Japan’s effort to attract young Asian workers

Japan’s effort to attract young Asian workers
————
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

Vietnamese workers in the context of revolution 4.0: Many disadvantages

The 4.0 technology revolution leads to high demands on technology innovation, which also means that businesses will have a high demand for high-tech labor. However, the majority of Vietnamese laborers are cheap laborers, so enterprises will find it difficult to improve their technology.

Be proactive in change

Regarding the labor market, Ms. Tran Thi Lan Anh, Deputy Secretary General of Vietnam Chamber of Commerce and Industry (VCCI) – Director of the Bureau of Laborers, said that in Vietnam, a number of policies have been issued to enhance the access to industrial revolution 4.0.

However, Vietnam currently has no basis for a specific view, as well as evaluating the industrial revolution 4.0. All that people know about this revolution is based on the advantages of the internet infrastructure, and telecommunications of the country.

In fact, Vietnam is lacking the necessary facilities to use and train workers in the 4.0 technology revolution. Up to 90% of Vietnamese enterprises are small and medium enterprises in the fields of processing and assembling, mainly at low level.

Many Vietnamese businesses are still in the 2.0 technology phase, some are between 2.0 and 3.0. 95% of Vietnamese businesses use the internet, but 60% of them find it difficult to use the internet for their activities.

Today’s Vietnamese businesses are not capable of digitizing, applying large data into analysis, design, deep chain into value chains. In addition, ordinary labor will find it difficult to adapt to the 4.0 revolution. Thus, Vietnamese workers will be disadvantaged with the 4.0 revolution if there is no innovation linking technology and human resources to adapt to high technology jobs.

Coming back to the story of low level, in competitions about math, physics, chemistry in the world, students in Vietnam are not inferior to other students in terms of knowledge, but in the use of knowledge in work and adaptation to the working environment, Vietnam is very inferior. This is also a major disadvantage of Vietnamese labor because Vietnamese laborers are so dependent on books that lack practicality.

According to Mr. Pham Duc Thang, representative of the General Department of Vocational Education, training of laborers in vocational schools is always challenging not only in the technological revolution. Accordingly, schools can not provide the modern machinery that businesses are using. Therefore, it is necessary to cooperate between the schools and enterprises to train the trainees. On the other hand, employers must also have clear requirements regarding the quality of their work.

Leapfrog

According to Mr. Truong Van Cam, Vice President and Secretary General of the Vietnam Textile and Apparel Association, the 4.0 revolution is a process of merging new technologies into production rather than completely replacing people with automation machines.

Using robots, factories will reduce the amount of hard labor, so it is necessary to train workers to use robots. Particularly for the textile and garment industry, industrial sewing machines are not fully replaceable by workers and that is still the advantage of Vietnam. However, self-employment also needs to be active in receiving new knowledge to better suit the job.

Dr. Le Anh Vinh from the Vietnam Academy of Science, the Ministry of Education and Training, said that by 2030, most countries in the world will be facing skilled labor shortages. Future workforce needs to incorporate a variety of elements: multimedia communication, social responsibility, interdisciplinary, artificial intelligence and electronic machinery, international connectivity, and sustainable development.

Under this new requirement, Vietnam should prioritize investment in improving the quality of education to improve the capacity for labor, in which training should focus on helping children to love and learn, communicate and collaborate, handle complex issues, and have open minds.

Source: Custom-news

.
.
.
.