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THE EFFECT OF POPULATION IN EMPLOYMENT AND ECONOMIC

GROWTH: A COMPARATIVE ANALYSIS BETWEEN BRUNEI DARUSSALAM


AND VIETNAM

A Concept Paper

Presented by

CLAIRE LARZEN Z. TELLO

To

Prof. Ernesto F. Bulayog

As a partial requirement for


Econ109- Human Resource Economics

October 2013

I.

Title
THE EFFECT OF POPULATION IN EMPLOYMENT AND
ECONOMIC GROWTH: A COMPARATIVE ANALYSIS BETWEEN
BRUNEI DARUSSALAM AND VIETNAM

II.

Introduction
Human Resource plays a very vital role in driving the economy.
Without it, sovereignty will not be achieved because human resource
manages capital and natural resources in the country.
Population is an indicator of how many citizens reside in a
particular nation. Population is considered as an asset since it will imply
the manpower capacity of the nation in terms of employment---high
employment, more taxes, leading to economic growth.
Population means stability, but too much of something is bad
enough. Hence, overpopulation comes in. Overpopulation is defined as
having a very high population that consumes capital and natural resources
rapidly causing insufficiency and depletion.
This study would then analyze if the theories on population and
overpopulation is applicable to Brunei Darussalam and Vietnam. These
two countries are chosen because they have significant difference in
population, per capita GDP, inflation, etcetera.
Brunei Darussalam has the second highest Human Development
Index among the Southeast Asian nations after Singapore, and is
classified as a developed country. According to the International Monetary
Fund (IMF), Brunei is ranked fifth in the world by gross domestic product
per capita at purchasing power parity. The IMF also states in a 2011
estimate that Brunei was one of two countries (the other being Libya) with
their public debt at 0% of the national GDP. Forbes also ranks Brunei as
the fifth richest nation out of 182 nations due to its extensive petroleum
and natural gas fields.
Vietnam has an estimated 90.3 million inhabitants as of 2012. It is
the world's 13th populous country, and the eighth-most-populous Asian
country. The country was unified under a Communist government, but was
politically isolated and impoverished. In 1986, the government initiated a
series of economic and political reforms, which began Vietnam's path
towards integration into the world economy. By 2000, it had established
diplomatic relations with most nations. Vietnam's economic growth has
been among the highest in the world since 2000, and in 2011 it had the
highest Global Growth Generators Index among 11 major economies. Its
successful economic reforms resulted from its joining the World Trade
Organization in 2007. However, the country still suffers from relatively high

levels of income inequality, disparities in healthcare provision, and poor


gender equality.
The two aforementioned countries need to be studied since it is
significant to compare and contrast them so that results can be generated
to see if their populations affect their general labor condition and economic
growth.
The overall objective of this study is to compare and analyze the
effects of population to the general labor condition and economic growth in
Brunei Darussalam and Vietnam with the specific objectives:
1. To determine the factors that affect the general labor condition in Brunei
Darussalam and Vietnam
2. To present trends on the macroeconomic indicators that affect the general
labor condition
3. To determine the effects of population in the two countries
III.

Review of Related Literature


Larger, more rapidly growing populations have fewer natural
resources per person, less physical capital per worker, more dependents,
and greater needs for new social infrastructure. Of course they must be
economically worse off. These intuitions shaped the earlier studies of
population and economic development such as the seminal Coale and
Hoover model (1958). Later studies developed more neoclassical versions
of these ideas, all showing that more rapid population growth led to lower
per capita income. But Nobel Prize economist Kuznets (1956), as well as
Boserup (1965, 1981) and Simon (1981) suggested many possible
positive effects of population growth, including economies of scale,
acceleration of technological progress, flexible market responses to
emerging shortages, induced institutional change, cheaper communication
and transportation, and easier collective social investments. Kuznets
examined per capita income growth and population growth rates across
nations and found no correlation, which seemed inconsistent with the
Coale-Hoover view. His study was replicated by many others.
Bloom and Freeman (1988) examines the relationship between
population growth and economic growth in developing countries from 1965
to 1985. Their results indicate that developing countries were able to shift
their labor force from low-productivity agriculture to the higher-productivity
industry and service sectors, and to increase productivity within those
sectors, despite the rapid growth of their populations. They also found that
at given rates of population growth, income growth is related to the time
path of population growth and that population growth due to high birth and
death rates is associated with slower income growth than population
growth due to relatively low birth and death rates. Hence, the timing and

components of population growth are important elements in the process of


economic development.
Minh Quang Dao (2012) found that based on data from the World
Bank and using a sample of forty-three developing economies, they find
that the growth rate of per capita GDP is linearly dependent upon
population growth, both the young and old dependency ratios, the
mortality rate, and whether or not the rate of population growth is less than
1.2 percent per year. Using interaction variables in light of the severe
degree of multi co-linearity among explanatory variables, they find that per
capita GDP growth linearly depends on population growth, the old
dependency ratio, the mortality rate, and the interactions between
population growth and both the young and old dependency ratios,
between population growth and whether or not the rate of population
growth is less than 1.2 percent per year, and the interaction term between
the young dependency ratio and whether or not the rate of population
growth is less than 1.2 percent per year.
IV.

Data

Table 1. Population in Brunei Darussalam and Vietnam


POPULATION
Data from: data.worldbank.org
Year

Brunei
Darussalam

Vietnam

2003

353,649

80,468,400

2004

360,797

81,437,700

2005

367,815

82,393,500

2006

374,697

83,313,000

2007

381.440

84,221,100

2008

388,017

85,122,300

2009

394,400

86,025,000

2010

400,569

86,932,500

2011

406,512

87,840,000

2012

412,238

88,775,500

Table 2. Total Labor Force in Brunei Darussalam and Vietnam

TOTAL LABOR FORCE


Data from: data.worldbank.org
Year

Brunei Darussalam

Vietnam

2003

167,794

44,581,976

2004

171,618

45,564,496

2005

175,534

46,537,055

2006

179,033

47,486,865

2007

182,864

48,418,789

2008

186,706

49,375,128

2009

190,749

50,268,444

2010

194,951

51,213,394

Table 3.
Labor

2011
198,097
52,068,206
Participation Rate in Brunei Darussalam and
Vietnam

Labor Participation Rate (% of total population ages 15 and up)


Data from: data.worldbank.org
YEAR
BRUNEI DARUSSALAM

VIETNAM

2003
2004
2005
2006
2007
2008
2009
2010
2011

Male
78.40%
78.20%
78.00%
77.70%
77.40%
77.10%
76.90%
76.80%
76.50%

Female
56.10%
56.10%
56.10%
55.90%
55.80%
55.70%
55.70%
55.70%
55.50%

Total
67.30%
67.20%
67.10%
66.80%
66.60%
66.40%
66.30%
66.30%
66.00%

Male
82.10%
81.90%
81.70%
81.40%
81.20%
81.00%
81.00%
81.10%
81.20%

Female
73.90%
73.70%
73.50%
73.40%
73.20%
73.10%
73.00%
73.10%
73.20%

Total
77.90%
77.70%
77.50%
77.30%
77.10%
77.00%
76.90%
77.00%
77.10%

Table 4. Unemployment Rate in Brunei


Darussalam and Vietnam
UNEMPLOYMENT RATE
Data from: www.tradingeconomics.com
Brunei
Year
Darussalam
Vietnam
2004
4.47
2.2
2005
3.53
2.1
2006
4.26
2.5
2007
4.02
2.3
2008
3.41
2
2009
3.71
2.4
2010
3.49
2.9
2011
2.9
2.9
2012
1.9
2.3
2013
1.1
1.81
INFLATION, Consumer Prices (annual %)

Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

Data from: data.worldbank.org


Brunei
Darussalam
Vietnam
0.3
3.2
0.8
7.8
1.2
8.3
0.2
7.4
1.0
8.3
2.1
23.1
1.0
7.1
0.4
8.9
2.0
18.7
0.5
9.1

Table 5. Inflation, Consumer


Prices in Brunei
Darussalam and Vietnam

Table 6. Inflation, GDP Deflator in Brunei


Darussalam and Vietnam
INFLATION, GDP Deflator (annual %)

Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

Data from: data.worldbank.org


Brunei
Darussalam
Vietnam
6.1
6.7
15.9
8.2
18.8
8.2
10.0
7.3
1.1
8.2
12.7
22.1
-22.1
6.0
5.3
11.9
19.4
19.4
0.8
PER CAPITA
GDP (current10.8
US $)
Data from: data.worldbank.org
Brunei
Darussalam
Vietnam
18,541.9
491.5
21,819.3
557.8
25,913.6
642.3
30,613.3
731.1
32,108.9
843.2
37,094.0
1,070.2
27,212.1
1,129.7
30,880.3
1,224.2
40,244.3
1,408.0
41,126.6
1,595.8

Table 7. GDP Per Capita


in Brunei Darussalam
and
Vietnam

V.

Data Analysis and Interpretation


Basing on Table 1, the population of Brunei Darussalam and
Vietnam is very different. Bruneis population does not even exceed
500,000 while Vietnams population is almost 90 million. With this statistic,
it can be concluded that the main variable for comparing economic growth
and general employment condition is indeed population. Population
characteristics such as population density (the ratio between total
population over total land area to get the per unit area of population) is
therefore very much different for both countries. To prove this conclusion,
we compute Population Density using this formula:
Population Density=

____ Population______
Total Land Area

Using the 2012 Data from worldbank.org, Brunei Darussalams


population is 412,238 while Vietnams population is 88,775,500. The total
land area of Brunei Darussalam is 5,765 square kilometers while Vietnam
has 331,210 square kilometers. Substituting these values to the
aforementioned formula, the Population Density of Brunei is 72 people
per one square kilometer and the Population Density of Vietnam is
268 people per one square kilometer.
The population densities imply the average number of people who
compete for the resources per square kilometer of land. This means that
in Vietnam, there are more people clumped and there are more people
who compete for food, clothing, and shelter, job opportunities, water
supply, and electricity supply, education, etcetera compared to that of
Brunei.

The increasing trend of population for both countries in the year


2003 to 2012 would also result to an increasing trend in total labor force.
Labor force comprises percentage of the population that belongs to ages
15 and up. The labor force is considered to be the quantity of manpower
and tax payers in the country. Many studies have proven that the higher
the labor force, the faster the economic growth. However, in the case of
Brunei and Vietnam, even if Vietnam has a significantly stronger labor
force and labor participation rate, Brunei is still a more developed and
stable country in terms of economics because we can interpret that the
bulk of the population in Brunei Darussalam is concentrated in ages 15-64
from year 1981 to 2001. (See Appendix 1 Labor Force Participation Rates
from Brunei Darussalam Statistical Yearbook 2010). Also, the literacy rate
of people ages 15 an up is relatively higher in Brunei Darussalam than in
Vietnam (See Appendix 2 LITERACY RATE of ADULTS (% of people ages
15 and above). With a high literacy rate of adults in Brunei, it can be
concluded that most members of the labor force are able to read, write,
and perform numerical calculations. This is probably one of the reasons
why most members of the labor force in Brunei belong to categories
requiring the above mentioned literacy skills such as legislators,
administration and related workers, professionals, technicians, clerical
workers, etcetera. (See Appendix 3 Number of Employees in the Private
Sector by Major Occupation Group, Brunei Darussalam Statistical
Yearbook 2010)
One of the major differences of employment conditions in Vietnam
and Brunei Darussalam is that Vietnams bulk of labor participants are
employed in the agricultural sector. (See Appendix 4 EMPLOYMENT in
THREE MAJOR SECTORS in the year 2006) While in Brunei Darussalam,
most of the employee bulk is in the Industry Sector especially in
production of oil and liquefied natural gas, sawmilling, timber processing,
mining, quarrying, manufacturing, construction, etcetera. (See Appendix 5
Number of Employees in the Private Sector by Major Industry, Brunei
Darussalam Statistical Yearbook 2010)
It can be observed that in Table 3, the trends of labor participation
rates for females in Vietnam are relatively greater than the rates in Brunei.
The reason for this is that Vietnam has been moving towards gender
equality and empowerment of women. In fact Vietnam has established a
Gender Equality Department in the Ministry of Labor, Invalids, and Social
Affairs (MOLISA) in 2008. As for Brunei, their female labor participation
rate is lower than that of the latter is because they have a stricter and
traditional culture on gender equality although their ambassador has
already seen a need for change in alleviating the status of women in their
country in 2006 as he signed the Tokyo Joint Ministerial Communiqu
Toward gender equality in East Asia.

The Unemployment Rate trends for both countries as shown in


Table 4 are really low. This means that the majority of the labor force is
really participating in driving the economy. In macroeconomic analysis,
when the unemployment rate is at 4% or less, then the economy is in full
employment. Table 4 then shows that in the year 2004 to 2013, Brunei
Darussalam and Vietnam are operating in full employment meaning all
resources are fully utilized.
In the trends shown above, it can be concluded that unemployment
and inflation has no relationship contrary to the Phillips Curve concept of
Sir A.W. Phillips in 1958 who stated that there is a short-run trade-off
between unemployment and inflation. Vietnam has a relatively low
unemployment rate but has a high inflation rate both at current prices and
at GDP deflator. Brunei Darussalam as well has a relatively low
unemployment rate but its inflation rate at current prices remains relatively
low. The GDP deflator of Brunei might have rising and sudden fluctuations
but there is no implication of its relationship to unemployment.
In Table 7, it shows that the trends of per capita GDP in Brunei
Darussalam and Vietnam are very different. The per capita GDP of Brunei
is very high compared to that of Vietnam. According to Investopedia, per
capita GDP is a measure of the total output of a country that takes the
gross domestic product (GDP) and divides it by the number of people in
the country. The per capita GDP is especially useful when comparing one
country to another because it shows the relative performance of the
countries. A rise in per capita GDP signals growth in the economy and
tends to translate as an increase in productivity. Per capita GDP is
sometimes used as an indicator of standard of living as well, with higher
per capita GDP being interpreted as having a higher standard of living.
With this, it can then be concluded that in terms of economic development,
Brunei Darussalam is performing better than Vietnam.
VI.

Conclusion and Recommendation


With the data and interpretation presented above, it can then be
concluded that population has greatly affected employment and economic
growth for both countries. In this case, the trends show that although
human resource is an asset to sovereignty, a stable population like that of
Brunei Darussalam is more beneficial for employment conditions and
economic growth because of the theory of scarcity. Overpopulation causes
many problems such as economic and environmental problems since it
tends to deplete resources faster than the natural rate of consumption.
Since all natural and capital resources are scarce, very high populations
cause an imbalance to the rate of resource regeneration. Although it can
be argued that Brunei Darussalam and Vietnam are very different nations
in terms of land area and system of government (Brunei Darussalam

being constitutional sultanate and Vietnam being communist), the time


series data of indicators still show the effect of population in employment
and economic growth. For employment, population has a good effect in
the sense that the higher the population, the higher the labor force. For
economic growth, population has a good effect if population growth is
stabilized with respect to land area and capital and natural resources.
This study has proven that Brunei Darussalam is already a
developed country that is improving more each year. Vietnam on the other
hand has also risen and is now moving towards development. The
Vietnamese government however should make reforms, programs,
projects, and laws to improve the mitigation of inflation in the country. They
should also strive to increase their per capita GDP by increasing foreign
direct investments and net exports.
For those who would want to improve this study, you are free to use
the data I have presented. It would even be better if an econometric model
will be used to prove that population has an effect on employment and
economic growth.
VII.

Appendices
Appendix 1

Appendix 2
LITERACY RATE of ADULTS (% of people ages 15 and above)
Data from: data.worldbank.org
Brunei Darussalam
Vietnam
YEAR Male
Female
Total Male
Female
Total
2010
96.8
93.6
95.2
95.3
91.1
93.2

Appendix 3

Appendix 4
EMPLOYMENT in THREE MAJOR SECTORS in
the year 2006
Data from: data.worldbank.org
Sector
AGRICULTURE (%
employment)
INDUSTRY (% employment)
SERVICE (% employment)

Appendix 5

Vietnam
Male
Female
49.60% 53.80%
24.40% 15.90%
26.00% 30.30%

REFERENCES:
http://www.unwomen-eseasia.org/Vietnam/gender_in_vietnam.html
http://www.unisa.edu.au/Documents/EASS/HRI/gender-budgets/brunei.pdf
http://www.aneki.com/comparison.php?country_1=Brunei&country_2=Vietnam
http://jetems.scholarlinkresearch.org/articles/Effect%20of%20Unemployment.pdf
http://www.investopedia.com/terms/p/per-capita-gdp.asp
http://www.tradingeconomics.com/brunei/unemployment-rate
http://www.tradingeconomics.com/vietnam/unemployment-rate
http://data.worldbank.org/indicator?display=graph
http://laborsta.ilo.org/
Brunei Darussalam Statistical Yearbook 2010