Labour trends in Vietnam - aging
/I am reading through a very interesting report on Vietnamese labor trends by the International Labor Organization. Full report here. It covers the period from 2012-2017 (although some of the data goes back more than that. A few things that seem to be key:
SOURCE: WORLD BANK, VIETECON.COM CALCULATIONS
The country had a demographic dividend (lots of young people) that is fading away as the population ages. We have talked about this before, but it bears repeating, especially as all these new foreign companies come to manufacture. It seems like the cut off age for these workers is something like 35, because it is just tough work. After that, they just don’t have the capacity to do it. Or not at the same level.
Right now (2018), the population is close to evenly split between above 35 (45%) and below (55%). This is expected to get worse over time. For example, people above 65 are 7.4% of the total population. This almost doubles to 14.7% by 2035, which is only 16 years away. The dependency ratio will increase to 50% by the same time, meaning that every 2 working age person needs to support an old or young person (with the increase mostly driven by old people).
What this means is that manufacturing really is only going to be a driver of growth for the next few years, before these people age out of it. Manufacturing will continue to be a big source of economic activity, but not of growth. And as the population ages and there are fewer workers, wages will likely rise. Conditions will also have to improve, in order to induce older people to work at the factories. But these new “costs” will very likely drive investors to put their factories in different countries.
The big drivers of job growth have been manufacturing and services. Eventually, growth will have to come from service jobs, which are less strenuous and allow people to work for longer.
Now, just to give a bit of support to these figures: I didn’t make up the figure for age 35 off the top of my head. This is something that is understood by both worker and employer. In fact, this story states it explicitly:
“It’s been like that for Xuyen for over 13 years. And soon, the factory is going to dismiss her because people over 30 are “not welcomed” there….Eighty percent of female workers over 35 in industrial facilities either quit or are forced to quit, according to the Ministry of Labor, Invalids and Social Affairs.”
Plus, there seems to be a view that two-thirds of the Vietnamese population is under the age of 35, but that’s not what the World Bank figures show - it is just 55% of the population (I double checked!).
More insights from the report tomorrow.