Aging population to negate Vietnam’s cheap labor advantage: report

The country had 70% of its population of legal working age (15-64) in 2015, but the ratio is set to fall to 60% by 2050 as the population ages rapidly, said the report, which studies and surveys over 1,000 public and private organizations.

Vietnam’s population, 2015 (L) vs. 2055. 100% = 92,677,082 people in 2055. 100% = 109,783,121 people in 2055. Chart by JICA

A large ratio of the population will be over 60 by 2050, and unless both productivity and labor force participation rate are increased, economic growth will be considerably lower and a shortage of workers likely, it said.

Although the labor force dwindles, salary will definitely rise, which will “make Vietnam lose its current cheap labor advantage in labor-intensive and low-skilled sectors,” it added.

Similar warnings have been sounded before. In 2016, experts at the World Economic Forum said that the Fourth Industrial Revolution will lower Vietnam’s low-cost labor advantage as automation replaces workers in the garment, footwear, seafood processing, electronics assembling, retail and other sectors.

JICA said that the solution to the problem was to increase labor productivity, but as most businesses in Vietnam are small and micro, they lack the necessary resources to upgrade their technology and management.

Skills and education are another problem. In 2020, only 38.8% of all workers had graduated from high school or had a professional certificate, which shows that low education level is one of the main reasons for Vietnam’s low productivity, the report said.

It recommended that Vietnam improves its education and training services to increase labor productivity in order to boost industrial productivity and competitiveness.