Changes in labour market since Vietnam's Law on Foreign Investment

April 30, 2023 | 09:00
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The official passage of the Law on Foreign Investment in Vietnam in 1987 is considered a historic turning point that contributed to attracting an increasing number of foreign-led enterprises to the nation. Nguyen Xuan Son, operations manager for Staffing and Outsourcing Services at ManpowerGroup Vietnam, discusses the law’s effect on the labour market and employees in Vietnam, as well as the expected trends for the next few years.

The impact of foreign direct investment (FDI) inflow on the domestic labour market

Changes in labour market since Vietnam's Law on Foreign Investment
Nguyen Xuan Son, operations manager for Staffing and Outsourcing Services at ManpowerGroup Vietnam

According to the results of the Labour Employment Survey from the first quarter of 2019 by the General Statistics Office, the FDI sector had been creating jobs for around 3.8 million employees, accounting for over 7 per cent of the total labour force (over 54 million employees) and over 15 per cent of the total number of permanent labourers (25.3 million people) in Vietnam.

In addition to creating direct jobs, the sector also indirectly created others for many staff members in supporting industries or other businesses involved in the supply chain for foreign-invested enterprises (FIEs).

The average salary of employees working in FIEs is often higher than in both the state-run and private sectors. Specifically, before the pandemic, the average salary of workers in the FDI sector was $350 per month. Meanwhile, staff members in the state-run and non-state sectors achieved average salaries of $328 and $272 per month respectively.

In addition, the FDI sector has also made an important contribution to improving the quality of Vietnam’s human resources (HR) through internal training programmes and partnerships with external training institutions.

Vietnam used to have a high proportion of personnel engaged in traditional sectors such as agriculture or handicrafts. However, with the growing development of other fields thanks to foreign investment, the proportion of labourers relying on traditional occupations has decreased significantly, especially outside the major cities.

Labour is now concentrated in the processing and manufacturing of food, textiles, footwear, and electronics, as well as accommodation, tourism and financial services.

The domestic labour market is becoming increasingly vibrant, developing in both quantity and quality, and attracting foreign capital flows into the country.

Changes in labour market since Vietnam's Law on Foreign Investment

Labour market trends for the coming years

Employees will continue to have higher expectations for employers. Salary is no longer a top priority, with more focus on other factors such as learning and growth opportunities, benefits, and flexibility. With the rise of new technology and the changing labour market demands, the recruitment market will become more competitive. Enterprises, including FIEs, will have to put more effort into building employer brands and efficient HR policies.

Enterprises will need to accelerate training, upskilling workers in the context of the digital transformation. Job requirements will constantly change. By 2025, there will be 149 million new digital jobs in areas such as privacy and trust, cybersecurity, data analysis, machine learning, AI, and software development, as reported in the latest New Human Age Report by ManpowerGroup in early 2023.

The report notes that half of all employees will need reskilling by 2025 as the adoption of technology increases.

The trend of labour sub-leasing and outsourcing continues to prevail as employers realise the value of leveraging highly skilled staff and offering professional services. Businesses will rely on these extended arms to assist them in recruiting the right talent and managing labour in a professional, efficient, and cost-effective manner.

Talent has no borders. With strong international integration and open working conditions, a proportion of the domestic workforce opt to work overseas, while foreign workers and expatriates seek career opportunities in Vietnam.

AI and robots will help do some human work, so many jobs in the fields of advertising, law, content writing, manufacturing, healthcare, and hospitality will be affected or even taken if workers lack the digital skills and adaptability required by the 4.0 era.

The demand for domestic labour is large, and labour shifts between industries have given rise to requirements for recruitment, management, and consulting activities. In this context, ManpowerGroup Vietnam is the first foreign-invested enterprise in the HR industry licensed by the Ministry of Labour, Invalids and Social Affairs to provide innovative workforce solutions. We are honoured to support the efforts of the Vietnamese government in developing local human resources to the next level.
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