Low-cost labor is no longer an advantage. Workers need better skills for survival

May 29, 2024 | 03:14 pm PT
Tran Hung Thien Businessman
Last month, the marketing community heard rumors of the brutal acceptance rate of only 1 out of 150 candidates for a leadership position at Vietnam's largest dairy company.

The rat race to the top corporate spots has never been harsher.

The job market is hard in Vietnam. And it is even more fierce in Singapore, a nearby but very mature market, with more opportunities but even harsher competition. I searched on LinkedIn, one of the world's foremost job search sites, for "business analyst" positions, which showed that 50% of the month-old job posts have on average over 100 applicants on LinkedIn alone. The remaining job posts have between 20 and 97 applicants.

Similarly, last month, a company operating an e-commerce site in Australia and New Zealand sent me its financial statements. Reading its reports, I was struck by how small the salary costs of the company were, too low to be real. Upon my questioning, the company answered that "all of our marketing team are Philippine citizens working remotely" whose hourly rate is just one-fifth of the local Australians' salary.

I asked why the company chose the Philippines instead of other countries like Vietnam. The company’s representative said: "The Philippines have good English and are hard-working. They are also very easily integrated into the company’s Australian culture. The longer they work, the more they improve. We could not ask for more."

Two weeks ago, a friend living in the U.S. told me that he had successfully revamped the working protocols of his company’s Vietnam branch, integrated more technology management and significantly cut its team size from 150 to 60 employees. To him, I honestly think that it was good news, having helped his company cut the salary budget by two-thirds. But to the 90 employees being laid off, I could not help but feel sad for them. The mass layoff trend in recent years has spread from large global conglomerates to companies of all sizes.

Vietnam boasts a strategic advantage of a cheap and abundant labor force. But how long will this remain a significant advantage for our country, considering the mass layoff trend globally?

I faced this question in a short discussion at "Vietnam-Australia IT Day" in Sydney. Several Australia-based IT firms posed it. The companies wanted to know if Vietnam could maintain its advantage as a young, strong, and cheap labor force. They also asked if Vietnamese employees in the IT sector could communicate in English in case these companies decided to open offices in Vietnam.

The language question, simple as it may be, is a fundamental concern for foreign companies wishing to invest in Vietnam.

While English proficiency in Vietnam is not low, it is also not something to be very proud of. According to the latest report by Education First, an international language training service provider, Vietnam ranks 58 out of 113 countries in English proficiency, with an index score of 505, which is slightly above the global average of 493. The country is considered "relatively proficient" in English. Within Asia, Vietnam ranks 7 out of 23 countries. Though the ranking is not exactly bad, it shows a large room for improvement.

Answering the Australian companies’ questions, I jokingly said that once they decide to invest in Vietnam, there will be some highly proficient English users to help. I hope that one day, instead of just meeting a few exceptionally proficient English employees, foreign investors would be welcomed by many employees with satisfactory English proficiency.

The aforementioned stories hint that the global labor market will become increasingly more competitive in the years to come. With global economies in stagnation, there is increasing competition between humans and machines, between humans within one country, and between humans globally.

There are many things to improve upon and many to learn. Workers need to prepare themselves with more advanced professional skills to avoid the "common laborer" trap. Laborers with skill sets sufficient enough to demand higher salaries, but not enough to prevent easy replacement, are the most vulnerable in a fast-changing world.

Always be prepared for the upcoming changes, and always be prepared to learn more. Getting too comfortable in the ever-changing market may lead to unfavorable outcomes for Vietnamese workers.

*Tran Hung Thien is an expert on market analysis and lecturer at the VNUK Danang and the Crimson Institute.

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