Challenges from labor quality

Data from the General Statistics Office (GSO) reveals a number of positive developments in Vietnam’s labor market during the first half of 2024. The workforce aged 15 years and over in the second quarter totaled 52.5 million people, an increase of 148,600 compared to the previous quarter and 217,300 more than in the second quarter of 2023. Overall, in the first half of the year, the workforce aged 15 years and over reached 52.5 million, an increase of 196,600 people year-on-year.

Of note, the workforce participation rate in the second quarter stood at 68.6 per cent of the population, with more than 51.4 million people being employed, an increase of 126,600, or 0.25 per cent, compared to the previous quarter and up 217,400, or 0.42 per cent, year-on-year. The number of employed people reached 51.4 million in the first half of the year, an increase of 195,800 year-on-year.

Though positive signs were plentiful, Vietnam’s labor market continues to face its share of difficulties and challenges. In particular, there has been little improvement seen in workforce quality, with informal workers engaged in unstable and precarious jobs still accounting for a substantial proportion of the total.

Little improvement in quality

Vietnam’s labor market faces several major limitations, including the quality of its workforce being largely inadequate and failing to meet the demands of a modern, flexible, sustainable, and integrated labor market, with over 70 per cent of workers not having received training at the primary level or higher. The percentage of Vietnamese workers with degrees or certificates, however, stood at 28.1 per cent in the second quarter, an increase of 0.3 percentage points compared to the previous quarter and 1.3 percentage points compared to the second quarter of 2023.

In particular, though, there has been little improvement seen in workforce quality, as informal workers in unstable or precarious employment represent some three-fifths of the total around the country.

Due to inadequacies in workforce quality, businesses again faced recruitment difficulties in the first half of this year. For example, the Hanoi Employment Service Center reported that businesses in the capital sought to fill approximately 46,061 jobs in the period. A number of job fairs were organized while many major enterprises posted job vacancies, but finding suitable workers remains a challenging task.

Similarly, many localities in the Southern Key Economic Region, such as Dong Nai and Binh Duong provinces, need to recruit tens of thousands of workers, especially at manufacturing enterprises seeking additional human resources to complete orders during the second half of the year. In Ho Chi Minh City, meanwhile, businesses also have significant recruitment demand. According to the city’s Center of Forecasting Manpower Needs and Labor Market Information, to meet production and economic development requirements in the second half, the southern city needs an additional 153,500 to 161,500 workers, mainly in key industrial sectors and service industries.

Finding human resources that meet requirements remains problematic amid this significant demand. A survey conducted by the Ho Chi Minh City Center of Forecasting Manpower Needs and Labor Market Information found that many businesses are dealing with recruitment difficulties. Of the 654 companies surveyed, 154, or nearly 24 per cent, reported problems in finding suitable candidates.

One reason for this is the changing recruitment trends among businesses. According to Mr. Nguyen Tay Nam, Deputy Director of the Hanoi Department of Labor, Invalids, and Social Affairs, businesses increasingly require workers with specialized skills and expertise, which are currently hard to find.

Meanwhile, young workers have high expectations about income and working conditions and will change jobs if these are not met. Some even prefer to move into self-employment, such as online business or freelance work.

Policies in support

To ensure that the recovery in the labor market is sustainable and that secure livelihoods are available for workers, the GSO proposed a range of solutions. The government should continue to implement support policies for both businesses and workers, launching domestic demand stimulation programs and assisting with trade promotions, market exploration efforts, and securing new orders for businesses.

It should also provide effective support to businesses facing capital shortages, rising input costs, difficulties in product consumption, and adverse impacts due to declining global market demand, such as in the leather, textiles, and electronics industries.

Ministries, sectors, and localities should also intensify their efforts to develop local human resources, especially the high-quality personnel needed to meet the development needs of various sectors and industries. They should also reorganize and restructure vocational education institutions to ensure these provide adequately skilled workers in support of socio-economic development, and continue with training and retraining policies to maintain employment.

Furthermore, the government needs to continue improving governance over the labor market to ensure it is modern, transparent, and connected with the national population database and other databases, to enable the timely and effective matching of labor supply and demand to boost employment and strengthen social welfare.

According to Mr. Pham Hoai Nam, Director of the Population and Labor Statistics Department at the GSO, the supply of highly-skilled and specially-trained workers is crucial in an increasingly industrialized economy. Awareness about the necessity of continuous skills development through lifelong learning is indeed growing within Vietnam’s workforce. “Expanding educational facilities would play a significant role in increasing the rate of continuously trained labor,” Mr. Nam said. “Vietnam has focused on improving education quality and expanding educational infrastructure to provide learning opportunities for more people. This helps with continuous education and skills enhancement for workers.”

There is intense competition in Vietnam as it becomes an attractive destination for international workers. Rising numbers of foreign experts, particularly from India and Southeast Asian countries, seek opportunities in the country. Labor experts suggest that in order to compete, Vietnamese workers must improve their quality, focusing on rapidly developing skills that meet existing market needs. In addition to certain specialized fields, recent recruitment trends are actually being increasingly “localized”, with many multinational companies and corporations prioritizing hiring and developing Vietnamese personnel for managerial positions.

The demand for personnel proficient in English and other languages to strengthen connections with international partners is also on the rise. Emerging trends highlight the importance of digital skills and the use of advanced technologies like AI, computer science, and blockchain to adapt to rapid market changes. Employers increasingly prefer candidates who possess both professional skills and business acumen and that are capable of working independently with digital tools. Flexibility and the ability to handle situations in a rapidly-changing environment are also highly valued.

Vietnam’s labor market is shifting from traditional low-skilled jobs to highly-specialized positions. In this context, employers have higher expectations, and candidates will benefit from the improved packages being offered by businesses. Mr. Nguyen Hoang Thanh Chuong, National Director of recruiters Adecco Vietnam, said that in order to seize opportunities that come their way, Vietnamese workers need to continuously develop their knowledge and skills, maintaining competitiveness in a labor market undergoing significant transformation. The key to success in this era is flexibility, adaptability, and readiness to embrace new opportunities.