Vietnam News

Why Vietnamese labor productivity is rated low

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After signing a purchase deal with an automotive parts supplier in Dong Nai Province, Thang’s business was constantly notified that its orders had been delayed.

As part of their agreement, his firm trained technicians for the supplier to help them produce the required parts.

But the company routinely claimed the delays were caused by key employees constantly quitting.

“They [the supplier] admit they cannot retain the technicians we had trained,” Nguyen Xuan Thang, managing director of the subsidiary of German rolling element bearings manufacturer Schaeffler Group, says.

The supply delays have caused significant damage to his company’s performance and its ability to attract more investment from its parent, he says.

But it helped him understand the mindset of workers in major hubs in the south like HCMC and Dong Nai and Ba Ria-Vung Tau provinces.

He explains that 80% of the workers in the region are from other provinces and many of them view job hopping as a means to find better opportunities and higher incomes.

“They tend to focus on short-term benefits, and that is one of the reasons why Vietnam’s labor productivity is low.”

A recent report from the World Bank said Vietnam’s labor productivity increased by 64% during the 2010-20 period, faster than any other country in Asia.

But data from the Asian Productivity Organization shows that in 2020 Vietnam’s labor output per hour was only US$6.4, less than half of Thailand’s $14.8 and just a 10th of Singapore’s $68.5.

These figures have sparked heated debate since their release, with some casting doubts on their accuracy and others claiming they reflect the country’s workforce.

Nguyen Quoc Viet, deputy director of the Vietnam Institute for Economics and Policy Research, believes that labor productivity figures do not accurately reflect a workforce’s competitiveness or potential.

Nevertheless, he acknowledges that the quality of Vietnamese workers is average or even low.

Since the country has only recently shifted from agriculture to industry, unprofessional mindsets and habits persist, he explains.

Thang, who is also Eurocham Vietnam’s vice chairman, says the lack of vocational training in the country poses a challenge for businesses.

Data from the General Statistics Office shows that only 27.8% of Vietnam’s 52 million workers have received vocational training.

There is a mismatch between workers’ skill sets and businesses’ requirements, especially in specialized fields such as engineering, Thang says.

Another major issue with Vietnamese labor is the high turnover rate, with 15-20% of employees quitting within the first year, he says.

Tran Anh Tuan, vice chairman of the HCMC Vocational Education Association, says however that workers alone should not be blamed for their low productivity.

He points out that productivity is partly dependent on businesses and working conditions.

Businesses will face high turnover rate and difficulties in hiring skilled workers that meet their needs if they hand out intense workloads while paying little attention to their welfare and training, he explains.

Training programs should not focus only on improving skills and expertise but also aim to promote work ethics and positive mindsets, he says.

Balancing the benefits of the workers and businesses is key to boosting productivity, he concludes.

Viet concurs saying many workers migrate for employment and often suffer from inadequate working and living conditions, which affects their productivity.

This sentiment is echoed by many employees who have been job hopping.

Lam Thi Hop, 25, a factory worker in Bac Ninh Province, says she has changed jobs five times in the last seven years because at most of them she had heavy workloads but little income.

Her work involves assembling electronic components. She works under high pressure, having to meet requirements in terms of both output and quality, and has a tight schedule with only a 10-minute break between shifts.

“Prices are rising, but my salary and allowances only come to VND6 million [a month]. Half of that goes just for rent.”

With little chance of getting promoted, switching jobs is imperative for workers like Hop to make ends meet, even if a new job only provides a slightly better income or benefits.

Hop has been at her current job for two years out of respect for her kind manager, but thinks a long-term commitment is out of the question.

“I am learning Chinese in the hope of switching to a better job before I turn 30 and face a possible layoff.”

Foreign business owners have had good experiences with local labor. While they are overly concerned about their benefits even before starting a job, Vietnamese workers are very intelligent and diligent, the owner of a Japanese firm says.

Having been in the food industry in Vietnam for over 10 years, Matsuo Tomoyuki, entrepreneur and president of the Japan Vietnam Gastronomy Association, has nothing but good words for Vietnamese workers for their diligence, self-esteem and loyalty.

“There is nothing I would like to change about them. It is the perspective of management that needs to change.”

Realizing that part of the low productivity issue stems from businesses themselves, Thang’s enterprise has implemented region-specific strategies to retain workers and develop skilled personnel.

After the failed partnership in the south, it tied up with a supplier in the north and got the firm to consistently deliver orders in time.

While the wage gap between the two regions is not large, the north has a lower worker turnover rate because people prioritize stability and living close to their families, Thang explains.

“Ultimately, our previous failure was due to us not fully understanding how to effectively utilize labor.”

By Phan Duong – – July 3, 2024

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