The ‘good job with high pay’ dream has become more distant for many workers amid the wave of automation and AI.

After three decades of doi moi (renovation), Vietnam has become a ‘rising star’. The extensive development with a labor-intensive outsourcing model has generated jobs for untrained workers and helped Vietnam join the group of low-middle income economies.

However, Vietnam has been maintaining the model for too long and is not prepared with workforce and technology capability to shift to an intensive development model, which would help turn Vietnam into a developed country with high income.

Education and training, and science and technology development need to be one step ahead to train the labor force and build technology capability. 

However, according to Pham Manh Hung, a lecturer at the Economics Institute under the Hanoi National University, Vietnam still has not made appropriate investments in science and technology development. The budgets for education and training, especially higher education and vocational education,     remain modest.

In 2023, the budget for R&D (reserach and development) accounted for 0.4 percent of Vietnam’s GDP, which was much lower than China’s 2.4 percent of GDP. The budget for higher education in Vietnam was also low, just 0.18 percent of GDP in 2020, compared with Malaysia’s 1.13 percent of GDP.

Paying inappropriate attention to education and science and technology investment, Vietnam has been ‘bogged down’ in the trap of doing outsourcing and assembling components for foreign partners, especially in key export sectors, including textiles and garments, footwear and electronics manufacturing. 

In these fields, Vietnamese still earn money with their ‘muscle’ instead of ‘brain cells’ and most products have low technological content.

Reports all show that the proportion of trained workers is modest, just accounting for 26 percent of the labor force in 2021, while workers with higher education levels just accounted for 12 percent.

The number of untrained workers was over 73 percent, while informal workers accounted for 68.5 percent of total workers who had jobs in 2021, or 33.6 million. 

Over 61 percent informal workers had only a primary education level. Even trained workers could not satisfy requirements of the labor market which showed problems in training.

As a result, a high number of workers have fallen into the ‘bad skill, bad job and bad pay’ trap. They are facing the risks of losing jobs at any time.

The number of workers who have good jobs and high pay now accounts for 10 percent. The figure is 60 percent in Singapore.

Because of low pay, workers have to lead lives with full of hardships. About 75 percent of workers say their incomes are not high enough to cover basic needs as shown by a Vietnam Labor Federation report in 2023.

The situation is even worse for informal workers with 47 percent of workers of this group having incomes lower than the minimum regional wage. The average income from major jobs of informal workers was VND4.4 million in 2021, just half of the formal workers’ average income (VND8.2 million).

Also because of low pay, workers don’t have opportunities to improve their skills to find jobs with better pay. Meanwhile, enterprises, using unskilled workers, cannot generate good jobs. As such, the national economy is facing the risk of falling into the ‘bad skill, bad job and bad pay’ trap and ‘middle income trap’. 

These factors explain why Vietnam’s productivity is low. In 2022, Vietnam ranked 135th among 180 surveyed countries in terms of productivity, just equal to 11.4 percent of Singapore, 35.4 percent of Malaysia and 64.8 percent of Thailand. 

Because of low productivity, Vietnam cannot raise minimum wages rapidly, because the move, if taken, will cause Vietnam to lose its competitiveness.

However, experts have warned that low-cost workforce will sooner or later cause Vietnam to be no longer competitive. It will also be influenced by the wave of automation and AI. Therefore, developing high-quality human resources is a must.

Tu Giang