The Binh Duong-based company’s orders have fallen by around 40% since the beginning of this year, and with no overtime as a result, workers’ wages have plunged from VND10 million ($425) a month to VND7 million, chairman Nguyen Liem told VnExpress International.
Liem, also the chairman of the Binh Duong Furniture Association, said many wood companies have suffered the same fate in the second half of the year, with some reporting a 60% decline in orders.
Hoping to retain their employees, they instruct them to clean the factory and machinery just so they have something to do, he added.
But yet many workers have been quitting and "when orders resume, a shortage of labor is inevitable," he said.
A similar story is playing out across Vietnam as global inflation and declining consumption in key markets cause buyers to cancel orders, which means less work and income for workers in Vietnam.
Nguyen Huu Tuan, director of human resources at Thanh Cong Textile Garment Investment, said the last few months of the year would test the resilience of companies as the lack of orders could cause weak ones to scale down or even shut down.
Strong companies are working hard to retain employees and wait for the recovery, he said.
In July, Thanh Cong increased workers’ salaries by 6% and their daily fuel stipend by 50% to VND15,000.
Dang Tuan Tu, labor union chairman at footwear maker Changshin Vietnam, said the company does not have enough orders and this situation could last through the first quarter of next year.
It has shut down several production lines and transferred 1,000 workers to other lines, he said.
"To keep employees, we distribute the work evenly among all of them."
The company now lets employees take an extra two days off a month due to the low amount of work, but some have quit.
Inflation is raging globally, with rates in the U.S. and Europe at multi-decade highs.
Dwindling consumer demand in the two biggest markets for Vietnamese goods is heaping pressure on exporters of electronics, garments, wood products, and steel, Tran Viet Anh, deputy chairman of the HCMC Union of Business Associations, said.
"Many companies have high inventories due to the lack of demand."
It would be a challenge for factories to find workers when demand recovers, he warned.
Labor crisis repeats
Economic figures in the first six months indicate a strong recovery by many sectors as trade, consumption and travel resumed after a two-year hiatus due to Covid-19, but things look bleaker for the second half.
The continued decline in manufacturing activity means employees are working fewer hours, causing many to quit and leave for their hometown just like they did in October 2021 when Ho Chi Minh City imposed strict social distancing restrictions to contain Covid.
Huynh Van Toan, 40, quit his job at Hoang Thong Wood factory in Binh Duong Province recently after its order book fell by 50%.
Unable to work overtime and his income reducing by a third, he returned to his hometown in Ca Mau Province to work as a fisherman after 20 years as a factory employee.
"If I stay my family will face [financial] difficulties."
Toan is one of over 800 employees to quit the company.
Duong Quang Hiep, its director of human resources, said in April buyers were sending trucks to take delivery of orders, but since May demand has suddenly plummeted, and exports have dried up.
"We spent VND3 billion earlier this year to recruit 1,500 workers, but now we have to see half of them leave."
He expected it to take until the middle of next year for operations to return to normal levels.
The same scenario is reported from around Binh Duong, an industrial province with 1.2 million workers.
Since the second quarter over 330 companies have reported difficulties and cut down production, forcing employees to stay at home without pay, according to the province labor union.
Over 41,000 workers have been affected, it added.
Hung Loi 2 dormitory, which has over 1,300 rooms rented almost exclusively by blue-collar workers, has seen thousands of tenants leave in the last few months.
It once had 4,000 tenants, but the number is now half, with many leaving without promising to return, its manager, Nguyen Van Hung, said.
"The situation is now even more difficult than during the Covid-19 outbreak," he said, pointing out that during that time workers received emergency food support but now have "nothing to eat."
"They were earning only VND5 million a month, which could not cover their expenses. They had to leave."
Of those who have stayed, some are eating escargot and vegetables they find nearby to survive, he added.
‘Gloomy and uncertain’
The possibility of workers returning to factories depends on a recovery in global demand, but analysts are uncertain when that will happen.
The International Monetary Fund, in its July world economic outlook titled ‘Gloomy and More Uncertain,’ forecast global GDP growth to almost halve from 6.1% last year to 3.2% this year.
Reducing purchasing power in the U.S., a deepening real estate crisis in China and spillovers in Europe from the Russia-Ukraine crisis are some of the causes for the gloomy outlook, it said.
This would cause a big burden on companies like footwear maker Nguyen Phuoc, which has seen a precipitous fall in orders in September and October.
In the past the company had orders coming six months in advance, but now that has is reduced to two months, CEO Nguyen Huu Phuoc said.
"Most of our contracts were signed earlier this year, but now we are running out of export orders. There are orders that have been canceled."
Workers will eventually be the worst affected.
Le Van Vu, 25, was recently laid off from an electronics factory in HCMC’s Thu Duc City as there was no work for him.
His production line had 400 workers, but 20% were let go so that people would not quit in droves when they saw their income fall, he said quoting his manager.
"We have to be laid off so others can work overtime."
Since his sacking he has been inquiring at several other factories for employment opportunities, but no one has called him back.
Le Tuyet, Dat Nguyen