Reverse exodus by migrants leaves HCMC with severe labor shortage

Nguyen Thanh An, trade union chairman at Vietnam Samho Co. Ltd., a shoe manufacturing company in HCMC’s Cu Chi District, recalls his trip in June to the Mekong Delta province of An Giang to recruit workers.

Despite offering accommodation, transportation and advance payments for living expenses, he was met with reluctance.

Many former workers, who had returned home during the Covid pandemic in 2021, now declined his invitation, saying they “had had enough of life in the city.”

Samho needs 1,500 more workers this year to meet orders, but only a handful of applications have trickled in despite extensive recruitment efforts.

“Workers in rural areas hesitate to return to Saigon,” An says.

This is part of a broader issue affecting manufacturing enterprises across HCMC, “where labor shortages have become a significant obstacle alongside cost pressures and green production requirements,” Nguyen Ngoc Hoa, chairman of the HCMC Union of Business Association, says.

He says after the pandemic many migrant workers left the city for their hometown, which hit labor supply.

A survey of over 2,000 companies by the HCMC Center for Manpower Demand Forecast and Labor Market Information has found that industries heavily reliant on migrant workers, including textiles, footwear, electronics, construction, and hospitality, are feeling the pinch.

At many businesses, non-locals account for over 60% of the workforce.

Le Van Thinh, director of the city Department of Labor, Invalids, and Social Affairs, points to a shift in labor migration patterns.

Previously a top destination for migrating workers, Vietnam’s biggest city is now losing its appeal.

The economic growth in rural provinces, fostered by industrial zones and economic hubs there, has created competitive job opportunities close to home for many people.

The decline in migration is most keenly felt in labor-intensive sectors that require a large workforce.

Companies are now forced to have workers working overtime, automate simple processes or relocate factories to provinces to sustain operations, he said.

Data from recruitment platform Viec Lam Tot (good jobs) shows a 30% increase in demand for unskilled labor in the first eight months of this year compared to the same period last year.

But with supply scarce, 85% of employers reported having difficulties finding workers.

Assoc Prof Dr Nguyen Duc Loc, director of the Social Life Research Institute, cannot emphasize enough the critical role migrant workers play in the city’s economy, pointing to the delivery drivers powering e-commerce, night-shift porters at wholesale markets, street vendors, waiters at restaurants and how integral they are to HCMC’s fast-paced industrial life.

“They are like the capillaries of a living body. Without them, the city loses its vitality.”

The departure of migrant workers has caused labor shortages, reduced services and imposed higher costs on consumers across the board.

He says the stark example was during the Covid-19 lockdown when the exodus of hundreds of thousands of workers brought the city’s economy to its knees.

To prevent further reverse migration, he says the city must improve and reform various policies.

“Currently most people leaving are low-skilled workers, such as manual laborers and freelancers. But in the long term this trend could extend to all demographics, and the city may also struggle to attract new talent.”

The city’s development strategy for 2025-30 says to achieve annual growth of 8.04%, the city’s workforce has to increase to six or seven million from the current five million, of which over 2.7 million are formally employed with social insurance.

A study titled “Strategic Orientation for Employment and Skills Development in HCMC 2023-2025, Vision to 2030” done by the HCMC Institute for Development Studies predicts that by 2027 labor demand will exceed supply.

The city faces challenges in attracting workers, including air pollution from fine dust and emissions, chronic traffic jams, urban flooding, garbage overload, and competition from neighboring provinces, it warns.

Workers leave a factory of Pouyuen, a Taiwanese shoemaker in HCMC’s Binh Tan District, a company with the most employees in Ho Chi Minh City, November 2023. Photo by Read/Quynh Tran

According to the 2023 Report on Provincial Governance and Public Administration Performance Index, HCMC lags behind other leading cities in several areas such as public services (rated lower than Hanoi, Da Nang and Can Tho), lifestyle appeal (lower than Da Nang and Can Tho) and natural environment quality (lower than Da Nang, Lam Dong and Can Tho).

Loc says for decades HCMC has naturally attracted migrant workers because of market dynamics. But other localities are actively working to retain their workforce, developing industrial zones, improving wages and advancing technology, making them competitive with HCMC, he explains.

In this new context, the city needs a “selective approach” to attract the right workforce to suit its development, offering them unique advantages in terms of social welfare, healthcare and education that other places cannot match.

Drawing inspiration from businesses and countries that successfully attract talent, Loc cites examples of enterprises recruiting skilled workers from developed nations by offering competitive salaries, education for their children, housing, and even support for their spouses.

European and American countries attract skilled labor by providing scholarships in fields with high demand, he says.

He suggested that the city should have solutions to enhance regional connectivity.

Neighboring provinces can serve as sources of raw materials, products and partnerships while it can focus on innovation and science and technology and provide them with support, he says.

“In this way, labor contributions can come from anywhere, benefiting the city.”

According to the HCMC office of the Vietnam Chamber of Commerce and Industry and the International Organization for Migration, retaining migrants requires joint efforts by the government and businesses.

They say the government can subsidize electricity, water and housing and provide childcare and educational opportunities for workers’ children.

It can also help women workers aged over 40 find and retain employment, while businesses should invest in infrastructure and improve workers’ benefits, they say.

While waiting for broader policy solutions, companies like Vietnam Samho continue to grapple with labor shortages.

The company has tried recruiting workers from rural areas by offering increased benefits, transportation and housing, but remains short by several hundred workers despite months of trying.

As it approaches its 30th anniversary in HCMC after being one of the city’s first foreign-owned enterprises, its representative, Nguyen Thanh An, says, “We have done everything we can, but businesses’ efforts alone are not enough.”