Vietnam’s Labor Market in 2023: Key Highlights and Future Prospects

In late 2023, Vietnam’s General Office of Statistics (GSO) released a comprehensive summary detailing the state of the country’s labor market. This overview captures the resilience of Vietnam’s workforce amid broader economic challenges and explores the evolving landscape as we head into 2024.

Growth of the Workforce

Vietnam’s workforce has experienced significant growth, with estimates indicating it reached 52.4 million people in 2023—an increase of 665,500 compared to the previous year. This growth is promising for foreign firms that have sought to minimize manufacturing costs through access to low-cost labor. However, a closer look at this workforce reveals that many of these individuals still reside in rural areas. According to the GSO, only 19.5 million (37.3%) of Vietnam’s working-aged population are located in urban regions, while a substantial 32.9 million (62.7%) remain in rural communities.

This rural-centric workforce raises questions about the accessibility of skilled labor for manufacturing industries located in urban hubs. Foreign companies may need to consider relocation incentives, such as better housing options and competitive pay, to attract these workers to areas where they are most needed.

Employed Individuals: A Closer Inspection

By the end of 2023, Vietnam had approximately 51.3 million employed individuals, marking an increase of 683,000 from 2022. Notably, the definition of “employed” in Vietnam includes anyone who has completed just one hour of paid work within a given period, which can cause variations in employment statistics.

The growth in employed individuals was largely attributed to the service sector, which added around 553,600 jobs, alongside the industrial and construction sectors that contributed an additional 248,200 roles. Conversely, the agriculture, forestry, and fisheries sectors saw a decline of approximately 118,900 jobs, indicating a broader economic shift toward manufacturing and services.

The State of Skilled Labor

Despite the growth in employment, the quality of the workforce remains a concern. In 2023, 27% of workers held a degree or a training certificate, reflecting a modest increase of 0.6% from the previous year. However, this still leaves a staggering 38 million workers without any higher education or recognized training.

This lack of qualified personnel poses significant challenges, especially as Vietnam seeks to climb the global value chain, particularly in high-tech industries like semiconductors. The current estimate indicates that Vietnam possesses about 5,000 chip design engineers but may require up to 20,000 in the next five years. In response, the government is considering initiatives such as an Investment Support Fund aimed at partially subsidizing the cost of upskilling efforts.

Wage Trends: A Mixed Bag

The average monthly income in Vietnam rose to VND 7.1 million (approximately USD 291.34) in 2023, reflecting a 6.9% increase from the previous year. It’s important to note that this growth occurred organically, as mandatory minimum wages remained stable. However, a notable wage hike of 6% is scheduled for July 2024.

On the gender front, men earned an average of VND 8.1 million (USD 332.38) monthly, while women earned only VND 6 million (USD 246.20), underscoring a persistent wage gap. Geographic disparities are also evident, with urban workers earning an average of VND 8.7 million (USD 356.96), compared to their rural counterparts who made VND 6.2 million (USD 254.38). This urban-rural wage discrepancy correlates with differing living costs, hinting at an opportunity for foreign investors willing to tap into lower-cost labor in rural settings.

Diving deeper into sector-specific wages reveals stark contrasts: mining workers received an average monthly wage of VND 10.3 million (a notable increase of 11.2%), while those in agriculture, forestry, and fisheries earned just VND 4.1 million (USD 168.19), representing a minimal increase of 6.6%.

Persistent Challenges

Despite the gains in wages and employment figures, Vietnam’s labor market faces several pressing issues. The transition of workers from lower-paid agricultural roles to more lucrative positions in industry and services has slowed, indicating potential bottlenecks in the labor market.

Youth unemployment remains a critical concern. In 2023, the unemployment rate for young people aged 15 to 24 stood at 7.63%, only slightly lower than the previous year. The GSO estimated that in the last quarter of 2023, 1.5 million young individuals—11.5% of their age group—were unemployed, neither engaged in work nor undergoing training.

Gearing Up for the Future

Vietnam’s labor market has shown considerable evolution over the past two decades, with recent years also reflecting small yet positive changes. However, it is clear that global economic downturns have had a tangible impact. Fortunately, Vietnam’s youthful and abundant workforce remains an attractive proposition for foreign employers, offering compelling cost benefits for businesses considering production partnerships in the region.

For those interested in the dynamics of Vietnam’s labor market, or seeking to leverage the workforce for business initiatives, consulting with human resources experts, like those at Dezan Shira and Associates, may provide valuable insights and guidance.

This summary aims to provide clarity on the structure and development of Vietnam’s labor market, highlighting both opportunities and challenges, and setting the stage for future growth.