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Technology investment: good way to increase productivity, reduce labor cost

Increasing productivity must be considered an important basis for calculating wage increases for workers, not just based on the CPI.

Hanoi-based Thai Binh Duong Co., Ltd, which runs a factory in Dong Van Industrial Park I in Ha Nam province, said that previously, it employed 80 workers to manufacture 200 sets of telecom and fiber optic cable products a day. The company had to pay about 21 million VND for labor costs/day.

Since early 2022, thanks to the use of digital and automatic machinery systems, the company only needs 10 workers to make 500 sets of products per day, paying a daily labor cost of only 4 million VND.

In 2020-2021, the Covid-19 epidemic made serious impacts on all aspects of life and businesses. So far, Vietnamese firms have been still struggling with consequences of the pandemic, including difficulties in recruiting workers. Many firms have to encourage their employees to work overtime to timely fulfil orders. For some companies like Thai Binh Duong Co., Ltd., by applying science and technology, they have adapted well to the new situation.

Some business associations have recently sent an official dispatch to the Prime Minister, proposing to delay the time for increasing regional minimum wage to January 1, 2023 instead of July 1, 2022 as proposed by the National Council for Wages. With an expected increase of 6%, equivalent to 180,000-260,000 VND, it will increase difficulties for employers.

Boosting productivity to cut labor cost

Economist Vo Tri Thanh said that the labor productivity of Vietnamese enterprises is low, leading to limited room for increasing income for workers. Increasing productivity must be considered an important basis for calculating wage increases for workers, not just based on the CPI.

However, Vietnam has never experienced any period of rapid productivity growth. In recent years, Vietnam's labor productivity has improved significantly, but it is still low compared to many countries in Southeast Asia and the world.

According to the International Labor Organization (ILO), Vietnam's labor productivity in 2020 was 7 times lower than that of Malaysia; 4 times less than that of China; 3 times less than that of Thailand; 2 times lower than that of the Philippines and 26 times lower than that of Singapore.

It is said that the increasing labor costs, and fierce competition in worker recruitment will force Vietnamese businesses to quickly perform digital transformation, apply science and technology to increase productivity and reduce labor costs, said Dr. Vo Tri Thanh.

According to Dr. Nguyen Trong Dieu, Chairman of the Association of Vietnamese Private Entrepreneurs, without digital transformation, businesses, especially small and medium-sized enterprises and local enterprises, will be in disadvantage on the competition of personnel recruitment and labor productivity in the coming time. In fact, enterprises that have successfully conducted digital transformation have their productivity twice as much as those without digital transformation.

Expert Vo Tri Thanh said that increasing labor productivity needs to be concerned and promoted to achieve national goals in the coming period. In the context of the fourth industrial revolution, accelerating the digital transformation process within enterprises is one of the leverage solutions to increase labor productivity.

Tran Thuy

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