Japan’s effort to attract young Asian workers

Japan’s effort to attract young Asian workers
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Foreign workers, both intellectual and general, are expected to help revive Japan’s aging economy.
Since taking office in 2012, Japanese Prime Minister Shinzo Abe has taken many measures to attract foreign manpower to revive an aging economy. In 5 years, the number of foreign workers working in Japan has increased 86% to 1.3 million, most of them through vocational trainee training programs.
In 2017, Abe’s government applies a “green card” program, granting permanent resident cards to skilled workers for a period of one year. The purpose of this program is to attract information technology engineers, investors and entrepreneurs from all over the world to Japan.
In December 2018, Japan for the first time passed a bill to receive foreign workers in the manual sectors, and at the same time opened up these workers for long-term residence.
Young, hardworking and ambitious workers from all over Asia flock to Japan, becoming a hope for a serious manpower-poor economy, especially in agriculture and construction. The foreign work force not only helps revive the industries but also motivates many Japanese businesses to look beyond the domestic market.

Labor Market Trends in Vietnam

Labor intensive sectors continue to be the growth drivers for Vietnam’s economic development. However, as the world moves towards Industry 4.0, the government has to introduce significant reforms across all the main sectors of the economy, to increase the productivity, skills, and quality of labor to remain competitive.

Not relative to economic growth

Productivity has not grown relative to the economic growth in Vietnam. In accordance with 2010 prices, the average annual productivity growth rate between 2011 and 2017 was 4.7 percent, while the growth in investment capital was higher at nine percent. In the same period, the economy grew from US$105 billion to US$220 billion. This discrepancy shows that the economy depends on other non-labor factors as well, in addition to productivity.

Wages vs productivity

The gap between the growth in economy and productivity has led to an increase in wages, faster than the productivity growth. From 2004 to 2015, the average wage increased by 6.67 percent, while labor productivity only grew by 4.96 percent.

Wage growth with respect to productivity has increased the highest for FDI firms, while for private firms they have stayed at almost the same levels. For state-owned enterprises, the growth in wages was below the productivity growth.

Industries with slow productivity growth such as mining, post and telecommunications, and transportation, have seen wages grow faster than productivity. For the utility sector, the wage growth has been much slower, while for manufacturing industries, trade, and construction, they have stayed at almost the same levels.

Effect of wages outgrowing productivity

If the wage growth continues to outgrow productivity, firms will see reduced profits, which would compel them to reduce hiring or shift their businesses to other competitive countries. Growth in wages, need to be at par with productivity if Vietnam wants to remain competitive.

Historically, increase in minimum wages have led to an increase in average wages, reduced profits, and lower employment, especially for FDI and private firms. Labor-intensive sectors usually move towards automation, while capital-intensive sectors reduce investments in machinery.

Sectors

From 2008 to 2016, the sectors with high labor productivity were mining, production and distribution of electricity and gas, finance, insurance, technological activities, real estate, and water supply.

During the same period, labor productivity was low for the processing and manufacturing industries and lowest for the agriculture, forestry, and fisheries sector.

Labor force distribution

According to the government’s Q4 2017 labor force survey, 67.8 percent of the labor force reside in the rural areas. The Red River Delta and North Central along with the South Central Coast account for the largest share in the labor force at 21.7 and 21.6 percent respectively. Mekong River Delta and Southeast follow at 18.9 and 17.1 percent respectively.

The average national labor force participation stood at 76.9 percent. Highest rates are in the Northern Midlands and Mountains and the Central Highlands at 84.9 and 83.3 percent respectively. Areas with lowest participation rates were the Red River Delta and Southeast.

Sector-wise, majority of the labor force in agriculture, forestry, and fishery reside in the Northern Midlands and Mountains, Central Highlands, and the Mekong River Delta. As for the industry and construction sector, the majority reside in the Southeast (Ho Chi Minh City) and the Red River Delta (Hanoi). In addition, Ho Chi Minh City, Hanoi, and Mekong River Delta account for the majority of the labor force in services.

Challenges

The major challenges facing the labor market in Vietnam include lack of skilled labor, the impact of industry 4.0, and the need for labor reforms due to the upcoming free trade agreements.

Lack of skilled labor

FDI firms continue to struggle in hiring skilled labor in Vietnam. According to the 2018 Global Talent Competitiveness Index (GTCI), which assesses countries in terms of their ability to attract, develop, and retain talent, Vietnam ranks 87th amongst 119 countries. Major challenges include the lack of technology infrastructure, R&D spending, vocational, and technical skills.

Lack of skilled labor will slow down the economic transition from labor-intensive industries to high-tech goods, which will reduce Vietnam’s competitiveness. Currently, around 40 percent of FDI firms in Vietnam find it difficult to recruit skilled employees.

The government has taken steps to increase vocational and technical training in order to meet the requirements of the labor market. In March 2018, the government introduced Decree No. 49/2018/ND-CP that provides for the accreditation of vocational education. As of February 2018, there are more than 1,900 vocational training centers across Vietnam, including 395 colleges and 545 vocational schools, which offer programs in tourism, beauty services, IT, construction, fashion, garment and textiles, pharmaceuticals, precision mechanics and hotel management. The government aims to provide vocational training to 2.2 million people in 2018.

Effect of industry 4.0

Global businesses are fast moving towards Industry 4.0, and if the Vietnamese government does not take steps to enhance human capital, it will have a significant impact on the economy. According to the International Labor Organization (ILO), 86 percent of textile and footwear industries workers in Vietnam are at risk of losing their jobs due to technology. Majority of the unemployment will be seen amongst the workforce just entering the market.

Hence, the government has to introduce reforms in education and industrial training to bring it more in line with current industry demands. According to the World Economic Forum (WEF)’s Readiness for the Future of Production Report 2018, Vietnam was ranked among those that are not currently ready for Industry 4.0. It ranked 90th in technology and innovation and 70th in human capital, among 100 countries.

FTA commitments

Once the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and EU-Vietnam Free Trade Agreement (EVNFTA) comes into effect, labor costs are predicted to go higher. These agreements are beneficial as it improves market access for Vietnamese exporters. However, the government needs to focus on labor reforms, technical skills, and corporate governance to fully realize the benefits of the agreement.

Labor rights are amongst the key provisions in both the upcoming agreements. They require members to adopt and maintain the rights as set out in the 1998 ILO Declaration in their laws, institutions, and practices. Although Vietnam has taken few steps to meet the requirements through institutional and legal reforms, more needs to done in terms of enforcement.

Source: vietnam-briefing

The Impacts of Vietnamese Workers Abroad​ (Part 2)

Negative impact

Firstly, reducing net factor income (NX) in gross national income (GNI).
Foreign workers who come to Vietnam to work have income and are transferred to the remainder of their income. It is this that reduces the net income of the national income; The result is a reduction in total national income.

Secondly, the introduction of foreign lifestyles and cultures is inconsistent with the traditions and customs of the Vietnamese people, distorting traditional ethical and cultural norms.
Foreign workers who enter Vietnam work, they bring the culture of their nation and their country. Along with civilized and modern elements; At the same time, they also bring a harmful lifestyle and culture that is inconsistent with the customs, customs and cultural identity of the Vietnamese people.

Reasonable choice for sustainable development
Thus, the international labor movement in Vietnam has both positive and negative impacts on socio-economic development. With its role, the State needs to make reasonable choices by specific policies in order to make the most of the positive impact, minimizing the unwanted impact. Therefore, policies should follow the following two basic principles:

The principle of “shocking” or the choice of two sharp points
The basic content of this principle is the labor market segment and the selection of labor groups at the two poles to bring abroad to work with different objectives. Accordingly, the labor market in Vietnam has three main sections: highly qualified labor, average qualified labor, and simple labor.
For the group of highly qualified workers, have the ability to access and collect new technologies to work in high-tech places with the aim of both earning high income for employees and implementing principles “3I”
For unskilled workers, especially agricultural workers, they must accept to work in industries that indigenous workers do not do; aiming at two objectives: to create jobs with reasonable income, to move labor away from labor-intensive production areas, to quickly bring advanced and modern production technologies to use less labor into production, creating high social labor productivity.

The principle of “traction” or motivation choice
The basic content of this principle is to select a number of professions that, if undertaken by foreign workers, it creates a boost for the economy such as the oil refining industry, information technology, etc. or some managerial positions such as general director, executive director of a number of state-owned economic groups and corporations.
International labor migration in Vietnam has a strong impact on economic growth and development in Vietnam; At the same time, it also impacts negatively on the cultural and spiritual life of society. Therefore, the issue of selecting and determining the target of international labor migration in accordance with each period is of utmost concern.

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