Causes of labor retrenchment in Vietnam: evidence from firm-based data

Abstract

Labor retrenchment is one of the most important issues of enterprises during the reform process in a transition economy, especially in the market economy. In the recent years, the number of labor fired in Vietnamese enterprise has risen rapidly. The question of whether which factors impact on labor retrenchment in firms is still considered. Therefore, this paper examines the causes of labor retrenchment in Vietnam. I focus on micro, small and medium enterprises using firm-level in Small and Medium Vietnamese Enterprises Survey in 2009. Using descriptive statistic and regression model, the results are found that enterprise’s performance measured by output; training cost for labor, wage rate; factors such as debt, firm age, firm size and competition; impact on the degree of labor retrenchment. Technological innovation measured by equipment investment affects labor retrenchment in a firm insignificantly.