Economy - November 23, 2023 | 03:00 pm PT

The forgotten golden generation of workers

Millions of workers who silently contributed to Vietnam’s remarkable economic reforms are now forgotten as they approach retirement age.

In 1996, Nguyen Thuy Lan, holding her 15-month-old baby son in her arms, hurriedly got on a bus to Saigon from Quang Nam after receiving a letter from her husband, who had moved to the city a year earlier, saying a Korean garment factory was hiring workers.

It was the first long trip away from home for the then 26-year-old woman.

After a nearly two-day bus trip, mother and son arrived in Saigon at dawn to a warm welcome from her husband.

They went to their new home, a small room barely 10 m2 and one of 10 identical rooms off a narrow corridor where 20 other emigrant workers lived.

The next morning Lan applied for the job at Pungkook, an established Korean backpack and handbag company, which had no minimum educational requirements and only required applicants to know how to sew.

Lan, who had only finished ninth grade ninth but worked as a seamstress in her hometown, easily passed the test and got the job.

With his grandparents not around to take care of him, their son was put in a childcare center where he would stay until late at night while they worked industriously.

Life was much harder in HCMC than in their hometown, but it was a sacrifice they were willing to make.

Lan recalls: "We were determined to stay in the city because we saw a future there. Life at the factory might be hard, but it was still better than back home because we made money."

Pungkook Sai Goon belongs to the very first generation of foreign-invested companies in HCMC, most of which were in labor-intensive industries.

Back in 1993 the company opened four factories in Districts 7 and 4, creating, along with other similar companies, innumerable jobs and making Sai Goon a "promised land" for workers like Lan.

But Lan did not foresee the day when the company would move its factories, leaving her and many other workers in their forties in a state of limbo as businesses in HCMC, the city which, for the past 35 years, has attracted the most FDI in the country, began to "transform."

Grass surounds the deserted factory of Pungkook, one of the first foreign direct investment companies to arrive in Ho Chi Minh City and also one of the first to leave the city. Photo by VnExpress/Thanh Tung

Big moves

Lan started work in the Pungkook Nha Be Sims (District 7) in 1996 at a monthly probationary salary of VND312,000 ($12.4).

Together she and her husband earned VND1 million a month, which afforded them childcare, rent and frugal food and enabled them to save up a mace (3.75 gram) of gold.

The year Lan began work at Pungkook also marked the start of the first big wave of foreign investment, with FDI reaching a record US$10 billion in 1996, 10 years after Vietnam threw open its economy to the world.

HCMC, the most attractive destination for foreign investors, received $2.4 billion, or 25% of the country’s total FDI, all of it in labor-intensive garment, footwear and electronics plants.

They were a magnet for workers, who flocked to the city from all over the country, increasing its emigrant population by 2.24% a year, 2.7 times the average rate in 1989-99.

Thus began to change HCMC.

Between 2006 and 2010 city authorities decided to adjust the industrial structure, reducing dependence on labor-intensive industries and instructing the textile industry in particular to make a sea change by reducing manufacturing and switching instead to designing and prototyping.

The second FDI wave came more into knowledge-intensive industries like software, electronics and IT, starting with Intel Group, which invested in a semiconductor plant in the Saigon Hi-tech Park, which had been built to attract technology enterprises.

During this period Pungkook Nha Be Sims reorganized its workforce and moved its manufacturing activities out of HCMC, causing Lan to lose her job after a decade at it.

Talking about the move, Pungkook officials point out that by 2000 the city administration was already considering relocation of factories away from residential and urban areas.

The Korean company shut down three facilities outside the Tan Thuan Export Processing Zone and built new factories in Binh Duong in 2004, Ben Tre in 2008, Tieng Giang in 2012, and Long An in 2013.

With no other skill except sewing and withdrawing her social security money, Lan applied for a job at Pungkook’s factory inside the Tan Thuan EPZ.

However, soon afterward the factory ran into some difficulties related to incompatibility with the EPZ’s operating model, rising labor costs and shortage of manual workers.

A motorbike rider passes the abandonned factory of Pungkook in District 7, Ho Chi Minh City after the company left for Binh Duong Province. Photo by VnExpress/Thanh Tung

In 2017 it began its second move away from HCMC and asked its workforce of over 3,000 staff to follow, especially those belonging to the four provinces where it had built the new factories, a request many workers accepted to maintain their seniority.

"[I] Started with a worker’s salary of VND312,000 and just got to a group leader’s position with a salary of VND13 million a month, but I had to quit," Lan recalls dejectedly.

Then the third big wave of FDI hit, with several billion-dollar conglomerates like Samsung and LG investing in Vietnam.

The labor-intensive textile and footwear industries were no longer the "stars" of the FDI sector like 27 years ago.

Moving out of major urban areas is a common trend in labor-intensive industries, according to a 2020 study by the HCMC Institute for Development Studies.

Statistics clearly show that many businesses restructured or left Vietnam after Covid-19, leaving behind a whole generation of workers who had stuck with them for decades, according to Assoc. Prof. Dr. Nguyen Duc Loc, head of the Institute of Social Life Research, which studies contemporary social phenomena.

Between 2016 and 2020 the number of industrial workers in HCMC decreased by an average of 3.29% a year, with manufacturing, including the textile and footwear industries, bearing the brunt.

These industries slowly moved to other provinces in the southeastern region and the Mekong Delta.

In the last two years, many foreign businesses have massively cut their workforce, including 1,200 employees by shoemaker Ty Hung in 2022 and 9,000 by footwear firm PouYuen Vietnam.

Marvin Tsao, CEO of Tan Thuan LLC, which manages the EPZ of the same name, says when the zone was established, 100% of businesses there were labor-intensive.

This rate has now dropped to 50%.

"These changes do not result from just businesses developing, they are inevitable in the development of society and economy," Tsao says.

The ‘obsolete’ generation

"Textile factories tend to gradually move to smaller provinces," Nguyen Huu Tuan, head of human resources at Thanh Cong Group, a Vietnamese-Korean joint venture textile company, says.

"If weaving and dyeing [jobs] moved because of the ban by HCMC authorities, sewing [jobs] moved because the industry itself wanted it."

With its workforce of 5,300, the textile company claimed it could "no longer bear" the labor cost and workers could not afford to live in HCMC, he says.

"Workers are hesitant to take a job in HCMC with a monthly salary of VND8 million since they will not have any surplus, and so businesses have difficulty hiring,"

To increase wages, the company would need to increase productivity, which has already peaked, and this only leaves the option of moving to areas with lower labor costs, he says.

Currently 40% of Thanh Cong’s workforce is based in Vinh Long and Tay Ninh provinces.

Tuan speculates that the textile industry will leave Vietnam when the country’s average income per capita reaches the same level as China’s when its industrial shift began, $6,000.

"Labor cost increased while prices could only inch up, if not fall. Our company definitely could no longer bear the labor costs."

The textile industry currently uses the most labor, nearly 2.6 million workers, in the private sector.

The top 100 foreign textile companies hire a whopping 26% of the total workforce.

"The common trait among the relocating businesses is the need for cheap labor," Tran Viet Ha, vice chairman of the HCMC Export Processing Zone Authority, which regulates EPZs and industrial parks in HCMC, explains.

They cannot increase wages fast enough to compete with the electronics and mechanical industries.

The city’s minimum wage for foreign firms in 1996 was $45 (VND495,000) per month.

After 27 years, it is now VND4.68 million, a 945% rise, but manual workers’ salaries are not enough to live in the city.

A 2021 survey by the Research Center for Employment Relations (RCER), an independent institute that provides training, research and consultancy for employee relations, found the minimum livable wage for workers in the city was VND7.5 million, while the average income was only VND6.6 million, indicating that companies are under pressure to pay workers more.

Labor-intensive factories look for cheaper but also younger labor.

According to RCER’s 2022 report, the productivity of a worker in a textile, footwear and electronics assembling company peaks after two or three years and stays there for 10-15 years if the person is in good health before starting to gradually decline.

Once a worker creates less value than their wages, the company will consider terminating their employment.

Workers themselves tend to quit after a while as they find working eight hours a day plus mandatory overtime too strenuous, Huynh Tan Tai, president of Pungkook’s labor union, says.

He adds that the Pungkook Sai Gon II factory in the Song Than Industrial Park in Binh Duong has around 4,000 workers, of whom only 30% are above 40 years old.

The mechanical engineer who has been with Pungkook for 27 years says of those who started working at the same time as him, only 30, mostly technical workers, are still with the company.

Again, this phenomenon is not exclusive to HCMC.

According to Doan Van Day, vice president of the Federation of Labor in Dong Nai Province, since 2017, several labor unions have warned about older workers being culled by large foreign businesses using various methods like the "startup assistance policy," under which severance pay of VND100-200 million is offered to encourage workers to leave.

Since most older workers spend their entire career at a company, they lack the knowledge to fully utilize the money and quickly use it up, then withdraw the social security they accumulated - their last safety net - early, leaving them broke and jobless, he says.

"Letting older workers go has become even more prevalent recently, given the pandemic, economic recession and lack of orders."

After three decades manual workers from the first FDI wave like Lan have entered middle age and face the dilemma of being not yet of retirement age but no longer of freshly employable age.

Loc of the Institute of Social Life Research explains that businesses want to maximize profits by hiring young workers with the best productivity at the cheapest price.

"If we say life only lasts 60 years, then these workers have only lived two-thirds of theirs."

So years of factory work without any backup plan leaves these workers in a tough spot.

According to a 2021 survey by the HCMC Federation of Labor on the living and working conditions of women textile workers, 2% chose to study after work hours while 68% did house chores and the rest watched TV, rested, etc.

Money spent on improving personal skills only accounted for 3% of cumulative spending by the respondents.

But the fall of this generation of workers was foreseen years ago.

Warning ignored

"Warning signs of the gradual collapse of the labor market were ignored," Assoc. Prof. Dr. Vu Quang Tho, former head of the Institute of Workers and Trade Union (IWTU), which offers research assistance to the Vietnam General Confederation of Labor, says.

Six years ago the IWTU published a report on how manufacturing businesses sought to replace workers older than 35 with younger people.

Of 64 companies surveyed for the report, the average worker’s age was 26.9 in the energy–electronics industry, 29.5 in footwear and 30.9 in food processing.

Workers only stayed at a company for six to seven years on average.

Tho warns that in the near future tens of thousands of workers could lose their jobs.

At the age of 40 they are still the family breadwinners but could become permanently unemployed if the government does not intervene, he says.

"Many say I think too far ahead."

Dr. Le Duy Binh, managing director at policy analyst firm Economica Vietnam, says: "Shifting labor-intensive jobs away from big cities and then from the country itself is a historical and constant trend."

Looking back to the first industrial revolution, the textile industry started in the U.K. and Europe and then shifted to the U.S.

Over time businesses in these countries moved up the value chain or switched industries, while labor-intensive industries shifted to Japan, Korea and Taiwan.

By the end of the 1980s order volumes shrank at Korean manufacturing firms, which forced companies to cut their workforce while simultaneously investing in automation and infrastructure.

At the start of the 1990s, Korean manufacturers were planning to either enter the technology industry for its higher value or shift their production to other countries.

At that time, Vietnam built several industrial zones which attracted FDI and enabled these investors to carry out their plans.

Starting out with labor-intensive activities then shifting them away to cheap labor countries has become the common pattern as countries develop.

Manufacturing that profits solely from labor moves to countries where it is cheap and where tax incentives are often offered used to attract investment and create jobs for surplus labor.

"But these shifts have side effects," Binh notes.

Workers over 40 losing their jobs is a consequence that countries following this formula have to deal with, including Vietnam.

According to Assoc. Prof. Dr. Loc, these workers have to find another job and start a second chapter in their lives after making a critical choice: stay in the city where they cannot compete or go back to their hometown in a bid to survive.

A worker is seen in a factory of Viet Thang Jean in Thu Duc City on Nov. 23, 2023. Photo by VnExpress/Thanh Tung

Regardless of their choice, they still have to face the burden of old age without any social security or savings.

These workers cannot make it on their own and require the help of the government and businesses, Loc says.

Vietnam was only able to achieve its economic miracle thanks to the silent contributions of these millions of workers.

Fast approaching 50, Lan tried her best to get a job at another factory, but was unsuccessful and had to take on multiple odd jobs, which did not work out either.

Hiring requirements have not changed much from 30 years ago, but the jobs that do not require skills or education are also ones that require good health – the only obstacles for middle-aged workers like Lan.

She can only get seasonal jobs at textile factories, and wages based on piece rate.

She used to earn VND4-5 million a month, just enough to cover living expenses. But since the end of last year orders have been slow and the forty-something woman cannot help but wonder how much longer she can afford to live in HCMC.

After all, after working loyally at a factory for 25 years, she never learned any other skill.

Story by Le Tuyet

Data compiled by Viet Duc
Graphics by Dang Hieu