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Did a Successful Fight against COVID-19 Come at a Cost? Impacts of the Pandemic on Employment Outcomes in Vietnam

Working Paper 2022-607

Abstract

Little evidence exists on the adverse effects of COVID-19 on the labor market for poorer countries. Despite its low middle-income status, Vietnam has been widely praised for its success in the fight against early waves of the COVID-19 pandemic, with a low mortality rate of around 100 deaths out of a population of less than 100 million by the end of 2020. We rigorously estimate the pandemic effects on employment outcomes in Vietnam, applying difference-in-differences and regression discontinuity design models to rich individual-level data from the Labor Force Surveys spanning 2015 to 2020. We find post-pandemic increased unemployment and temporary layoff rates and decreased employment quality. Monthly wages reduced but the proportion of workers receiving below-minimum wages substantially increased, contributing to sharply rising wage inequality. Our findings suggest that more resources can be allocated to protect vulnerable workers, especially as the pandemic prolongs and likely results in more severe damages to the economy.

Authors: Hai-Anh Dang, Cuong Nguyen, Calogero Carletto.

Keywords: COVID-19, employment, wage inequality, differences-in-differences, RDD, Vietnam
JEL: E24, I30, J21, O12