Economy - December 8, 2022 | 06:27 pm PT

Employees twiddle thumbs after being overworked earlier this year

Garment factory employee Trinh was working overtime at the beginning of the year until orders dropped. Now she and over 100 other colleagues are sitting idle with nothing to do.

Unprecedented market

Roughly one year ago, when the Covid pandemic hard hit southern factories, Trinh and many other garment workers in the southern province of Binh Duong covered a distance of nearly 2,000 km to return to their hometown, the central province of Thanh Hoa.

After Tet (Lunar New Year holiday) in early 2022, she intended to seek a job in the hometown to have conditions to take care of her little daughter. But her garment factory phoned her, telling her back to work because it was receiving more orders and facing a labor shortage.

Many such a call were made as businesses started to resume full operation after the pandemic was put under control. Employers were afraid of encountering severe shortages of labor because a large number of workers had returned to their native provinces, and been reluctant to back to work.

Workers of Garment 10 Company in March 2022. Photo by VnExpress/Hong Chieu

Nong Van Dung, deputy director of the Dong Nai Department of Labor, Invalids and Social Affairs, said the department’s officers went to the Central Highlands region and the Mekong Delta to persuade workers to come back to work in the southern province. At that time, factories in Dong Nai needed some 60,000 workers.

Phi Ngoc Trinh, general director of Ho Guom Garment Company, said garment firms, which created 3 million jobs, received increasing number of orders, and they could choose orders which were most suitable to them.

Garment 10 Company even prepared materials for production slated for the next six months to serve big markets.

However, some months later, everything suddenly changed.

Garment 10 Company’s general director Than Duc Viet said 10-15% of foreign clients told his company to delay production, explaining that they had big inventories till Christmas, while the firm had already prepared materials for production.

"Returning to this land (Binh Duong), I have never thought that we would be underemployed in the year-end like this," garment worker Trinh said in late November, sitting in a boarding house in the province’s Di An City.

After six months of working overtime, she and over 100 colleagues in the garment factory are now working only five days a week.

Receiving fewer orders, a plethora of garment factories have had to scale down production. The number of orders, mainly from Japan’s Uniqlo and the U.S.’s Nike and Adidas, a garment firm in the northern province of Hai Duong received in October decreased 30% against October 2021, so it told workers to stop working overtime.

In September, the firm planned to open a new factory, but now it has stopped the plan on hiring more workers, and tried to maintain the current workforce of 17,000 after laying off some 4,000 people.

Job seekers at Thang Long-Hanoi Industrial Park in November 2022. Photo by VnExpress/Pham Chieu

Truong Van Cam, president of the Vietnam Textile and Apparel Association, forecasted the order shortage will last till mid-2023 at the earliest.

Like garment makers, footwear and construction materials firms faced the same gloomy situation.

"We, footwear producers, have never seen such a strange market over the past 40 years. Orders have dropped en masse in a short period of time," said a Vietnam Leather, Footwear and Handbag Association official.

The official said that in June factories still received orders and hired more workers, but only one month later, orders started to decrease gradually. Most factories encountered order shortages of 50-70%, even some got no orders, he recalled.

Dinh Hong Ky, vice president of the Vietnam Association for Building Materials, told VnExpress that construction material firms have recently laid off more workers than in early 2021 when the pandemic situation was serious.

In April 2021, the firms also reduced their workforce and working hours, but mainly to follow pandemic prevention rules, while market demands remained stable, he explained.

Ky’s firm, Secoin, whose nine factories produce bricks and tiles for export to 60 countries, has had to cut jobs. One of the factories has recently reduced its workforce by 40%.

"In October, the first time in our company’s history, clients in Japan told us to stop production for new orders. They will only receive products for orders placed earlier," he said, noting that even in the 2008-2009 Asian financial crisis, his company’s export to Japan did not decrease.

"No one in the building materials industry, neither Vietnamese factories nor foreign customers, can confidently predict when the difficulties will end," Ky said.

According to Ky, unfavorable conditions for production include the uncertainties of geopolitical tensions, China’s unpredictability with anti-pandemic policies and high inflation, and Vietnam’s sluggish real estate market and tightened credit growth.

Massive layoffs

According to statistics from the Vietnam General Confederation of Labor, 472,000 workers have recently been fired or underemployed, with 41,500 people having their labor contracts terminated. Most of them worked in such labor-intensive industries as garment and textile, footwear, wood processing, seafood, electronic component and mechanics.

Shrunken working hours and salaries have happened at not only blue-collar workers but also white-collar ones.

In late November, a leading construction firm with a workforce of more than 5,000 asked office clerks to work only 40 hours a week, from Monday to Friday, and lowered salary-based allowances of managerial post holders.

Hoai Anh, a communication staff of an advertisement company in Hanoi, was shocked last weekend when she was informed that her income would decrease by 30% starting in December due to the company’s receiving fewer customers. Smaller salary means smaller social insurance premium.

Big data from recruitment service provider Navigos Group, the owner of VietnamWorks and Navigos Search, showed that recruitment demand is declining sharply in the last quarter.

"The recruitment demand in the first nine months of this year actually returned to the level before the Covid-19 onset, but in the last three months, it decreased by 15-18%," said a Navigos Group manager.

The steepest decreases were reported in aviation and tourism industry, followed by restaurant and hotel, garment and textile, and maritime transport.

The fall in recruitment demand will last till 2023, Navigos Group predicted, adding that recruitment demand is increasing only three industries, namely banking, insurance and stock.

Proposed solutions

Economics expert Phung Duc Tung told VnExpress that the labor market was affected by different factors, including the global economic slowdown which has recently caused orders to drop, and the result of local businesses starving for capital and running out of money.

"The current control of inflation and exchange rate is not satisfactory... The tightened corporate bond market and increased interest rates make it difficult for businesses to keep jobs," he said.

Local businesses in the auxiliary industry said they have recently found it very hard to access loans because banks have reached or nearly reached the capped credit growth, so they currently lack capital to invest in new machines and technologies to maintain their positions in supply chains.

Many experts and businesspeople stated that it is necessary to solve two problems at the same time - supporting businesses to overcome difficulties and ensuring welfare for workers.

According to expert Tung, Vietnam should accept moderate inflation, for example 5-6%. At the same time, the country should inject money through the acquisition of foreign currency, accelerate public investment, expand credit room and allow unfinished real estate projects to continue by borrowing money or issuing corporate bonds.

The expert also suggested that authorities review corporate bond issuance. With well-performing firms, they should be allowed to issue bonds to reverse debts in order to maintain business.

"Now, it is necessary to restore confidence in the market," Tung stated.

Many other experts believed that it is time to consider exempting and reducing trade union fees, and delay social insurance premium payment to support businesses to keep jobs for workers.

The Vietnam Confederation of Commerce and Industry (VCCI) is proposing to deduct the Unemployment Insurance Fund, which has current balance of some VND55.57 trillion ($2.315 billion) to support people who have lost their jobs.

But fluctuations in the labor market pose a longer-term problem for policy makers, Le Duy Binh, director of business consulting firm Economica Vietnam, told VnExpress.

Essentially, Vietnam is moving up in the value chain, so the restructuring of industries and businesses will take place regularly, he said.

As a result, the number of workers being made redundant due to the bankruptcy of enterprises then having to move to other industries or leaving the labor market will increase.

"This phenomenon happens regularly, but faster this year due to external influences," Binh stated.

Therefore, it is necessary to accept the reality to have radical solutions, not just supportive ones when a group of workers are affected, he said.

The radical solutions are the preparation for, training and re-training of employees, and providing them, especially workers aged over 35, with adequate information, recruitment and transfer opportunities.

Accordingly, the Government and localities can consider promoting specific programs to specifically support training, connection and counseling for workers.

"If they have better vocational training, when they meet a shock, at least they will have a chance to change jobs. Training is not only about professional skills, but also soft skills, and adaptability," Binh said.

He also emphasized that the social safety net should be ensured because it is a buffer zone for workers.

Pham Ngoc Toan, director of the Center for Strategic Analysis and Forecast at the Institute of Labor Science and Social Affairs, said Vietnam should consider gradually establish regional or satellite industrial parks to attract local workers. At present, industrial parks are located mainly in big cities and lure workers from distant provinces.

Workers of Ty Hung Company in HCMC’s Binh Tan District, specialized in producing leather shoes for export, were on last their working day at the firm. Photo by Chan Phuc

According to Toan, in the past, many people were willing to migrate to big cities to work, but after days of insecurity, they would no longer take risks, just seeking jobs in their hometowns or neighboring areas.

If this situation happens on a large scale, it will cause labor shortages in big cities, he said.

And the situation has somewhat occurred in HCMC over the past few days.

At a labor seminar on Dec. 2, Tran Le Thanh Truc, head of the employment, occupational safety and social insurance bureau under the HCMC Department of Labor, Invalids and Social Affairs, said that when footwear producers like Ty Hung and Vietnam Samho fired thousands of workers, the department contacted and introduced new jobs for them, but only 770 out of more than 2,000 laid off workers took the new jobs.

"It is not impossible to introduce new jobs to more people, but they have other options," she said. Some laid off migrant workers decided to go home for a long vacation, and others switched to seasonal jobs.

"Hearing that nearly 1,200 workers of Ty Hung Company had lost their jobs, we went there to distribute recruitment leaflets, but no one took our offer," said Vu Trong Hien, human resources director of Thuan Phuong Embroideries Garments Company.

However, for workers like Trinh, they do not care macroeconomic issues and policies. Her current plan is simply clinging to the garment factory with a meager monthly income of over VND5 million ($208), hoping that it will give her Tet bonus.

If the factory keeps on cutting jobs, Trinh may return home once more.

By Phuong Anh, Hoang Phuong