Luận văn thạc sĩ UEH rural urban micration and urban unemployment, the case of ho chi minh city

Problem statement

In the past 20 years, Vietnam has been remarkably successful in ensuring high levels of economic growth and in reducing poverty This goes hand in hand with important shifts in population distribution and mobility

The economic reforms carried out in 1986-affected migration in three main ways In agriculture and the introduction of the household contract system have released farmers from the land In cities, the household registration system continues, but no longer limits the acquisition of essential goods and access to employment In the emerging industrial sector, Vietnam's incorporation into the global economy, it has resulted in flows of foreign direct investment attracting migrant workers where such industries, services

The migration from rural to urban areas has been an important part of the urbanization process and created structural changes population among regions, especially make labor market adjustment from agriculture to manufacturing and services sector in modernization and industrialization process in Vietnam

Todaro and Harris (1970), the migration of rural to urban areas is an important part of the problem urban unemployment and underemployment in almost every contemporary big city in developing countries Rural to urban migration mainly caused the labor force in rural to become scarcely Simultaneously created urban unemployment for unskilled and skill labor in formal and informal sector

Ho Chi Minh City is the largest economics central in Viet Nam The city and its surroundings have lured more investors than any other area in Viet Nam By at the end 2006, Ho Chi Minh City had toped about attracting FDI account to 26,9% of project, 24,1% total registered capital (reported by MPI, 10-2006)

This thesis will to what find is relational migration and under what circumstance? In addition, how to it is relate to urban unemployment in Ho Chi Minh City? Should local government intervene and create conditions to attract high skill employment as migrants Moreover, what should be their policy to reduce unemployment situation in

• urban area The thesis tries to find the determinants of migration effects to unemployment To do so, we use instrumental variables and cross - section data techniques which is used to this thesis

The research objective of the thesis

The main objective of this thesis will be analyzing the feature of migrants that relate to urban employment, the case of Ho Chi Minh City The finding mainly factors an economic behavioral of rural - urban migration and the determinants of urban unemployment Additionally, fulfill these alternative policies design to alleviate urban unemployment The thesis focuses on addressing the following issues:

To analyze the personal characteristics effect on finding job in Ho Chi Minh City

To explore the link between migration and wage level which affect employment level at destination area

What is the labor market performance of migrants in term of their wages and the probability of unemployment?

Main hypothesis to be tested

In the context of significant migration that take opportunities and challenges for the country's development and urban area related to non - migrants and migrant's employment and unemployment, this study expect to find out the relationship between the migration and unemployment in urban sector

1 Individuals seek to maximize their incomes moving to places where the wages are higher Therefore, the main engines of the decision are wages differentials, which result from geographical differences in demand and supply in urban labor markets How does the relationship the migration and wages at destination?

2 How the link between migration and unemployment status at urban sector, in which based on human capital model, the key issue is whether being a migrant has a distinctive effect on the probability of being unemployed.

The scope and limitation of the thesis

The limitation ofthe thesis

The thesis does not aim to provide an overall picture the social - economic and health of migrants in Ho Chi Minh City It attempt to evaluate and find out relationship between migration and wage, probability of unemployment in the difference between migrants and non- migrants in Ho Chi Minh City

The 2004 VietNam Migration Survey designed as a micro-level study of migration in selected areas that are major destinations for internal migrants in Viet Nam These areas include rural areas, industrial zones and large cities The main objective of the survey is to expand the knowledge base on migration outcomes within VietNam The focus of the survey is on decision making related to migration and outcomes of migration The results of the Vietnam Migration Survey 2004, data of Ho Chi Minh

City, will be analysis and evaluate.

Methodology

The thesis method used IS mainly quantitative combining both descriptive and regression analysis

First, the descriptive statistic method use to describe the relevant database Next, an econometric model estimate to examine the relationship between dependent and independent variables The relationship tested by a set of primary data, which collected by Vietnam GSO and UNPFA, 2004.

Data source

The study uses primary and secondary data source from Vietnam Migration Survey

2004 by General Statistic Office and UNFPA conducted 2004

The 2004 Viet N am migration survey was collected information on various aspects of respondents' background, migration history, details of last move, activities and current living condition, health and STis, AIDS and family planning in migrants and non - migrants

Other information sources from report, articles and newspaper

Chapter 2: Literatures review This part will discuss of the literature review analyze migration its relation with urban unemployment in developing countries

Chapter 3: Migration and urban unemployment in VietNam, the case of Ho Chi Minh City

Chapter 5: Econometric analysis and Results Chapter 6: Conclusion and Policy implications

2.1 MIGRATION AND FACTORS AFFECT ON MIGRATION

Migration is socio-economic phenomenon that could find in any country Generally, migrations include all types of residential change from one domicile to another (Goldscheider, 1971) Migration, which occurs because of changes in the economical, cultural, and political structures of social transformation, causes important alternations in social structure Therefore, migration is defined as a demographic process mainly as changes in residential areas between the geographic and/or administrative regions Migration, in this perspective, is an act of change itself for both the migrant and the societies, communities between which the migrant has moved Both demographic and historical dimensions of migration brought into consideration, in particular, their varying effects on different institutions, such as marriage and family Migration decision has also focused on the individual characteristics of persons that do or do not predispose them to migrate such as person's age, sex, education (Sjaastad, 1962)

Migration to urban and related problem is common issues in developing countries such as employment, environment and housing shortage Main goal is to minimize the negative effects of this process and complete this process with least problems

Because migration and urbanization, which is one of the first steps of modernization, will certainly occur together with some mistakes and troubles Therefore, due to migration towards cities several different settlements occurred and still are occurring in the centers and surroundings of cities

Lee ( 1969) pointed out that the migration process is selective because differentials such as age, gender, and social class affect how persons respond to push and pull factors, and these conditions shape their ability to overcome intervening obstacles

According to Lee, the "push factor" could be more important than the "pull factor", which the difficulties in rural areas, such as poverty, unemployment, land shortages are driving forces that urge the farmers to leave their native areas the homeland to find a new place to settle and to work The "pull factor", which refer to job or income opportunities outside the farmers' homeland that are so attractive that they cannot stay at home By these means, the job and income opportunities in urban areas are pulling factors that pull the people to the urban areas to settle and finding jobs for themselves

Larson and Mundlak (1997) suggest that rural to urban migration is beneficial for the remaining agricultural workers are increased and so is their income The same amount of output produced by fewer labors raises the income level of the households This reduces the rural urban income differential and acts as a disincentive to rural to urban migration for raising the family income The rural sector can also benefit from benefit from remittance send by the migrants, Williamson (1988) shows that remittances in Africa and Asia equal 1 0 to 13 percent of the urban incomes of rural migrants

Therefore, the centrality of the phenomenon is to recognize that economics issues are mainly causes to affect rural and urban migration process This process will in tum itself tend to alter the pattern of sectoral and geographic economic activity, income distribution and even population growth

For the case of Vietnam, the movement of people who leave the countryside for gaining better social - economic opportunities in the cities (including towns at the country level) will considered as rural - urban migration With frequent fluctuation and prolonged depressions in the prices of agriculture communities associated with the greater global integration, it is more difficult for rural people to make a living on small farms Not surprisingly, migrating (especially to the cities) is the aspiration in life for the overwhelming majority of non - farm people and especially youth who have many opportunities to find job in urban areas Despite often living in crowded conditions and working overtime, migrants can hope to earn much higher incomes than on their farm or in rural employment

The factors influencing the decision to migrate are varied and complex Because migration is a selective process-affecting individual with certain economic, social, educational and demographic characteristic, the relative influence of economic and non-economic factor may vary not only between regions and areas but also within defined geographic areas and population Migration were effected by difference in economic opportunities and living conditions between places (rural and urban sectors), people's awareness of those differences and desires to improve their live by moving and their ability to act upon those desires The main factors influencing desires to migrate include difference in employment opportunities, wages rate and living conditions Moreover, nature of migration decisions and the relevance of both origin and destination conditions to these decisions Factors are in influencing out- migration from rural areas in the context of household and community-level contextual factors That are affected income-earning opportunities of household members at the level of the household farm or business (e.g., the amount and quality of land available); or through their effects on economic opportunities in the community

Local community, Conditions in area of original

Internal factors (Market, price, trade/capital flows)

Urban policies (Economics, environment, demographic, socio - economic, infrastructure)

Individual/household characteristics (Age, education, marital status, previous migration, work experience of member, family size/composition, land/assets, migration network)

Local community Conditions in possible areas of destitution

Adapted to Richard E Bilsborrow, Migration, population change, and the rural environment, p78, ECSP report, Issue 8, 2002

2.1.3 The effects on origin and destination areas

The production structure of an economy also affects the migration decisions of individual For instance, in Vietnam, the change in the agricultural structure has had important consequences for developing the rural sector That is cause for migration to urban areas The flow of rural migrants to urban areas, the effect on destination area is less clear, if urban industries cannot absorb all migrants, there will be higher urban unemployment However, some companies will prefer to employ migrant labor Rural migrants have fewer expectations of job opportunities and generally receive lower wages Moreover, there is also some evidence that the destination areas will benefit from rural to urban migration, when rural migrants do unpleasant jobs, contribute to economic growth and as consumers in the urban economy

2.2 MIGRATION AND URBAN UNEMPLOYMENT IN DEVELOPING COUNTRIES

In many developing countries, rural poverty manifested in low agricultural incomes, low productivity and underemployment is pushing many migrants out of rural sector towards sectors with greater employment opportunities Some recent studies in developing countries have observed increasing unemployment in rural sector and a further widening of the gap between rural and urban income (see, as example, Todaro,

1969, 1997) The pressure of population in terms of higher people/land ratios have been hypothesized as an important cause of increasing poverty and of rural out - migration, with given technology, there is only a certain proportion of the labor force, which can be absorbed by agriculture, and indeed as technology advances, demand for rural labor may diminish, thereby creating further unemployment As the population grows, increasing numbers of people must move to the urban centers for employment opportunities, unless difficult to imagine radical improvements can be made in agricultural intensity and rural systems In fact, population pressure is not the only nor even the principal cause of the increasing unemployment and poverty of the rural population; at least as important are the low rate of investment in agriculture, fragmentation of land ownership, inequalities in the distribution of land and other productive assets One o the mam reasons for this is the fact that much farm technology is imported from labor scare countries and favors the use of capital relative to labor (Lucas, 1997)

Due to the over-population problem in most developing countries, especially in Asia, Africa, and the continuing high levels of demographic fertility, the pool of landless in addition, near - landless increases from generation to generation Progressive fragmentation of land has pushed many of the landless and near- landless peasants to move to cities in search of non - agricultural jobs

While these factors have led to rural - urban migration among the very poor, especially those of the rural middle and upper classes, with low education level and an awareness of the economic and social opportunities available in urban centers, some migrants to further their education while others migrate as they become dissatisfied with the prospects of rural life

LITERATURE REVIEW 2.1 Migration and factors affect on migration

Migration definition

Migration is socio-economic phenomenon that could find in any country Generally, migrations include all types of residential change from one domicile to another (Goldscheider, 1971) Migration, which occurs because of changes in the economical, cultural, and political structures of social transformation, causes important alternations in social structure Therefore, migration is defined as a demographic process mainly as changes in residential areas between the geographic and/or administrative regions Migration, in this perspective, is an act of change itself for both the migrant and the societies, communities between which the migrant has moved Both demographic and historical dimensions of migration brought into consideration, in particular, their varying effects on different institutions, such as marriage and family Migration decision has also focused on the individual characteristics of persons that do or do not predispose them to migrate such as person's age, sex, education (Sjaastad, 1962)

Migration to urban and related problem is common issues in developing countries such as employment, environment and housing shortage Main goal is to minimize the negative effects of this process and complete this process with least problems

Because migration and urbanization, which is one of the first steps of modernization, will certainly occur together with some mistakes and troubles Therefore, due to migration towards cities several different settlements occurred and still are occurring in the centers and surroundings of cities

Lee ( 1969) pointed out that the migration process is selective because differentials such as age, gender, and social class affect how persons respond to push and pull factors, and these conditions shape their ability to overcome intervening obstacles

According to Lee, the "push factor" could be more important than the "pull factor", which the difficulties in rural areas, such as poverty, unemployment, land shortages are driving forces that urge the farmers to leave their native areas the homeland to find a new place to settle and to work The "pull factor", which refer to job or income opportunities outside the farmers' homeland that are so attractive that they cannot stay at home By these means, the job and income opportunities in urban areas are pulling factors that pull the people to the urban areas to settle and finding jobs for themselves

Larson and Mundlak (1997) suggest that rural to urban migration is beneficial for the remaining agricultural workers are increased and so is their income The same amount of output produced by fewer labors raises the income level of the households This reduces the rural urban income differential and acts as a disincentive to rural to urban migration for raising the family income The rural sector can also benefit from benefit from remittance send by the migrants, Williamson (1988) shows that remittances in Africa and Asia equal 1 0 to 13 percent of the urban incomes of rural migrants

Therefore, the centrality of the phenomenon is to recognize that economics issues are mainly causes to affect rural and urban migration process This process will in tum itself tend to alter the pattern of sectoral and geographic economic activity, income distribution and even population growth

For the case of Vietnam, the movement of people who leave the countryside for gaining better social - economic opportunities in the cities (including towns at the country level) will considered as rural - urban migration With frequent fluctuation and prolonged depressions in the prices of agriculture communities associated with the greater global integration, it is more difficult for rural people to make a living on small farms Not surprisingly, migrating (especially to the cities) is the aspiration in life for the overwhelming majority of non - farm people and especially youth who have many opportunities to find job in urban areas Despite often living in crowded conditions and working overtime, migrants can hope to earn much higher incomes than on their farm or in rural employment.

Factors effect on migration

The factors influencing the decision to migrate are varied and complex Because migration is a selective process-affecting individual with certain economic, social, educational and demographic characteristic, the relative influence of economic and non-economic factor may vary not only between regions and areas but also within defined geographic areas and population Migration were effected by difference in economic opportunities and living conditions between places (rural and urban sectors), people's awareness of those differences and desires to improve their live by moving and their ability to act upon those desires The main factors influencing desires to migrate include difference in employment opportunities, wages rate and living conditions Moreover, nature of migration decisions and the relevance of both origin and destination conditions to these decisions Factors are in influencing out- migration from rural areas in the context of household and community-level contextual factors That are affected income-earning opportunities of household members at the level of the household farm or business (e.g., the amount and quality of land available); or through their effects on economic opportunities in the community

Local community, Conditions in area of original

Internal factors (Market, price, trade/capital flows)

Urban policies (Economics, environment, demographic, socio - economic, infrastructure)

Individual/household characteristics (Age, education, marital status, previous migration, work experience of member, family size/composition, land/assets, migration network)

Local community Conditions in possible areas of destitution

Adapted to Richard E Bilsborrow, Migration, population change, and the rural environment, p78, ECSP report, Issue 8, 2002

2.1.3 The effects on origin and destination areas

The production structure of an economy also affects the migration decisions of individual For instance, in Vietnam, the change in the agricultural structure has had important consequences for developing the rural sector That is cause for migration to urban areas The flow of rural migrants to urban areas, the effect on destination area is less clear, if urban industries cannot absorb all migrants, there will be higher urban unemployment However, some companies will prefer to employ migrant labor Rural migrants have fewer expectations of job opportunities and generally receive lower wages Moreover, there is also some evidence that the destination areas will benefit from rural to urban migration, when rural migrants do unpleasant jobs, contribute to economic growth and as consumers in the urban economy.

Migration and urban unemployment in developing countries

In many developing countries, rural poverty manifested in low agricultural incomes, low productivity and underemployment is pushing many migrants out of rural sector towards sectors with greater employment opportunities Some recent studies in developing countries have observed increasing unemployment in rural sector and a further widening of the gap between rural and urban income (see, as example, Todaro,

1969, 1997) The pressure of population in terms of higher people/land ratios have been hypothesized as an important cause of increasing poverty and of rural out - migration, with given technology, there is only a certain proportion of the labor force, which can be absorbed by agriculture, and indeed as technology advances, demand for rural labor may diminish, thereby creating further unemployment As the population grows, increasing numbers of people must move to the urban centers for employment opportunities, unless difficult to imagine radical improvements can be made in agricultural intensity and rural systems In fact, population pressure is not the only nor even the principal cause of the increasing unemployment and poverty of the rural population; at least as important are the low rate of investment in agriculture, fragmentation of land ownership, inequalities in the distribution of land and other productive assets One o the mam reasons for this is the fact that much farm technology is imported from labor scare countries and favors the use of capital relative to labor (Lucas, 1997)

Due to the over-population problem in most developing countries, especially in Asia, Africa, and the continuing high levels of demographic fertility, the pool of landless in addition, near - landless increases from generation to generation Progressive fragmentation of land has pushed many of the landless and near- landless peasants to move to cities in search of non - agricultural jobs

While these factors have led to rural - urban migration among the very poor, especially those of the rural middle and upper classes, with low education level and an awareness of the economic and social opportunities available in urban centers, some migrants to further their education while others migrate as they become dissatisfied with the prospects of rural life

The concentrated growth of industrial infrastructure in the cities m developing countries after independence has encouraged migration streams from rural regions by providing job opportunities for those migrants Until recently, governments have also favored a policy of concentrating public and social services investments in urban areas, particularly major urban areas Similar investments in the rural areas neglected

In most of the developing world, migrants from rural to urban regions target primate cities This phenomenon is due to the concentration of services, industrial zone, and other social economic and cultural services in prime cities and large metropolitan regions The development of transport system has found to reduce the role of distance on inhibiting migration in developing countries (Greenwood et al., 1981 )

Transportation and communication system not only reduce the cost of migration but also reduce cultural gap between the origin and destination sectors, making migration eas1er

Migration exacerbates these rural - urban structural imbalances in two direct ways

First, on the supply side, internal migration disproportionately increases the growth rate of urban job seekers relative to urban population growth, because of the high l proportion of well - educated young people in the migrants group Their presence tends to swell the urban labor supply while depleting the rural countryside of valuable human capital Second, on the demand side, urban job creation is generally more difficult to accomplish than rural job creation because of the need for substantial complementary resource inputs for in the industrial sector Moreover, the pressures of rising urban wages and compulsory employee fringe benefits in combination with the unavailability of appropriate, more labor-intensive production technologies means that a rising share of modem-sector output growth is accounted for by increases in labor productivity Together this rapid supply increase and lagging demand (what many now refer to as "jobless growth") tend to convert a short-run problem of resource imbalances into a long-run situation of chronic and rising urban surplus labor

2.2.2 Urban unemployment in developing countries

The economic explanation of human mobility treat the decision to migrate as an investment decision involving an individual's expected costs and returns- monetary and non- monetary overtime (Siaastad, 1962) This approach assumes that migrants have access to precise information about the economic conditions at both ends of the migration process An alternative model (Todaro, 1976) suggests that the decision to migrate built on a perception of an expected stream of income, which depends on urban wages, and the probability of obtaining employment However, Todaro assumes also that urban in - migrants are able to upgrade and move from the informal or traditional sector to the modem sector

Other studies have shown that in the cities of developing countries where an informal sector exists the rate of rural to urban migration was often high Poor peasants were often attracted to the unskilled jobs and cash income this sector provided, as poor people from the countryside often had low levels of education and lacked vocational skills The informal sector did not hinder a poor person's chance for employment; rather it attracted unskilled laborers who were preferred for low wage employment

Some studies have shown that if land distribution created wider disparities, the possibility of improving the living standards of poor people decreased and because of this, the rate of rural-urban migration increased

In developing countries, the extent of government concern and even alarm at the trends in urban population growth in the world Almost all countries dissatisfied with the size and growth of their urban population believed that internal rural-urban migration was the dominant factor contributing to city growth

Table 2.1: Rural-urban migration as a percentage of urban population growth, selected developing countries

Item Country Annual urban Share of growth growth due to migration

Source: K Newland (1980), City Limits: Emerging Constraints on Urban Growth, World watches PaperNo 38 Washington, DC Todaro M.P, 1997 No 104

The problems of rapid urban growth and accelerated rural- urban migration undoubtedly will be one of the most important developments in developing countries

However, the problem of urban unemployment and underemployment in almost every contemporary developing country, the one of the major consequences of the rapid urbanization process has been the burgeoning supply of job seekers in both the modem (formal) and traditional (informal) sectors of the urban economy For instance, in most African countries, the supply of workers far exceeds the demand, the result being extremely high rates of unemployment and underemployment in urban areas These statistics are from the 1960s (more recent detailed data for these countries are nearly nonexistent)

Table 2.2: Rates of urban and rural unemployment as a percentage of the active population in Africa, by country and year

Item Country Year Area Unemployment

7 Kenya 1968-69 Capital city lO.Oa n.a

Note: na = Data not available aMen only

Source: Paul Bairoch (1973), Urban Unemployment in Developing Countries Geneva:

International Labour Organization, 1973 Page 49 Josef Gugler (1976), Internal Migration:

The New World and the Third World Eds A Richmond and D Kubat Beverly Hills, CA:

Unemployment rates African cities had very considerably below current levels (for some 1980s data), high rates of open urban unemployment

Table 2.3: Percentage of open urban unemployment in four African countries

Item Co untry Year Average unemployed

Source: International L abour Organization ( 1989), World Labour Report, 1989 Geneva: anization Tables 1.7 and 1.12 Todaro M.P, 1997 No 104 International Labour Org

The substantial numbe rs of the urban labor force who were underemployed in part- service activities had been included, the overall figures for both openly unemployed and underemployed) would have most countries (Todaro, 1997) time, informal-sector urban surplus labor ( exceeded 30 percent in

Migration theories overview

For some decades, va rious approaches have been trying to analyze and provide ding for the phenomenon of migration There are multitudes of empirical studies, which are concerned with the determinants d of internal migration fundamental understan theoretical as well as both of international an

Lee (1969) classified Factors associated wit all factors associate with migration into four major groups: h the area of origin, Factors associated with the area of g obstacles and personal factors According to him, in every factors Some of them attract people to move to, some other eople, and there are neutral factors Between the origin and destination, Intervenin area there are various factors tend to repel p destination, areas are different people in dif many intervening obstacles However, regional factors affect ferent ways For example, the cost of transporting household e to some people but prohibitive to others goods may be negligibl

Alternatively, Lee also already divided the forces exerting an influence on migrant perception into "push" and "pull" factors The former are negative factor tending to force migrants to leave origin areas, while the latter are positive factor attracting migrants to destination areas in the expectation of improving their lot Lee hypothesized that factors associated with origin area conditions would be more important than those associated with destination sector would These forces associated with the area of origin and of destination are governed by personal factor "which affect individual thresholds and facilitate or retard migration" (Lee, 1969) Lee's approach reflected in a broad range of studies, particularly sociological studies dealing with migrant selectivity It is actually not a theory but a conceptual framework for classifying factors in migration decisions

The final element in Lee's model is the notion of "inventing obstacles" interposed between origin and destination These constitute "friction" in the migration process (transport costs, migration controls) and may reduce or retard migration Lee's approach reflected in a broad range of studies, particularly sociological studies dealing with migrant selectivity It is actually not a theory but rather a conceptual framework for classifying factors in migration decisions

2.3.2 The dual economy development model

Theoretically, migration is defined as simply a process of personal movement from one area to another However, economist consider rural to urban migration as a process of labor movement from less - developed to more advanced areas The first well - known economic model of development to include as an integral element the process of rural - the agricultural sector where the labor force is suffering from unemployment and underemployment transfer modernization areas where many employment opportunities are being generated and also suffering from a labor shortage Lewis ( 1954 ) This model considers migration as an equilibrating mechanism, which through transfer of labor from the labor surplus to the labor deficit sector, eventually brings about wage equality in the two sectors The model based on the concept of a dual economy, comprising subsistence, agriculture sector characterized by unemployment and a modem industrial sector characterized by full employment to equilibrium

In the subsistence sector the marginal productivity of labor is zero or very low and workers are paid wages equal to their cost of subsistence, so wage rates exceed marginal products Because of high productivity or labor union pressure, wages in the modern urban sector are much higher With such differences in wage rates, migration occurs from the subsistence to the industrial sector This increases industrial production as well as the capitalist's profit Since this profit assumed to reinvest in the industrial sector, it further increases the demand for labor from the subsistence sector

The process continues as long as surplus labor exists in the rural sector is greater than or equal to the rate of labor out - migration, but it must end eventually if the rate of growth of demand for labor in the area exceeds rural population growth

Despite the appeal of the dual economy model, most observers have found it unsatisfactory because of a number of shortcomings First, migration did not included solely by low wages and underemployment in rural areas Second, the assumption of near - zero marginal productivity and surplus labor in agriculture has been widely criticized on empirical grounds Third, the model assumes a high rate of expansion of employment opportunities through continuous investment of the rural surplus in the urban sector In fact, the rate of growth of employment in the modern industrial sector has generally not been sufficient in developing countries to absorb the increasing labor supply resulting from both natural population increases in the urban sector and net rural -urban migration Consequently, the net effect of rural - urban migration has been to shift underemployment from the rural to the urban sector

The dual economy explains convincingly the causes of migration because of wage rate differences, many other theorists have brought out it unsatisfactory because of a number of shortcomings (Todaro, 1976) First, although the wage rate differences are an important reason for migrants to move from a rural to an urban sector, the movement of people from rural to urban sector should not to be seen as simply a case of wage differences Second, many people believe that the assumption of zero marginal productivity and labor surplus in rural sector are not very realistic Third, the assumption that the rate of job generation in urban sector is high enough to absorb the labor from rural sector is not true in many cases Fourth, there is the possibility that urban investors might invest their industrial profits in new technology and labor - saving machinery, thereby killing the demand for further rural labor transfer In general, industrialization in urban sector creates a high demand for labor, but nowadays under the strong threat of competition, many firms have not employed labor intensity technology, but capital intensity instead, therefore the demand for labor in urban sector is not always high enough to absorb labor from rural sector

Todaro ( 1969), Harris and Todaro (1970) set up a seminal framework of migration between rural and urban areas They hypothesize that individuals migrate to urban sectors with the aim of obtaining employment in the formal sectors and that informal sector employment is a transitional phase during which migrants are searching for formal sector job In their decision to migrate, potential migrants balance the probability of unemployment against the real income differentials between urban formal sector and the rural area The decision to migrate depends on expected rather than actual urban-rural real wage differentials, where the expected differential is determined by the interaction of two variables, the actual urban-rural wage differential and the probability of obtaining employment in the urban sector (Todaro,

Migration rates in excess of job-opportunity growth rates are not only possible but also rational and even likely in the face of wide urban-rural expected-income differentials High rates of urban unemployment are, therefore, inevitable outcomes of the serious imbalance of economic opportunities between urban and rural areas In the Todaro approach, migration rates in excess of the growth of urban job opportunities are not only possible but also rational and probable in the face of expected large positive urban - rural income differentials High rural - urban migration can continue even when high urban unemployment rates exist and known to the potential migrants

The approach therefore offered a possible explanation of a common paradox that migration keeps on happing even with rising urban unemployment In early dualistic

; model, it assumed that there is no unemployment in the urban sector and no observed unemployment in the rural sector without cost

Todaro's basic model and its extensions consider the urban labor in developing countries as distributed between the relatively small modem sector and a much larger traditional sector Wage rates in the traditional sector considered not to be subject to the partially non - market intuitional forces that maintain high wages in the urban sector but to be determined competitively As a result, they are substantially lower than those in the urban sector are, but still significantly higher than in the traditional rural subsistence sector

According to this model, migration proceeds in response to urban - rural differences in expected income rather than actual earnings Expected gains measured by the difference in real incomes between rural and urban work and the probability of a new migrant are obtaining an urban job The rate migration held to be a function of the difference between the present values of expected urban earnings and expected rural earnings, with the size of the flow of expected urban earnings significantly affected by the probability of obtaining employment in the urban sector (UC)

Suppose that P(t) presents the probability of securing a job in the UC in period t, Yu and Y1 represent average real income in the UC and rural sector, respectively; Cis the one time cost of the move; and r is the migrants time preference rate of discount The expected net income from migration given by:

Migration takes place only if V (O) is positive In other hand, migration takes place only if there gain from moving only if:

The equilibrium migration condition: _!_ (~~~ - ~ã)- C = 0 ~ ~~~ - ~ = rC r

Todaro defines the probability of selected for a job during period t as being equal to the ratio of new urban sector employment in period t relative to the number of accumulated job seekers in the urban traditional sector in timet

Economic impacts

Migration viewed favorably in the economic development literature Internal migration thought to be a natural process in which surplus labor gradually withdrawn from the rural sector to provide needed labor for urban industrial growth The process deemed socially beneficial because human resources shifted from locations where their social marginal product often assumed zero to places where this marginal product was not only positive but also rapidly growing because of capital accumulation and technological progress

Migrant has clearly contributed to economic development through the kinds of sub sectors such as construction, processing and manufacturing, services but precise estimates on this contribution are not available Based on data from Bangladesh,

China, Vietnam and the Philippines (Dang, 2003) concludes that migration is a driver of growth and an important route out of poverty with significant positive impacts on people's livelihoods and well-being In the case of China, Murphy (2005) notes that migration has made major contributions to development, by accelerating economic growth, building up cities and establishing rural-urban linkages and return flows

Research by Chinese scholars estimates that labor migration from rural to urban areas contributed to 16 per cent of total GDP growth in China over the past 18 years They argue that migration has remained one of the key reasons that China has been able to sustain GDP growth rates above 8 per cent over the past 25 years A cheap and literate workforce has given China a competitive advantage relative to other countries It has also noted that migration has stimulated the transport sector

The economic role of that migration plays in local and national development and its impact on poverty reduction needs to be recognized and make more explicit in the planning process Given the nature of migration processes, the government needs to recognize and identify indirect measures that can help alleviate poverty in source areas

In Viet Nam, development strategies have not considered voluntary or spontaneous migration Issued by different agencies and at different levels, these policies and strategies are often inconsistent and even in conflict with each other They barely recognize the role which internal migration has played in contributing to the development of areas of origin and of destination, as well as to the well-being of individual migrants and their families

2.4.2 The relationship between the wage differential and employment

The most commonly stated for rural to urban migration the inequality between the rural and the urban sector real wage rates A larger wage gap between the two areas results in a greater incentive for rural workers to migrate to the cities Migration can even take place when there in no certainly of employment, as long as the probability of finding a job is high enough

Follow Todaro (1969) and Arellano (1981) the flow of migration presented as directly related to the probability of finding a job and to the wage differential

Where M, L, P and W are respectively, the number of migrants per period, the urban labor force, the probability of finding a job and the wage ratio between urban and rural sector

The probability of finding a job defined as the ratio between the number of new openings and the number of unemployment workers This means that the potential migrant sees his job opportunities as if he was competing with the unemployed for the new jobs available

According to Bardhan and Udry (1999), at this fixed wage there are also a fixed number ofurbanjobs, Nu The remainder ofthe labor force finds themselves as urban unemployed or working in the rural sector at the applicable wage rate W Rã The typical rural worker is a utility-maximizing individual who has a choice to produce the agricultural good or migrate to the urban sector in search of waged employment The rural worker is enticed to migrate to the urban area in search of work if their expected urban income exceeds their guaranteed rural wage That is, the choice to migrate depends on a comparison of the expected income from remaining in the rural sector with the expected urban wage

Rural expected income given by: E(WR) = WR

Because income guaranteed in the rural sector, the expected urban wage, which is taken to be the ratio of number of urban jobs N u to the total urban labor force Lu This gtves

Therefore, migration occurs when: wu( ~:) > W,

The most commonly stated reason for rural to urban migration 1s the inequality between the rural and the urban sector real wage rates In the migration decision, the returns to labor in the rural sector compared with the going wage rate in the urban and the number of job vacancies in the urban area A wage gap between the two sector results in a great incentive for rural workers to migrate to the cities Migration can even take place when there is no certainly of employment, as long as the probability of finding a job is high enough

There are various reasons for the rural urban income divide The simplest of these is the existence of an institutionally fixed urban minimum wage imposed by the Government or negotiated by trade union The efficiency wage theory suggests that the wage differential is the result of company policy Employers are willing to pay a wage premium to urban employee to avoid adverse selection This policy choice minimum shirking on the job and reduces labor turnover (Stiglitz, 1974) If a worker can expect a higher than average wage rate from his employer, he will be more concerned about keeping his job.

MIGRATION AND URBAN UNEMPLOYMENT IN VIET NAM

History and the trend of internal migration in Vietnam

3.1.1.1 Historical development of migration in Vietnam

Population movement also occurred during the French colonial period (1858-1954)

The availability and exploitation of low-cost, unskilled labor were a major concern of the French Movement took four main forms: rural to urban migration of landless people; low-cost labor movement between rural villages and the colonial plantation/mining zones; international movement of laborers to other French colonies; and circular movement of agricultural workers between rural areas during the transplanting and harvesting seasons The last category seems to have accounted for the largest volume of movement in the period of French colonial rule (Thompson,

Following Vietnam's victory over the French arm1es at Dien Bien Phu in 1954, Vietnam divided into two regions, resulting in the exodus of over 82,000 evacuees from the north to the south Overall, as many as 900,000 people estimated to have moved from the north to the south, and 100,000 from the south to the north (Anh,

2003) Then, during the American war, (1954-75) substantial regional differentials characterized population movement People in the north evacuated from urban centers to the countryside to avoid bombing, while people in the south forced to abandon their villages to move to urban centers, especially to large cities, to cut off potential contact with the northern army The two opposite processes caused a sharp decline in urban populations in the north and inflated them in the Southern provinces Banister, J

(1993) reported a sharp increase, from 20% to 40%, in the proportion of the urban population in the south between 1960 and 197 5

A massive repatriation of southern people to their native villages followed reunification in 1975 At the same time, there was large-scale population movement from urban to rural areas with the establishment of new economic zones (NEZs)

During the 1980s, the government's population and labor relocation policy focused on rural to rural and urban to rural migration

The land-based settlement policies since 1975 continued to reinforce Migration to the three major cities (Hanoi, HaiPhong and Ho Chi Minh City) was discouraged in order to limit their rapid population growth Migration flow involving changes of residence to urban places, especially to the largest cities, strictly controlled through migration policies and the household registration system (Ho khau system) Urban to rural and rural to rural migration were explicitly encouraged to avoid what was considered to be over urbanization and to redress the perceived imbalance in population density both between the north and the south, and between the two deltas and the frontier, mountainous areas (Dang, Goldstein and McNally, 1997)

In the last decade, Vietnam has been remarkably successful in ensuring high levels of national economic growth and reducing poverty As data from 1999 population and housing census showed, this goes hand in hand with important shifts in population distribution and mobility (GSO, 2001) Although Viet Nam has a relatively low proportion of urban residents (around 24% of the total population of over 82 million), this proportion increased rapidly during the last time

In the early 1990s, the major form of internal migration in Vietnam was among rural areas These large-scale movements planned, organized and controlled by the government Motivations for the resettlement program included security issues, as well as economic objectives: in the North, population pressure was very high, while in the South and in the Central Highlands population, density was much lower These motivations reflected in the direction of flows: North to South, and into resettlement sites (also known as the New Economic Zones or NEZs) in the South and in the Central Highlands

Non-agricultural job growth was slow, and government discouraged such movements through the household registration system and other policies These barriers became less effective after the introduction of economic renovation in 1986 Dang (1997) have identified three important features of the renovation that reduced barriers to migration:

(i) Land-use rights assigned to individual households, which raised agricultural productivity and exacerbated a labor surplus in rural areas

(ii) The subsidy system abolished, making the household registration system less effective as a tool to control movement

(iii) Restrictions on private sector involvement in transportation, communication, and trade eased, resulting in lower cost of movement and increased integration among areas

3.1.1.2 The trend ofinternal migration in Vietnam

The economics reform, or Renovation (Doi Moi), introduced in 1986 marked a break with the past and effected migration in three main areas First, the change was significant in the agricultural sector, where decollectivization and the introduction of the household contract system have unbound farmers from their land The increasing commercialization of agriculture has been of major significance in dispersing the rural workforce and encouraging the move away from rural to urban areas Second, in the emerging industrial and technology sectors, Vietnam's incorporation in the global economy has resulted in an increase of foreign direct investment into the country As the result, migrant workers are attracted to areas where foreign investment has created industrial hubs Despite the continuation of the household registration in urban center, it no longer acts to limit the acquisition of essential goods and access to employment

Third, parallel to this process, community - based social networks that connect places of origin and destinations have expanded, and in tum influence population mobility (Dang, 1997) The development of transport systems, telecommunications and mass media across regions has facilitated spatial mobility and enhanced social contact between rural and urban areas New opportunities have produced difference rates of economic growth, and levels of natural endowments have led to widening differentials in labor demand and labor mobility Migration can open new opportunities for income, employment, education and social services While economic factors, including higher incomes, appear to be the mam reason for migration, other factors relating to culture, religion, family and marriage also play important in the decision migrate (Dang, 2003 ) Migration grows out of a growing awareness about emerging economic opportunities and income - generation activities

The economic disparities between regions generally prove to be the main motive for migration Since Doi Moi, inequalities between and within rural provinces and, even more, between rural and urban areas have increased The highest levels of rural income inequality are in the big cities, while increasing landlessness and poverty in the Mekong River Delta and Red River Delta linked to the commercialization of agriculture According to survey results showed that, on average, urban income in Ha Noi and Ho Chi Minh City are as much as five to seven times higher than the income of farming laborers in rural areas (UNDP, 1998) The latest available data suggest poverty rates in rural areas are six times higher than in urban areas (UN, 2003 ), indicating a growing gap between the two areas This gap has placed rural residents at a disadvantage and encouraged out migration to urban areas

During the five years preceding the 1999 census, more than 4,350,000 people over five years of age moved across provincial boundaries, accounting for 6,5 percent of the total population aged five and above Among these migrants, 55 percent moved within the same province, and 45 percent moved across provincial boundaries within Vietnam (GSO, 2001 ) This indicates that a significant proportion of spontaneous migration occurred outside the settlement programs organized by the government

Rural - to - urban migration occurred mainly across the provincial boundaries and over relatively long distances The development of transport and telecommunication facilities, the movement of rural labor to urban and industrial center is easier It facilitates internal migration and enables such migration to become circular rather than a single permanent move The multi-spatial households with their members working in different locations have become a common feature of settlement and a feasible choice owing to improved means of transport and telecommunication Major cities have become the primary destinations of migration stream Ho Chi Minh City is centers of migration activity, being the largest recipient of inter provincial migration

The city's positive net migration rate of 8,15% is the highest in the country Every year, the city receives around 1,000,000 KT3 and KT4 migrants from other regions (IER, 2002) The figure for Ha Noi was 4,8%, indicating more economic opportunities and better levels of income in Ho Chi Minh City.

Internal migration in VietNam

In Viet Nam, as in most regions of the world, internal migrants are predominantly young adults; the proportion of the migrant population under 30 years of age is 73 percent in Ho Chi Minh City, 72 percent in the Southeast Industrial Zone and 71 percent in the Northeast Economic Zone In all areas, the age of female migrants is younger than that of male migrants In the Southeast Industrial Zone, in the age group

15 - 24 the percentage of female migrants is higher than that of male migrants (54 percent compared with 40 percent) Corresponding proportions in the Northeast Economic Zone are 58 percent for females and 42 percent for males (GSO and UNFP A, 2004)

The social characteristics of migrants are also highly varied Migration survey data reveal that the proportion of migrants who are never married is over twice that of never - married non-migrants, reflecting in part the younger age of migrants and perhaps a trend of migrants to marry at a later age than non- migrants The areas where the proportion of migrants who are never married is highest are also those areas that have high proportions of migrants who are at young ages The Central Highlands is primarily a destination for family migration; hence, over three quarters of male migrants and over 80 percent of female's migrants are married In contrast, 50 percent or more of female migrants in the Northeast Economic Zone and Southeast Industrial Zone are never married (GSO and UNFPA, 2004) It is apparent that these two areas are very attractive destinations for young single females, most of who move to work in the factories that abound in these areas

Much of the migration in search of better educational opportunities directed to major cities where higher educational institutions are located Rather than return to their

;, places of origin after graduation, students tend to stay and looking for jobs in urban sectors, especially Ha Noi and Ho Chi Minh City In term of occupation, labor migrants account for a large proportion of workers in the manufacturing and construction sectors, migrants are least represented in agriculture, forestry and fishery

At other extreme, high number of migrants work in the service sector that includes mainly retain trade, transportation, restaurant and personal services Both Hanoi and

Ho Chi Minh City attracted large numbers of migrants from other provinces and regions Ho Chi Minh City was the largest gainer of inter-provincial migration, indicating its higher levels of economic opportunity

In Vietnam, macro processes of economic development and social change have exerted a large influence on patterns of internal migration Economic factors such as incomes and employment opportunities have more of an effect than non - economic factors in determining current migration in Vietnam The decision to migrate appears to reflect income differentials rather than background variables (such as age, sex, marital status) Although other non - economic factors such as cultural differences, education, religion, family and marriage also contribute, their influence in migration decision-making does not appear to be as strong as economic factors (Dang, 2003)

Migration in Vietnam is largely associated with high rates of under- and unemployment in rural areas, particularly in the densely populated Red River Delta in the North High unemployment and under-employment rates attributed to the growth of modem agriculture that is no longer able to absorb the growing surplus of labor

The increase in the working age population continues to bring a heavy employment pressure Each year Vietnam must create 1.5 million new jobs for the expanding labor force The number of youth entering the labor market estimated at 1.4 million each year This figure does not include those who were unemployed the year before but did not find a job (Dang et al, 2005) These young entrants into the labor market confront serious competition in finding suitable and better job opportunities Migration is often associated with changes in education and occupation that individual migrants experience In rural areas, the lack of high educational institutions and manufacturing work can serve as push factors for out-migration among young students

Table 3.1: Decrease and increase population by internal migration region, Viet Nam: 1994- 1999 (1,000 migrants)

Region of residence Migrants Immigrants Net migrants

Red River Delta 406 257 (156 moving to HaNoi) - 149

South central Coast 188 111 (45 moving to Da -77

The large ratio of immigrants move to HaNoi, Da Nang and HCMC where they have many opportunities in finding job with better incomes.

Employment and migration in VietNam

Vietnam is well - know for its disciplined, hard - working, fast - learning population

This is the country's main asset in its drive for economic development Low wage costs also make it one of the main sources of its international competitiveness Labor force participation rates areas unusually high in Vietnam, both men and for women, whereas unemployment rates are unusually low In Vietnam, a large majority of the working- age population is active, and the most often employed (under table 3.2)

Table 3.2: The structure of the Labor force

Source: V1et Nam Development Report, 2006 Note: All above figures are in percent of the population aged 15 to 64, except for unemployment rates, which are in percent of the active population Employment figures are based on main occupation The last row is based on MOLISA's labor force survey All other figures are from VLSS and VHLSS Household businesses are treated as private enterprises for their hiring of wageworkers, and as a source of non-farm self-employment for the jobs they provide to household members on an unpaid basis

Rapid economic growth has resulted in two, related forms of job mobility From an occupational perspective, an increasingly large share of the population works out of agriculture Individuals working for equitised enterprises and for joint ventures involving the state sector may declare that they work for SOEs Moreover, the form of mobility characterizing the Vietnamese labor market is geographical Some people engage in non - farm employment without leaving the rural areas they live in But for a large of population, moving from farming to wage employment also entails moving from rural to urban areas Migrants make up a large proportion of urban residents

Migration into large cities, most notably Ha Noi and Ho Chi Minh City, has been happening at faster pace The recent, mid - term population census of Ho Chi Minh City uncovered 420,000 more people living in the city than had been predicted by GSO, 2004

The migration flow puts additional pressures on already overload infrastructure and public services in major cities, local authorities have established implicit to labor movements leading to additional costs by migrants Migration partly driven by the huge geographical dispersion of wage jobs, almost two thirds of those at work in Ho Chi Minh City do it for a wage or a salary and the share is around 60 percent in Da Nang and Hanoi This is where the opportunities for work are

-+-Unemployment - Urban ooemployment - • - Urban ooemployment (MOLISA)

Source: Author's calculation based on data from GSO and MOLISA, 2004

As above figure, the unemployment rate in Vietnam is low by international standards

Moreover, for urban areas, unemployment rate is quite low, ranging between 2 and 6 percent depending on the data source used (GSO or MOLISA) In contrast with the pressure urban unemployment in developing countries, the shortage of workers at urban areas where the speed of industrialization have very rapid and it has required quite a large number of workers, and the local labor force has not satisfied the demand for employment.

Migration in Ho Chi Minh City

Ho Chi Minh City is largest city in VietNam, with permanent population estimated to be 6.109.251 people (Loan, 2006) Ho Chi Minh City is the main economic center of southern VietNam Now, Ho Chi Minh City consists of 24 urban and rural districts, among which 13 are inner districts; six are newly established urban districts, and five are suburban districts The economy based largely on light manufacturing, construction, banking and finance services, trade and sales All sectors of the economy attract migrants and the occupational distribution of migrants does not differ much from that of non - migrants Migration is an important component of population growth in Ho Chi Minh City and other larger cities in Viet Nam For same period, migration contributed to over 50 percent of growth of the largest cities of HaNoi and

Ho Chi Minh City (General Statistic Office, 2001) In recent year, urbanization has been taking place rapidly and vigorously in Ho Chi Minh City As a reason of the implementation of Doi Moi policy or the policy has transferred the planned economy to the market economy in many fields, the economic growth of Ho Chi Minh City has amounted up to over 11% in almost every year for the past decade (Thanh, 2006) A lot of industrial and export-processing zones as well as new residential areas established, accelerating urbanization, economic transformation, and development of

Ho Chi Minh City The development of transport systems, telecommunication and mass media across regions has facilitated spatial mobility New opportunities have produced different rates of economic growth, and level of natural endowments has led to widening differential in labor demand and labor mobility Migration can open new opportunities for income, employment, education and social services (Dang, 2001 )

3.2.2 Structure of migrants in Ho Chi Minh City

According to Statistic Department of Ho Chi Minh City, the results of the mid 2004 population census (1st Oct 2004) in Ho Chi Minh City has shown that, now, in the city there are 1,844,548 persons belonging in the KT3 and KT4 categories They have come from other provinces and cities nationwide and make up 31,2% of the city population (6,177 ,251 people) But the statistic of year 2000, the number of people without permanent residence status was only 15,2%, making a total of 730,878 people in the whole city Reality has shown that in the last 5 years, the number of people without permanent residence permit has remarkably increased, approximately up to 1 million people

Base on statistic data of Statistic Department of Ho Chi Minh City that the migration rate has also noticeably increased If from 1979 to 1989 it was 0,02%, then in 1989 -

1999 it was up to 0,84% and from 1999 to 2004 it reached 2,33% This increase has caused the general increase rate of the city to raise from 1, 63% to 2,36% and 3,6%, corresponding to the three periods of time mentioned above This highlights the role of migration rate in the context of the continuing decrease of the natural increase rate of the city, respectively in those three periods of time, going from I ,61% down to 1,52% and I ,27% On other hand, from 1999 to 2004 the general increase rate was particularly higher than in the previous years and the main cause is the rise of migration rate

Table 3.3: Percentage of population and migration increase rate by period

Net migration rate 0,02 0,84 2,33 ã General increate rate 1,63 2,36 3,60

Source: Statistical Department of Ho Chi Minh City

Migrants are concentrating in particular in suburban districts like Binh Tan where 51,3% of the population are temporary residents (migrants KT3 and KT4) In district

12 it is 47,2%, in Tan Phu 46,5%, in Go Yap 40,3%, in district 9 38,4%, in district 7 33%, in Tan Binh district 35,3% and in Binh Chanh district 31 ,8%; in Binh Thanh district 23,1% (Loan, 2006) There are two main causes to concentrate people in districts; the first, the price of land in suburban districts is relatively cheaper than in the inner city; second, the creation of industrial and processing zones, which generate jobs and attract workers

At ward level, there about 30 wards where over 50% of he people are migrants In Tan Tao A, of Binh Tan district, and in Binh Chieu and Linh Xuan, of Thu Due district, the statistics are up to 70% This leads to rapid increase of population in these districts and is the cause of many difficulties in investment on urban development, in the building of technical and social infra - structures as well as in urban management in the process of urbanization This also leads to many disorders and confusion in local people's life, not just economically, administratively and socially but also culturally and even environmentally

According to the results of a population census in mid year 2004, about 1,033,702 people above the age of 5, who came from other provinces 5 years ago and 2,415 foreigners, are living in the city A few main districts with large numbers of migrants within a period of 5 years are Binh Tan district with over 145,000 people, Thu Due with about II2,000 people, Go Vap with 96,000, Tan Phu with 94,000, district 12 with 85,000, and Tan Binh with 75,000 The increase in population actually has put pressure on the weak and inadequate infra - structure and service of the city The most critical areas are the new districts where urbanization is in progress The distribution of migrant population is concentrating in old and new urban districts, reaching approximately 90% Only I 0% are in outskirt districts (rural districts) and this increase the severity of the problem of population density in old inner-city districts as well as in new periphery districts

3.2.3 A profile of migrants Ho Chi Minh City

Most migrants are young include pupils who come from all parts of the country to study in training school, college and universities, and stay working for enterprise in city They move more and more independently (single), they no longer depend on their family for migration as seen in the early years People over 40 and fewer than I 0 years of age are not many They mainly accompany younger relatives

Table 3.4: Percentage of distribution age structure of Ho Chi Minh City population and that of migrants

Non migrants Migrant KT3 Migrant KT4 population

Source: Ho Ch1 Mmh City Statistics Department, 2004 The similar to other developing countries, migrants to Ho Chi Minh City are the youngest Moreover, over half of all migrants were in the young age group 15-29, with 38.17% of KT3; 70.37% of KT4, only 9.92% of KT3; 4.14% of KT4 in age group 45 and over

In previous stages of migration, male migrants outnumbered females However, this pattern changed for in the recent time The most interesting is that a large number of young female workers come from the Mekong delta provinces, the most of these migrants work in clothing, leather and shoe as well as food processing factories

Table 3.5: Percentage distribution of migrant sex ratio by some age group

Whole population Non migrant Migrant

Source: Ho Chi Mmh City Statistics Department, 2004

The migration sex ratio in the city this period is lowest than whole the country, this ratio was only around 70% in the age group 15-24 and reached 83.38% total migrants

The result, again, reflect the increasing trend of females mobility relative to males during recent time

According to the 2004 Viet Nam Migration survey, migrants in Ho Chi Minh City come from all parts of the country

Table 3.6: Percentage distribution of place of previous origin of migrants by area of current residence

Central HoChi Southeast Item Origin region HaNoi Economic

Source: The 2004 VIetNam MigratiOn survey, GSO and UNFPA, 2004 Table displays the percentage distribution of the previous region of residence of migrants Migrants to Ho Chi Minh City originate from a much more diverse set of regions and the areas under survey, migrants from Mekong River Delta made up 1/3 with 19,7%; North Central 21,5%, Red River Delta area 17,8% It could explain that

Ho Chi Minh City is the most dynamic economic city in the South and in whole country as well The speed of industrialization in these places in recent years has required a large number of workers and the local labor force can satisfy the demand for employment

According residence status, total population has 1,767,290 people belong permanent registration within 5 years They concentrate in living at districts of the city

Table 3.7: Percentage distribution of residence status of migrants in HCM City

Source: MigratiOn to Ho Chi Mmh City year 1999 - 2004, Loan Migrants concentrate to live in sub-urban, new districts and around export processing zone, Industrial zone It has over 30% migrant to live, work in 9 districts, main districts with large numbers of migrant such as Binh Tan with 204,951 people; Go Vap with 181,200 people; Thu Due with 160,446 people

One of the most consistent findings of migration is the positive correlation between educational attainment and migration Increasing labor market return to educational skills have been a key element of conventional human capital models of migration

Migration and urban unemployment, the case of Ho Chi Minh City

3.3.1 Reasons for out- migration and motivation for migrating to HCMC

According to human capital theories, people move to the place where they found their utility maximized By moving, they can take advantage of the differences between areas in term of economic and living conditions, education and amenities

Migration to such large cities as Ho Chi Minh City has stimulated by newly created employment opportunities in the private sector Researchers done by the Institute of Economy on migration from rural areas to the cities have found that the majority of families in Can Giuoc, Long An, whose relatives have migrated to Ho Chi Minh City, do hope this help them somehow get out of poverty It is to note that migrant workers have social networks of relatives and friends in Ho Chi Minh to support and help them to find job in here It has found from studies that over 80% of migrants from

Can Giuoc have come to Ho Chi Minh City, 14% to other provinces and 6% to other foreign countries Some migrants have relatives working and becoming successful in

Ho Chi Minh City This motivates other village youth who took up on them as role models for them to do the same

Motivation for migrating has many reasons that could find both in their home and in the city Unemployment in rural areas or the low income people get from work is the main cause of migration movements towards the city In those places, living conditions are not good because the standard of living, both material and cultural, is far much lower than on the city There are not many opportunities for studying, medical care, housing and transportation and finding jobs In the city, economic reasons are gaining more and more in importance and in increasing rate because it is relatively easy for migrants to find work Over 80% have been able to find jobs within the first month after their arrival in the city (Thanh, 2006) They might find work in businesses owned by people who come from the same hometown or they might get through the recommendation of other migrants who had come from to the city with the first waves of migration These jobs do not require high skills and large capitals and are very attractive to migrants such as textile, transportation, construction etc

Reasons for migrating reflect the most important determining factors for migration

The reported reasons usually include push factors at the origin and pull factors at the destination The implications of these findings are important for addressing the social and economic development issues of the particular areas as they relate to migration

Table 3.12: Percent of migrants citing specified reason for move by area of current residence and sex

Item HaNoi Economic Minh Industrial move

1 Did not find any job

Source: The 2004 VIetNam MigratiOn survey, GSO and UNFPA, 2004

Above table shows the main stated reasons for migration The key factors contributing to migration appear to be economic They also appear to relate to the situation in the place of destination rather than the place of origin For instance, Ho Chi Minh City leads in migrating because they could not find a job in the place of origin with 18 percent and over 70 percent of migrants cite finding a job in their present location as the reason for moving So economic issues are the most frequently cited reason for moving to Ho Chi Minh City

3.3.2 The migration and wage differential

The rural-urban migration to HCMC, and to a much lesser extent, suburbanization processes stemming from the core city, is primarily responsible for this development

One of the main reasons for migration has been the prospect of generally better income opportunities in the urban region for mostly unskilled workers Large city,

- such as Ho Chi Minh City, have provided more economics opportunities With 80 percent of migrants reported that their current earnings are higher than the income they had before migration (GSO/UNFPA, 2004) Therefore, higher earnings are most important motivation for migration in VietNam On other hand, in the Ho Chi Minh City, industrialization has required quite a large number of workers and the local labor force has not satisfied the demand for employment

The most migrants to new locations are workers who take simple jobs such as factory work, hired work in shops, or become small traders or street vendors Apart from a small percentage of people who work in pubic sectors

Generally, the wage migrant's labor is not lower than the minimum wage (or basic salary), their benefit also is guaranteed according to regulations of Labor law

However, the wage migrant's labor is not much higher than non - migrant's labor

The average monthly income of migrants to urban areas is about 1,46 million VND, this average income of migrants in urban area is about 3 - 4 times higher than average income in rural area and that is the reason, which explains the rationale of rural - to - urban migration

Table 3.13: Monthly income of rural to urban migrants by working skill and education

Item Working skill and education Average income (1000 VND)

Source: Rural to urban migratiOn m VIetnam, Cu Chi Loi, 2005 The income of migrants differs from group to group depending on their productivity

Those who have had a good educational background are the ones that have stable jobs and they get the highest average income The average income gap between the most skilled group and the least skilled group is more than two times The income gaps, both either between the skilled and unskilled or between the highest and the lowest, indicate the disadvantages of the untrained and unskilled workers in the competition for jobs

3.3.3 Employment and unemployment in Ho Chi Minh City

Ho Chi Minh City is the most dynamic economic area in the South, and in nationwide as well The speed of industrialization in this place has been very rapid The industrialization in here has required quite a large number of workers, and the local labor force has not satisfied the demand for employment The shortage of employment has generated a migration flow of people from surrounding rural areas and people from other regions of the country Seeking employment is the main for the majority of migrants Lack of stable employment and low income are also major difficulties of migrants after their arrival A critical question concerning migrants is how long it takes a migrant to find a job after his or her arrival in the place of destination According to the survey migration 2004, duration measured by the number of weeks spent by migrants after their arrival until they obtain their first job

After arrival, most migrants found their first job very quickly, about 86 percent of them found a job during their first month of arrival; it generally takes more time for females to find their first job than males On average, it takes 4 weeks for males and a bit longer than 5 weeks for females to get their first job after arrival However, duration of find job is different by type of registration such as the different migrant groups show that migrants with permanent household registration are faster than any other groups of migrants in finding employment

In the survey, occupation was originally recorded in 15 categories, but can be re- grouped into five main groups: (i) professional and semi-professional; (ii) skilled jobs; (iii) elementary occupation; (iv) students; and (v) other occupations Housework is included in elementary occupation Students treated as a separate group due to the relatively large proportion of migrants in this category The percent unemployed, defined here as the percent not working but who want to work, is very low for both migrants and non - migrants

A large percentage of migrants are working for enterprises in formal sector including both domestic and foreign invested company Because of the high speed of industrialization in recent years, the surveyed areas became where many foreign and domestic enterprises are located and running businesses This has induced a strong flow of migration into the area to work for enterprises

Table 3.14: Distribution of employment of migrants in 2004 by economic sectors

Source: Cu Chi LOI, 2005 The above table indicates that the migrants are working in different economic sectors including the public service sector, state owned enterprises, foreign invested ones, and in small or informal enterprises The role of the public service sector and state owned enterprises to absorb the migrants are quite limited Domestic private enterprises, although they have been booming in past years, are not a major engine to generate jobs for migrants as these enterprises have absorbed only 10 percent of migrants On the contrary, the foreign invested companies have generated many jobs for those people The foreign invested firms and joint ventures have absorbed about 43 percent of total migrants the area Beside the foreign invested firms, the informal sector has shown its importance for migrants as it has accounted for 25 percent of total employment for them

Enterprises cannot absorb all the migrants from rural areas, and they only recruit ones

- - - - - ã - - - - - that are young, and skillful enough However, the migrants of many different ages, with different work skills, hence a great share of migrants have to find jobs outside enterprises working as small traders, street vendors, and so on to earn a living

The econometric design

This part introduces the appropriate econometric models for testing the mam hypothesis of thesis The main hypothesis can be tested empirically through the aspects, namely, evaluate the influence of migration to earnings in urban sector and the relationship between migration and unemployment are positive or negative in urban sector between migrants and non - migrants

According to Todaro (1970), who modeled migration because of an individual utility maximization subject to a budget their income Individuals seek to maximize their incomes moving to places where the wages are higher: therefore, the main engines of the decision are wages differentials, which result from geographical differences in demand and supply in regional labor markets A region characterized by distinctive labor and capital endowments and the scarcity of one input relative to the other determines the equilibrium level of the factors prices The existence of wage differentials drives a migration flow from low wage to high wage regions and this reallocation of resources causes a shift in the supply of labor in the regions, leading to new factor price equilibrium The process stops when the wages differentials reflect only the costs of the movement, pecuniary and psychological

Todaro (1969) and Harris-Todaro ( 1970), who give the assumption the probability of employment in the utility function of movers: migration expressed as a function of expected rather than actual earning differentials and therefore migrants chose

.- destinations, which maximize their earnings weighted by the probability to find a job in the destination area There is main advantage to explain the large flows of rural to urban migration, despite the high unemployment rates in the urban areas

The study provides a test of the neoclassical approach in estimates migration equation related wages and unemployment According to the literature developed by Mincer

( 1978), the standard semi - log function is used and the dependent variable expressed as monthly log wage, it could rewrite in term of the characteristics of migrants as follow

Where wi is the wage, xi is characteristics of individual ifMi = 1 ifMi= 0

The second regression is an unemployment logit function, where the probability of being unemployed is a function of individual characteristic (X) and other dummy variables (D)

The model to estimated for individual characteristic can be specified as following

Ln 1 ! p is the log odds of migrants that represent the dependent variable Where: l3o is a constant J3i is estimated regression coefficients

Xi is independent variables whose effect examined ei is regression error term

A logit model is used to analyze the impact of individual characteristics on the probability of being unemployed Where dependent variable is binary choice, taking the value of 1 if the person is unemployed and otherwise.

Description of the data

The data employed for this thesis extracted from the 2004 Viet Nam Migration Survey, which was a sample survey on internal migration to major areas typical for three flows of migration to big cities, industrial zones and rural areas The survey conducted in eleven cities and provinces, which selected to represent for five areas

These areas were: Area 1: Hanoi; Area 2: Northeast Economic Zone, including Quang Ninh, Hai Phong and Hai Duong; Area 3: Central Highlands, including Gia Lai, Dak Lak, Dak Nong and Lam Dong; Area 4: Ho Chi Minh City; and Area 5: The Southeast Industrial Zone of Binh Duong and Dong Nai For the purpose of this thesis, only migrants into Ho Chi Minh City are considered and analysis

The sample of the survey included 10,006 interviews 4,998 migrants and 5,008 non- migrants - evenly divided among the above-mentioned five areas

The main objective of the survey was to contribute to improving knowledge in the following areas:

Migration process, including the decision to migrate, steps involved in the move, and adjustment to the destination; socio-economic, demographic, and facilitating factors related to migration;

Consequences of movement on migrants and their families in terms of: income and employment, living conditions and housing, remittances, access to social and health services, life satisfactions and recreation, adaptation and attitude change, and; differences in the situation of migrants and non-migrants in the destination areas

Furthermore, data recorded in the researches conducted by Institute for Economic Research of Ho Chi Minh City and Ho Chi Minh City Statistics Department have presented the estimated data of population movement and give an overall picture of population growth and movement tendency of population in here In which, the consequences from uncontrolled migration and urbanization also have been mentioned to the local authorities and the government Besides, other published and unpublished reports, books, and journals have been widely used in this study.

ECONOMETRIC ANALYSIS AND RESULTS 5.1 Descriptive analysis

Results of regression model

The results of the linear estimation for individual characteristics related to the wage, which took part in VietNam migration survey 2004, presented table 5.3 as follow:

Table 5.3: Regression result of unrestricted model (14 variables)

AGE AGESQ GENDER SINGLE MARRIED DIVORCED HIGH SCHOOL COLLEGE UNIVERSITY ILLITERATE MIGRANT URBAN STAY

Note: The standard errors are g1ven in parentheses Dependent variable natural log of monthly wages

Source: Author's calculation from the VietNam migration survey 2004

The regression result with 14 independent variables in above table is shows that STAY and SE variables are not statistically significance with statistical significance at 10% level in the model Therefore, to test whether these variables can drop from the linear model, we make use ofF - test following:

H 1: at least /3 13 or /314 * 0, or both /3 13 and /314 * 0

With statistic significant 10% level, we have: F;~.9992 J (0,1) = 2,3 Since Fe )F;_~,9992 l (0,1) = 2,3 => we accept the null hypothesis

The null hypothesis supposes that coefficient of STAY and SE variables equal zero

For all variables of selection model, p value is smaller than 10%, it means that all variables of model are meaningful It showed that the null hypothesis is accepted

Table 5.4: Regression result of restricted model (12 variables)

Note: The standard errors are given in parentheses Dependent variable = natural log of monthly wages

Source: Author's calculation from the VietNam migration survey 2004

The wage function specified to include individual characteristics such as gender, age, marital status, and other relevant information such as the time of person to stay at Ho Chi Minh City, residential status and individual status of employment variable

According to the human capital theory suggests that demand for education reflects the decision to undertake an investment in order to maximize the lifetime earnings

In the above results, the level of earnings is explained by a set of individual characteristics, by a dummy variable for migrants, which allows a distinct intercept effect between migrants and non - migrants and captures a location specific human capital between the migrant dummy and the age, age squared, marital status, education and other variables

Table 5.4 presents the exogenous variables effect on log monthly wages Males enjoy higher wages than females In fact a man, regardless of being migrants and non - migrants, earn 13% than a women per month, on average and ceteris paribus, perhaps confirming the existence of some form labor market discrimination Overall the marital status variable do not reveal a different impact on wages, in which from above result it appears that married people earn higher than other persons

The variables which demonstrate the most different effect on earnmgs are the education dummies and they all agree with real situation in earning which for migrants and non - migrants Those who completed high education level, on average and ceteris paribus, earn more than those who have primary education or no education, that positively affect earning both migrants and non - migrants but that cannot be observed and measured details among them In addition, there may be differences that arise from the socio-economic background that cannot capture If the direction of correlation between the unobserved variables and earning is positive, the coefficients of the human capital variables biased upward

Living in an urban area has strong impact on earning: on average and ceteris paribus, those who live in city earn 30% than people resident in the rural area One possible explanation is the existence of compensating differentials for lower livings cost and more pleasant environment enjoyed in the rural area

The sign of these estimates prove that wage increase with age, educational level except no education or illiterate that is negative with wage, and residential status But at a decreasing rate with migrant which is specified clearly, on average and ceteris paribus, migrants have wage level lower than non - migrants

Summarizing, three factors can highlight the positive of internal migration on wage level, detected using the Vietnam migration survey, give support to the migration theory This theory in fact predicts that migrate from rural to urban sectors with the aim of obtaining employment with higher wage level than their original that is an investment decision

The second conclusion, some unobserved characteristics could induce lower R-squared for explaining independent variables affect to dependent variable

The third conclusion is that migrants may have lower wage level compared to non - migrants, which suggested by the negative sign of the coefficient dummy variable This may be due to initially low educational level and its career opportunities, and/or lack of family networks and contacts, which would help to find the best jobs available in the destination

A logit model is used to analyze the impact of personal characteristics on the probability of being unemployed in which collected from the Vietnam migration survey 2004 (GSO and UNFA, 2004)

Table 5.5: Probability of Unemployment: Logit regression for Migrants and Non - migrants

Note: The standard errors are given in parentheses Dependent variable = binary choice, taking the value of 1 if the person is unemployed and the value of the person is employed

Source: Author's calculation based on Vietnam migration survey, 2004

As in the wage equation, particular emphases give to the individual variable: the key issue is whether being person has a distinctive effect on the probability of unemployed and other variables are responsible for different patterns

The problem of employment is quite marked in transitional economies, which may suggest that the official estimates of the unemployment rate are misrepresenting the real situation In particular, among migrants and non - migrants, the true unemployment may be lower or higher than survey data reported, which means that

data available are not able to capture potential differences m the unemployment likelihood between migrants and non - migrants

In the results estimated by logit technique, the independent variables are a set of personal characteristics, a dummy variable for migrants The dependent variable takes the value of one if a person is resulted unemployed at the time of the surveyed and 0 otherwise

According to the International Labor Organization, unemployed are those who have no job but are actively looking for one The employed group combines employees and self -employed

A ceteris paribus analysis shows that all variables have the sign of coefficient and probabilities are not significant at 10% level These results suggest that at least between migrants and non- migrants in the unemployment effect at Ho Chi Minh City

Moreover, this result confirms the findings in the literature that characteristics difference in unemployment rate in most countries are small (Layard, Nickell and Jackman, 1991)

The age coefficient shows that, young people are more likely to be unemployed, and the effect is pronounced for migrants and non - migrants, the coefficient sign affect negative with unemployment function The theoretical explanation of this pattern that mean they can lack seniority and hence they are more vulnerable to job- dismissals In addition, they are more inclined to wait until they find the suitable job in the future

On other hand, migrant coefficient also shows that migrant is slightly affected to unemployed This is discovered an inverse relationship between education and unemployment, simultaneously the limited in finding job between migrants and non- migrants

CONCLUSION AND POLICY IMPLICATIONS 6.1 Conclusion

Policy implications

Migration is becoming an increasingly important component of population change; migration in Vietnam has been characterized by increasing levels movement, increasing participation of migrants in market relations and marked redistribution of

- - - - the population, through migration, from rural to urban areas heavily populated to less heavily populated areas On other hand, migration is closely linked to social and economic development and to government policies in local authorities Urban areas provide a valuable source of employment for rural migrants Urban jobs demand relatively higher skill requirements and pay higher wages It hence conceivable that rural migrant's relatively greater skills may have a better chance of finding urban job and have a higher urban to rural wage gain

Migration is positive phenomenon through which the economic resources are better utilized By establishing a link between the difference earning gap and career opportunities in urban areas, local authorities should research to create more employment opportunities for both migrants and non - migrants in economic development strategies at Ho Chi Minh City

Migration from rural to urban areas inevitable phenomenon in the process of urbanization, due to the attraction exerted by city with employment opportunities, living standard and modem convenience Moreover, the impact of rural migration on the city has two sides, both positive and negative The contribution made to the economic life of the city by migrant workers is undeniable but at the same time this labor force also puts an extra pressure on urban sector such as infra - structure, environment and urban unemployment The city authorities should find some solutions to the existing problems suffered by migrants and permanent residence status who are taking part in contribute the economic development of the city and have found stable accommodation (putting into practice Law of Residence approved by National Assembly year 2006 in Ho Chi Minh City with a decree on regulation of migrant's housing)

However, the original authorities should focus on training vocational schools or practical training courses because the schools can help labor force in reducing the dependence on agricultural income, creating the non-farm works at the local that prevent migration outflow to urban areas The local authorities also should create the advantage credit policies to help them in create jobs in rural, especially unskilled labor in local In fact, the extra income from the household' small projects have good affects on decreasing number of migrants to urban than any macro strategies implementing by the authorities

Simultaneously, the Government should create an appropriate rural - urban economic balance and non - economic opportunities to ameliorate urban and rural unemployment problems and to slowing the pace of rural - urban migration The main issue of activity should promote the integrated development of the rural sector, the spread of small- scale industries throughout the countryside and social investments toward rural areas

Indicated by the study findings, both rural and town-based migrants have decided to move directly to urban centers and large cities Urban centers and large cities in Vietnam continue to grow together with the spread of the market economy its associated labor migration Ever larger numbers of people will come and settle in the cities As seen in this study, the observed outcomes of migration are in favor of large cities such as Ha Noi and Ho Chi Minh City It suggested that a restructuring of the city economy, to make it more robust and absorptive of labor migrants, might be a solution As for towns, where agricultural activities still play a significant role, they should be integrated into the urban economy in the promotion of rural-urban linkages

In addition, from migration survey data, the wage function confirmed the role for economic variables in the migration decision The results reveal that wage differentials are an important explanation for the propensity to migrate, the analysis found wage level at the destination influence migration into large city, and the wage and unemployment differentials need to be assumed constant throughout the time

In this study, the relationship between migration and urban unemployment is quite frail in Ho Chi Minh City but the role of employment is an important factor in the migration decision to Ho Chi Minh City Therefore, the study may be good foundation for further studies about the absorption of skilled labor migrants and settle their housing problem in Ho Chi Minh City j

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