 4 (near poor)

Quintile 5 (very poor)

Respondents

725

13

97

305

41

269

Percentage

100%

1.8

13.4

42.1

6.3

36.4

 

Number of workers not in social exclusion

Number of workers in social exclusion in the economic aspect

Respondents

725

367

358

Percentage

100%

50.6

49.4

Tuyen Quang

125

Districts in Highland areas

49

76

10

7

59

Yen Bai

160

76

84

22

5

57

Ha Giang

146

66

80

20

8

52

Quang Ninh

164

District in plain areas

65

99

22

12

65

Bac Giang

130

96

34

9

10

15

Source: Mai N A et al. (2013), p 226 - 227

 

Questionnaires were designed based on a continuous and ordinal scale (Likert scale) to collect independent variables’ data.

  • To obtain information on money spending on agricultural activities, known as Funding data, questionnaires were designed so that interviewees would fill up their money spending on agricultural activities annually.
  • Information of the household head's educated qualifications, known as Education data, was collected as the respondents filled in the appropriate boxes about their qualifications and vocational training courses that they have been trained in.
  • Questionnaires were designed so that interviewees would fill up the ordinal scale to collect technical data, representing the technological level that rural workers apply in daily farming, of which 1 was the weakest and increased gradually to 5, which was the highest.

RESULTS AND DISCUSSION

Using the survey data processed by the SPSS software, the authors found the following results:

Case Processing

Table 2 presents the target group's number, 358 out of 725 respondents from 5 surveyed provinces.

Table 2. Summary

Unweighted Cases (a)

N

Percent

Selected Cases

Included in Analysis

358

49.4

 

Missing Cases

367

50.6

 

Total

725

100.0

Unselected Cases

0

.0

Total

725

100.0

a) If weight is in effect, see the classification table for the total number of cases.

Table 3 indicates that, among 358 laborers suffering economically social exclusion, 83 laborers are over poverty line, the rest are below poverty line.

Table 3. Classification Table (a, b)

 

Observed

Predicted

 

INCOME

Percentage Correct

 

1.00

2.00

 

Step 0

INCOME

1.00 (below poverty line)

275

0

100.0

 

 

2.00 (over poverty line)

83

0

.0

 

Overall Percentage

 

 

76.8

a Constant is included in the model.

b The cut value is .500

Table 4. Omnibus Tests of Model Coefficients

 

 

Chi-square

Df

Sig.

Step 1

Step

68.481

3

.000

 

Block

68.481

3

.000

 

Model

68.481

3

.000

 

In Table 4, Omnibus Tests of Model Coefficients shows both Chi-square and Sig. are below 5%. It is suitable for conducting study.

Table 5. Model Summary

Step

-2 Log likelihood

Cox and Snell R Square

Nagelkerke R Square

1

31.922

.474

.563

Hypothesis testing result of general relevance degree has sig.= 0.00; therefore, the research disapproved the hypothesis H0: âvondt = âhocvan = âcongnghe =0

It can be seen that -2LL = 31.92, which was not relatively high, proves a relatively good sign of the model in general (Table 5).

Table 6. Classification Table(a)

 

Observed

Predicted

 

INCOME

Percentage Correct

 

1.00

2.00

 

Step 1

INCOME

1.00 (below poverty line)

263

12

95.6

 

 

2.00  (over poverty line)

59

24

28.9

 

Overall Percentage

 

 

80.2

a) The cut value is .500

 

Impacts of Funding, Education, and Technology on Vietnamese rural laborers' endogenous income suffering economically social exclusion are presented in the classification Table.

According to the results, out of a total of 275 employees with incomes below the poverty line, the forecast's accuracy rate was more than 95.6%. In contrast, in more than 83 workers being under the influence of social exclusion in the economic aspect with above-average income, the forecast showed that 24 workers could escape from social exclusion in the economic aspect (Table 6). Hence, it can be seen that the average rate of the model's accurate prediction is more than 80%.

 

Table 7. Variables in the Equation

 

B

S.E.

Wald

df

Sig.

Exp(B)

Step 1(a)

Funding

.156

.023

47.750

1

.000

1.168

 

Technology

.114

.146

.603

1

.037

1.120

 

Education

.561

.285

3.887

1

.049

1.752

 

Constant

-4.488

.654

47.088

1

.000

.011

a Variable(s) entered on step 1: C821, C1405, CHOC.

In Table 7, (Table for Variables in the Equation), using the Wald test on the significance of the overall regression coefficients, the study discovered that both policy and qualification variables have significance values (sig.) being less than 0.05. Therefore, it is safe to reject the hypothesis Ho: âcapital = âlabor = âtechnology =0.

 

Thus, the discovered regression coefficients had significant value, and the model was written as:

 

Loge [P (Y=1)P(Y=0) ] = - 4.488 + 0.561Education + 0.156Funding + 0.114 Technology

(2)

The significance of coefficients in the Binary Logistic regression can be interpreted as follows: all factors positively respond to Vietnamese rural laborers' endogenous income suffering economically social exclusion. In other words, if one of these factors is increased, it will increase the revenue of rural workers. Specifically, improving workers' educated qualifications have the most substantial impact on increasing Vietnamese rural laborers' endogenous income suffering economically social exclusion.

 

Recommendations to Increase the Endogenous Income of Informal Laborers Suffering Economically Social Exclusion in Vietnam’s Northern Mountainous Rural Area

Although not eliminating the quintile of income, increasing endogenous income increases each of the 5 income quintiles' real income. Besides, the increasing internal income also increases the chances of some members of the income quintile getting out of the poverty line or economically social exclusion. Endogenous incomes are influenced by money spending on agricultural activities (Funding), workers' educated qualifications (Education), and technological application on daily laborers’ employment (Technology). Unless providing prospectus job opportunities for workers, endogenous incomes will not change in a positive direction. This section will explore current supporting employment policies for rural laborers in Vietnam; recommendations will be discussed to enhance the employable chance for rural workers in general and economically social exclusion in particular. The better of employable chances a laborer occupies, the higher endogenous income a laborer can earn.

 

Firstly, in Terms of Education

As vocational education training educates participants with technical and valuable skills and the know-how to implement them in daily agricultural activities (Huijsmans & Chea, 2017), being well prepared for their profession enhances individuals' chance to afford better job opportunities (Do et al., 2020). The better job opportunities a laborer obtains, the more money a laborer earns. Job opportunities for rural laborers are influenced heavily by vocational training policies.

Up to now, vocational training policies for laborers in Vietnam’s northern mountainous area in general and Vietnamese rural laborers' endogenous income suffering economically social exclusion, in particular, have been expressed in various forms, including Program 135 known as ‘Socio-economic development program for especially difficult communes in mountainous areas’; Resolution 30a/2008/NQ-CP on ‘the rapid and sustainable poverty reduction in 61 poor districts’; Decision 1956/QD-TTg on Vocational training for Rural laborers by 2020; The National Target Program on sustainable poverty reduction for the period of 2016-2020, etc.

According to these policies, rural laborers in mountainous areas receive funding for short-term vocational training, food stipend, travel expenses, etc. Local, provincial authorities determine the specific financing for each training course according to their local budget. For vocational training courses with a training period of 3 months or more, learners are trained in public vocational training institutions. They are entitled to ‘scholarship, social allowances, and other policies as boarding high school students of ethnic minorities’ (Do et al., 2020). Besides enhancing rural laborers in mountainous areas accessing the labor market after finishing the training course, The National Fund for Employment belonging to the Targeted National Employment Program provides loans for these people.

Policies on vocational training increased endogenous incomes, living condition improvements for laborers and their families in Vietnam’s northern mountainous areas in general, and Vietnamese rural laborers' endogenous income suffering economically social exclusion, in particular. However, several problems need to be solved for better vocational training policies in Vietnam’s northern mountainous areas. In Vietnam’s northern mountainous regions, the number of laborers who can find jobs in non-agricultural sectors is relatively low, as very few laborers obtain intermediate vocational training levels (Nguyen, 2020; Patkar et al., 2020). In the view of rural laborers in Vietnam’s northern mountainous regions participating in intermediate vocational training courses would be time-consuming; their families' living expenses are not guaranteed while they are getting rid of work. Besides, it is difficult for non-agricultural vocational trainees to apply their knowledge and techniques to production. Most rural laborers in Vietnam’s northern mountainous areas registered for short-term vocational training courses; they continue to work in the agricultural sector and self-employed after graduation (Kotvitska et al., 2019; Pham, 2020). However, the qualification of short-term vocational training courses is not adequate. The gap between training and the actual needs of laborers needs to be narrowed as soon as possible.

Therefore, the vocational training contents should be integrated with the region's socio-economic development and suitable for local demands. Non-agricultural vocational training must originate from employers' needs. Unless employment for learners is guaranteed, the vocational training course would not be opened. Some short-term vocational training courses and specialized training programs should be taught in ethnic languages that suit these target groups' conditions and circumstances.

The Government should continue to strengthen communication on the benefits of education, especially for the ethnic minority working group, to help them recognize that education is a prerequisite in absorbing knowledge, applying scientific and technological advances to improve agricultural and rural workers' quality. To achieve this, on the one hand, the Government should continue to invest in opening more ethnic boarding schools in remote areas and areas with ethnic minorities to attract more children from families living in these areas to attend school and limit the possibility of school drop-outs of this target group. On the other hand, the policy to attract teachers to rural/remote areas also requires reasonable adjustments, especially in salary. In the next period, the salary of teachers in rural areas should be modified so that teachers can ensure a living based on their received salary. 

Secondly, in Terms of Funding

The capital resources investing in the agricultural production process influence the development of livelihood in rural areas (Zhu et al., 2021). However, these resources are relatively low as Vietnam’s northern mountainous areas were known as the poorest regions in the countries, with more than 50 percent of the poor before the early 2000s. The Government has launched many policies on financial assistance for rural development, including Decision No. 67/1999/QD-TTg on ‘a number of banking credit policies in service of agricultural and rural development; Decision No. 289/2008/QD-TTg on ‘promulgating many policies to support ethnic minorities, policy beneficiary households, poor households, near-poor households, and fishermen’; Decree No. 41/2010/ND-CP on ‘credit policies for agricultural and rural development; Decree No. 75/2015/ND-CP on ‘mechanism and policy of forest development associated with the policy on sustainable and rapid poverty reduction and assistance to ethnic minorities for the period of 2015 – 2020’.

Agricultural production faces potential risks because of natural disasters, droughts, storms, and floods on a large scale. Besides, epidemics in crops and animals continuously cause severe consequences for production and affect workers' ability to pay off their bank loans. Therefore, Decree No. 41/2010/ND-CP allows commercial banks to review the restructuring of customers' repayment terms. If the borrower has evidence that their agribusiness has been adversely affected by natural disasters, the commercial bank also considers lending new loans regardless of the old balance. However, the interest rate of 0.65%/month is relatively high. High interest rates make it difficult for them to switch from monoculture to commodity production. Besides, for workers involved in the farm economy, although the non-mortgage loan level has been raised to 10 million VND, this amount is still meager compared to farm economic development requirements. Besides, only a 'prominent profile' can provide preferential treatment for borrowers. However, most borrowers do not have this kind of profile or currently have a mortgage at the bank. Therefore, it is not easy to access these incentives. Moreover, to benefit from preferential treatment when buying machinery and equipment, farmers must purchase exactly the machines and equipment in the required goods list. The shortcomings make it difficult for laborers in general and rural laborers' endogenous income suffering economically social exclusion, in particular, to access bank capital in rural areas.

Extending the debt repayment period for customers at risk due to force majeure reasons and helping borrowers complete procedures to enjoy preferential treatment need to be adjusted in the rural laborer supporting policy in the coming period. Besides lowering interest rates with loans for rural workers' agricultural production, the Vietnamese Government should consider carefully that informal laborers can raise their agricultural production funds.

Thirdly, in Terms of Technology

Technologies used in agricultural production are not only equipment but also the technical skills of informal workers (Kubanov et al., 2019; Leonid, et al., 2020). Farming activities of each farmer's household in Vietnam usually take place on a small and scattered scale, so it is incapable of applying modern machinery to cultivate on a large scale. Additionally, because people's accumulation in the northern mountainous areas is not much, not many families can own modern machinery for cultivation. Therefore, cultivation skills are the most effective techniques to improve crop yields and facilitate endogenous income growth. Farmers want to be equipped with fundamental knowledge for agricultural production such as fertilizers and pesticides properly and want to grasp new farming techniques and advanced technology to apply in the production process. Many policies to enhance informal laborers' technical skills in rural areas have been launched, such as Decision 52/2012/QĐ-TTg on employment and vocational training support policies for laborers subject to agricultural land recovery; Decision 5480/QĐ-BNN-KTHT on Approval of agricultural vocational training plan for rural workers 2016-2020. However, the number of staff working in agricultural promotion is still tiny and low qualification.

In the next period, besides revising credit policies on supporting agricultural production, the Vietnamese Government should strengthen the qualification of the specialized team's network working on a farming extension. To obtain the goals, the Government needs to increase the budget expenditure on the training of technical staff for agricultural promotion. This team is required to be regularly trained and updated with information and skills. They, therefore, can orient and advise rural workers in applying cultivation farming methods and techniques. So that high-yield and high-quality seeds and breeds of farming are increased.

 

CONCLUSION

Using Binary Logistic regression to identify factors affecting Vietnamese rural laborers' endogenous income suffering economically social exclusion from 358 out of 725 respondents, the paper indicates that selected factors represent positive signs. Although several recommendations have been mentioned to increase the endogenous income of informal laborers suffering economically social exclusion in Vietnam's Northern mountainous rural area, state budget allocation for implementing these solutions requires more extensive discussions. It is beyond the scope of this study to conduct such intensive research.

ACKNOWLEDGMENTS: None

CONFLICT OF INTEREST: None

FINANCIAL SUPPORT: This research is funded by National Economics University, Hanoi, Vietnam.

ETHICS STATEMENT:  None

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How to cite this article
Vancouver
Mai CN, Mai AN, Nguyen HNT, Nguyen HT. Factors Affecting Endogenous Income of Informal Laborers Suffering Economically Social Exclusion in Vietnam’s Northern Mountainous Area. J Organ Behav Res. 2021;6(1):59-70. https://doi.org/10.51847/zqgvCD9ayk
APA
Mai, C. N., Mai, A. N., Nguyen, H. N. T., & Nguyen, H. T. (2021). Factors Affecting Endogenous Income of Informal Laborers Suffering Economically Social Exclusion in Vietnam’s Northern Mountainous Area. Journal of Organizational Behavior Research, 6(1), 59-70. https://doi.org/10.51847/zqgvCD9ayk
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