Vietnam’s Journey Towards a Skills-Based Labor Market

Vietnam, with its almost 100 million inhabitants, stands as one of the most populous countries globally. Over the past 35 years of significant national renovation, the nation’s labor market has transformed dramatically in terms of both scale and quality. This evolution highlights Vietnam’s efforts to enhance its workforce, improve institutional frameworks, and bolster national productivity.

Progress in the Labor Market

The enhancements in Vietnam’s labor market have been substantial, marked by stronger institutional support, improved wages, and increasing labor competitiveness. The efforts to revamp labor laws and policies have undoubtedly contributed to a more robust economic environment for workers. However, challenges remain.

Despite these advancements, the Ministry of Labor, Invalids and Social Affairs identifies critical shortcomings that need addressing. One of the most glaring issues is the quality of labor. A significant discrepancy exists between the actual skills available in the workforce and the skills demanded by the labor market.

Skilled Labor Shortage

As of early 2023, only 26.4% of the approximately 52.2 million working-age individuals in Vietnam are trained, and many of those skills do not align with market needs. This glaring gap reveals that a substantial number of workers remain unqualified for the roles available, with over 38 million workers lacking professional training.

Moreover, the average monthly salary is relatively low, around VND 7 million, indicating that many laborers are not achieving their potential. The imbalance between supply and demand exacerbates the challenges in the labor market. Regions are developing unevenly, leading to specific areas experiencing a shortage of skilled workers while others are overwhelmed with unqualified individuals.

Underemployment of Skilled Workers

The situation is compounded by the phenomenon of underemployment. While many businesses seek qualified workers, available skilled labor is often funneled into roles that do not demand their qualifications. This mismatch signifies a waste of human resources, as many educated individuals occupy positions that do not utilize their skills.

Additionally, the existing vocational training programs, overloaded with theoretical content, fall short in developing essential soft skills like teamwork, foreign language proficiency, and critical thinking. There is also a lack of collaboration between educational institutions and businesses, further complicating the pathway for graduates entering the workforce.

Initiatives for Improvement

Recognizing the dire need for improvement, local government figures, such as Phan Van Mai, Chairman of the Ho Chi Minh City People’s Committee, have emphasized a shift towards enhancing capacity within vocational training institutions. This shift is especially crucial in sectors like digital economy and technology to meet the evolving needs of the market.

Investment in better facilities and training equipment is imperative, enabling educators to equip students with the skills necessary for a competitive workforce.

Employers’ Challenges

Businesses face difficulties due to the insufficient readiness of new graduates, often requiring retraining for newly hired employees. This was a common theme expressed by industry leaders like Mr. Tran Minh Tu of Kem Nghia Company. To combat this, companies are willing to offer higher salaries to attract skilled workers, thereby reducing the time needed for training and enhancing labor productivity.

Furthermore, the labor market is evolving, with a clear trend moving from simple occupations to specialized technical roles. The Covid-19 pandemic has intensified this shift, particularly in demand for healthcare professionals, indicating a pressing need for skilled workers in today’s economy.

Recruitment Landscape

In the first quarter of 2023, an analysis of recruitment needs revealed an active demand for skilled labor. About 16,730 companies posted a combined 75,285 job advertisements, while approximately 72,458 individuals were in search of employment. Interestingly, only 8.3% of businesses sought workers without professional qualifications, underscoring the high demand for educated talent.

Positions requiring advanced qualifications—such as software developers and network administrators—predominate recruitment ads. Employers increasingly prioritize not only academic credentials but also various workplace skills, including proficiency in information technology and foreign languages.

Towards a Skilled Workforce

The future of Vietnam’s labor market is poised for a transition towards a focus on high-quality and skilled human resources. As companies demand not just technical qualifications but a suite of practical skills, it becomes essential for training programs to adapt accordingly.

Investment in vocational education must cultivate practical skill sets, extending practice time and integrating social practical skills essential for success in the labor market.

In summary, Vietnam’s labor market is on a path towards becoming more skills-oriented, yet significant work remains to align educational outcomes with market needs. Addressing these gaps will be critical for realizing the full potential of the nation’s workforce.