Definition: A labor market is the place where workers and employees interact with each other. In the labor market, employers compete to hire the best, and the workers compete for the best satisfying job. Description: A labor market in an economy functions with demand and supply of labor. In this market, labor demand is the firms demand for labor and supply is the workers supply of labor. The supply and demand of labor in the market is influenced by changes in the bargaining power
STRATEGIC HUMAN RESOURCES MANAGEMENT Labor market analysis (Labor supply) Group | Page Contents Definitions 1.1 Definition of “labor market” 1.2 Definition of “labor supply” .3 1.3 Key factors affecting labor supply .3 Situation of labor supply 2.1 Situation of labor supply in the world .4 2.2 Situation of labor supply in Vietnam 2.2.1 Reality 2.2.2 The proportion of unskilled labor 2.2.3 Vietnam labor quality Solutions 3.1 Solutions for labor supply 3.2 Solutions for labor demand .10 3.3 Solutions for connecting supply and demand of labor 10 3.4 Solutions are implementing in Vietnam reality .10 3.4.1 Solutions support enterprises in establishment and development 10 List of tables 14 List of Figures .15 | Page Definitions 1.1 Definition of “labor market” Definition: A labor market is the place where workers and employees interact with each other In the labor market, employers compete to hire the best, and the workers compete for the best satisfying job Description: A labor market in an economy functions with demand and supply of labor In this market, labor demand is the firm's demand for labor and supply is the worker's supply of labor The supply and demand of labor in the market is influenced by changes in the bargaining power 1.2 Definition of “labor supply” Definition: The labor supply is the number of hours people are willing and able to supply at a given wage rate Description: It is the number of workers willing and able to work in a particular job or industry for a given wage The labor supply curve for any industry or occupation will be upward sloping This is because, as wages rise, other workers enter this industry attracted by the incentive of higher rewards They may have moved from other industries or they may not have previously held a job, such as housewives or the unemployed The extent to which a rise in the prevailing wage or salary in an occupation leads to an expansion in the supply of labor depends on the elasticity of labor supply 1.3 Key factors affecting labor supply The real wage rate on offer in the industry itself – higher wages raise the prospect of increased factor rewards and should boost the number of people willing and able to work Overtime: Opportunities to boost earnings come through overtime payments, productivity-related pay schemes, and share option schemes Substitute occupations: The real wage rate on offer in competing jobs affects the wage and earnings differential that exists between two or more occupations For example, an increase in the earnings available to trained plumbers and electricians may cause some people to switch their jobs Barriers to entry: Artificial limits to an industry's labor supply (e.g through the introduction of minimum entry requirements) can restrict labor supply and force pay levels higher – this is the case in professions such as legal services and medicine where there are strict "entry criteria" | Page Improvements in the occupational mobility of labor: For example, if more people are trained with the necessary skills required to work in a particular occupation Non-monetary characteristics of specific jobs – include factors such as the risk with different jobs, the requirement to work anti-social hours or the non-pecuniary benefits that certain jobs provide including job security, working conditions, opportunities for promotion and the chance to live and work overseas, employerprovided in-work training, employer-provided or subsidized health and leisure facilities and other in-work benefits including occupational pension schemes Net migration of labor – the UK is a member of the European Union single market that enshrines free movement of labor as one of its guiding principles A rising flow of people seeking work in the UK is making labor migration an important factor in determining the supply of labor available to many industries – be it to relieve shortages of skilled labor in the NHS or education, or to meet the seasonal demand for workers in agriculture and the construction industry Source: Economic Times Situation of labor supply 2.1 Situation of labor supply in the world The global supply of labor almost doubled in absolute numbers between the 1980s and early 2000s, with half of that growth coming from Asia At the same time, the rate at which new workers entered the workforce in the Western world began to decline The growing pool of global labor is accessed by employers in more advanced economies through various methods, including imports of goods, offshoring of production, and immigration Global labor arbitrage, the practice of accessing the lowest-cost workers from all parts of the world, is partly a result of this enormous growth in the workforce While most of the absolute increase in this global labor supply consisted of less-educated workers (those without higher education), the relative supply of workers with higher education increased by about 50 percent during the same period From 1980 to 2010, the global workforce grew from 1.2 to 2.9 billion people According to a 2012 report by the McKinsey Global Institute, this was caused mostly by developing nations, where there was a "farm to factory" transition Non-farming jobs grew from 54 percent in 1980 to almost 73 percent in 2010 This industrialization took an estimated 620 million people out of poverty and contributed to the economic development of China, India and others The Institute estimates that increased exports in developing countries contribute to one-fifth of non-farm jobs in those nations and that immigrants from developing countries contributed to 40 percent of the | Page workforce in advanced ones By 2008 foreign-born workers accounted for 17 percent of all STEM (science, technology, engineering and math) positions in the United States Table Global labor force and population figures, selected groups Source: World and regional trends in labor force participation, ILO Employment is growing fastest in emerging and developing economies Over the past years, the incidence of long-term unemployment (the share of unemployed persons out of work for 12 months or more) has increased 60% in the advanced and developing economies for which data exist Global unemployment is expected to approach 208 million in 2015, compared with slightly over 200 million in 2012 The number of people employed in precarious work (also called "vulnerable employment")— employment that is poorly paid, insecure, unprotected, and cannot support a household—has increased dramatically in recent decades This includes part-time employment, selfemployment or freelance work, homeworkers, fixed-term or temporary work, on-call work, other contingent work, and telecommuting jobs Demographic trends Figure Medianage by country, 2015 Source: Wikipedia These numbers show that, globally, the structure of the workforce has been changing In addition to the economic and social factors described above, a large part of this restructuring is also due to demographic factors, changes in the structure of the world's population In wealthier countries | Page with more advanced economies, fewer people die from communicable diseases and, overall, life expectancies are much longer while birth rates are lower In these areas, the overall median age is rising (see List of countries by median age) The youngest populations, primarily those in Southeast Asia and Africa, are those in which overall life expectancies are lower—many children and some adults still die from communicable diseases—but the birth rate is also high Figure Global labour force participation by age group and sex Source: World and regional trends in labour force participation, ILO Figure provides a graphical view of these ongoing trends In each of the age groups, women’s participation remains lower than men’s, although between 1980 and 2005 female participation grew in every age group except the two youth cohorts The largest decline in participation for both women and men has occurred in the 15 to 19 age group Again, this is likely due to increasing participation in secondary education – a positive reflection of ongoing economic development in some regions of the world The decline in participation among both women and men aged 20 to 24 could also reflect expanded participation in tertiary education, but this could also be an indication of increased discouragement among young workers who would willingly enter into the labour market if given a better chance to find a decent job The next section examines participation trends in the different regions in order to provide a clearer picture of how economic activity is evolving around the world Global worker mobility The movement of individuals across national, regional, cultural, or linguistic boundaries has been referred to as "global mobility." This global workforce mobility impacts an employer's ability to provide goods or services to users and consumers Management theory attempts to address these movements of globally mobile individuals ranging from business expatriates to more recently identified groups such as selfinitiated expatriates, international business travelers, international | Page commuters, and "flexpatriates" (short-term assignees and international commuters) Movement of people across national borders is becoming increasingly common Traditionally, this has been described in terms of push and pull forces that drive migrant workers and immigrant laborers toward more developed countries However, not all labor mobility is outward movement toward more advanced economies An increasing number of individuals move to less developed countries to provide new expertise or return their expertise to their country of origin This includes a return movement or repatriation of internationally relocated individuals such as immigrants, refugees, sojourners, retirees, military personnel, international students, or other expatriates Such movements of people may influence interstate relationships concerning politics, economics and culture Thus, global workforce mobility research is relevant to both host and home country policies From a focus on longer-term and assigned expatriation, current research is focusing on the drivers and dynamics of a range of new alternative forms of global mobility in the workforce Conclusion: In 2005, there were an estimated 3.05 billion individuals in the global labor force, a figure that represents an increase of more than 1.1 billion – more than 35 per cent – since 1980 This growth was driven not by increased rates of labor force participation, but rather by population growth While the results show an increase in global economic activity rates from 67 per cent in 1980 to 67.5 per cent in 1990, the rate declined to 65.7 per cent in 2005 The initial increase was driven by a substantial rise in female participation that occurred in the 1980s, while the decline has resulted mainly due to a rapid fall in youth participation and a gradual and modest decline among prime-age men Among women aged 25 to 54, activity rates rose a full percentage points in the 1980s to 65.9 per cent in 1990 The trend in prime-age female participation continued in the 15 years from 1990 to 2005 – though at a slower pace – and by 2005 more than two-thirds of women in this age group around the world were in the labor force Women account for slightly more than 40 per cent of the world’s workforce The male prime-age participation rate declined slightly between 1980 and 2005, from 96.3 per cent to 95.1 per cent, with nearly the entire decline occurring after 1990 There has been a rapid decline in youth participation rates The global youth labor force participation rate fell from 63.9 per cent in 1980 to 61.4 per cent in 1990 and then declined sharply to 54.7 per cent in 2005 This paper argues that the most likely cause of this trend is increasing enrolment in secondary and tertiary education | Page 2.2 Situation of labor supply in Vietnam 2.2.1 Reality The labor force in Vietnam grows dramatically recently To some extent, it creates a significant resource for the country, yet, put a huge pressure on vocational education and employment According to a survey conducted by Ministry of Labor, War Invalids, & Social Welfare of Vietnam in Q1, 2016, the labor force increased from 54.4 million to 54.51 million in Q1, 2017 On the other hand, the population aged 15 and over in Q1, 2017 was 71.71 million, increased by 1.49 percent compared to that number in Q1, 2016 In detail, the data for female increased by 1.4% and for people who live in urban increased by 2.21% The labor force aged 15 and over in Q1, 2017 was 54.51 million, increased by 0.18% compared to that number in Q1, 2016 The data for female increased by 0.06% and for people who live in urban increased by 0.82% The proportion of population aged 15 and above who join the labor force in Q1, 2017 was 76.55%, decreased by 0.27 percentage point compared to that number in Q4, 2016 and by 0.98 percentage point compared to the same period of time last year This report also shows that in Q1, 2017; the number of people who have jobs was 53.36 million, increased by 74.43 thousands (0.14%) compared to that number in Q1, 2016 In the comparison to Q4, 2016; that indicator decreased by 41.85 thousand (0.08%), yet still lower than that decreasing level in Q1, 2016 compared with Q4, 2015 The number in urban was 16.89 million of people while in urban was 36.38 million The report implies the labor force distribute unequally, especially the main distribution was in rural area In Q1, 2017; the number who unemployed was 1,101.7 thousand, decreased by 8.3 thousand of people compared to that in Q4, 2016 but increased by 29.5 thousands since Q1, 2016 The unemployment rate cut down to 2.3% (in Q4, 2016 was 2.31%); however, it was higher than that in previous year The rate in urban area in 2017 was 2.96% The unemployed people who have higher education background and above was 138,8 thousand, decreased by 80 thousands compared to that in Q4, 2016 The unemployment rate of this group was 2.79%, which was significantly decreased by 4.43% of the last quarter On the other hand, the unemployed people who have college background was 104.2 thousand, decreases by 20.6 thousands compared to that in Q4, 2016 The unemployment rate of this group cut down to 6%, yet it was still the highest level The unemployed people who have high school background was 83.2 thousands, increased by 13 thousand The unemployment rate was 3.08% Compared to Q4, 2016; the number of unemployed young people reduced by 38.2 thousand, and yet the unemployment rate of this group was 7.29%, which was higher than that of the last quarter and last year | Page 2.2.2 The proportion of unskilled labor The high-skilled labor who have high technical skills are still limited and slow to change The structure of training system is not compatible with the structure of specified qualifications, hence affect significantly to the operation of labor market and social development target of the country The labor force in rural area is plentiful In 2016, the number in rural area was 46.11 million, increase by 217 thousand of people (0.47%) compared to last year From 2016 to 2017, the average total labor force increases 97 thousands of people (0.12%) However, the contribution of agriculture toward the economic growth was not significant The productivity of agricultural sector was low and not yet focus in depth development The shift of rural labor force toward the decrease of labor proportion in agricultural sector but increase of labor proportion in industry and service was slow Level of ability of labor in agriculture sector in rural area is quite low The restructuring of economic sectors has changes labor structure in Vietnam to industrialization and modernization The total labor in industry and service sector keeps increasing, while it keeps decreasing in the agriculture sector 2.2.3 Vietnam labor quality Vietnam labor quality is limited The differences in level of education among regions are significant, especially between rural and urban Up to 78% of young people who are in age of 20 – 24 are lack of education and vocational training when join the labor market Not to mention even when they are educated and trained; their skills, strengths, flexibilities are just around average Even though there were much improvement in health care for people, the majority of population does not guarantee about health issues due to the features of a poor but crowed country Health status of Vietnam labor is much far from other countries in the same region, in terms of height, weight and endurance This reality has been proved from these data below: Height (m) Weight (kg) Male Female Male Female Vietnam 1.62 1.52 58 45 Japan 1, 71 1.58 61 51 Korea 1, 73 1.62 69 57 Table Indicators of height and weight by gender in Vietnam, Japan and Korea in 2014 According to table 2, the average height of male in Vietnam in 2014 was 162 cm (160 cm, 1930) Compared to 70 years before, the average height | Page of male in Vietnam unlikely to change Meanwhile, the height and weight of male will increase one unit after each 10-year The research about labor structure by level of education shows that Vietnam has quite high level of qualification Unit: % Male Female Without qualification With qualification Sơ cấp 18,7 19,1 13,3 13,3 Trung cấp 30,0 30,4 Cao đẳng 20,0 21,3 Đại học trở lên 17,6 15,9 Table The structure of jobseekers in the employment portal by sex and professional qualification Source: Ministry of Labor - Invalids and Social Affairs2017 Solutions 3.1 Solutions for labor supply Enhancing professional qualifications, equip necessary skills and attitude to meet the requirements of modern industrial production Paying attention to develop human resources in remote, inaccessible and ethnic minority area and vulnerable group in the society Focusing on training for high-skilled labors in terms of quantity, reasonable structure of job industry Focusing on key economic sector and human resources in key economic regions Universalizing vocational education for rural labor force, then creating job opportunities for trained target Encouraging firms and enterprises to participate in training program and to develop human resources as the last utilizer 3.2 Solutions for labor demand Supporting firms and enterprises in establishment and development, diversifying forms of sales and production in various economic sectors Attracting domestic and foreign investment toward sustainability and win-win situation Territorial development planning must pay attention to the development of key economic areas, industries, export processing zones, etc Meanwhile, it should appropriately focus on handicrafts development, traditional professions, auxiliary occupations, etc., for 10 | P a g e appropriate labor utilities of on-the-job labors, agricultural labors and ordinary labors Considering and adjusting wage and salary policies to be compatible with the reality 3.3 Solutions for connecting supply and demand of labor Connecting supply and demand for labor through legal employment agencies Creating transparent information platforms for employers and employees to update about labor market Investing in research activities, data statistic and analysis to provide useful information for the market For example: job trending projection, demand trend of employers, training cost, training turnover rate, economic forecast, potential investment, development project, etc Base on those information, firms and employees can make appropriate decision to meet their needs and demand 3.4 Solutions are implementing in Vietnam reality 3.4.1 Solutions support enterprises in establishment and development Resolution No.35/ NQ-CP about support and develop enterprise by 2020 Objectives: By 2020, develop Vietnamese enterprises of high competitiveness and sustainable development There will be at least million operating enterprises including large-scale enterprises having reliable resources The Vietnamese private sector contributes around 48-49% of the GDC, approximately 49% of total social investment capital Labor productivity increases by about 5% per year Tasks and Solutions: Ministries, ministerial-level agencies, Government bodies, People’s committees of provinces and centrally-run cities and the relevant agencies shall strictly implement the Resolution No 19/2016/NQ-CP dated April 28, 2016 of the Government on key tasks and measures to improve business environment, enhance national competitiveness in two years 2016 – 2017 Review and evaluate the implementation and effectiveness of business support policies, especially policies to support start-ups and innovative enterprises; propose measures to accelerate the implementation or supplement to functions and duties of the Small and Medium Enterprises Development Fund, together with the National Technology Innovation Fund and funds of the private sector to increase funding for start-ups, particularly innovative and high growth potential enterprises 11 | P a g e Review and amend national technical standards, norms and procedures on conformity and compliance assessment, creating favorable conditions for commercialization of products; review and streamline process and procedures to establish intellectual property rights; improve enforcement efficiency and promote the creation, exploitation and management of intellectual assets of enterprises; create favorable conditions for enterprise to access, exploit and utilize effectively national key laboratories; strengthen protection of intellectual property rights, continue to strictly handle violations Reduction of business costs: The Ministry of Finance shall coordinate with relevant ministries and agencies to perform on reviewing regulations on land towards reducing land rent, costs of land use conversion and other expenses of enterprises Reviewing and adjusting BOT tills and feels evaluating and proposing reasonable adjustments to support enterprises to reduce costs, especially transportation enterprises The Ministry of Transport shall lead and coordinate The Ministry of Finance to consider amendments and supplements to relevant legal documents, ensuring transparency prices and charges in addition to shipping service prices by sea; implement appropriate control measures, in line with international practices on fee collection of carriers The Ministry of Labor-Invalids and Social Affairs shall lead and coordinate with relevant ministries and agencies to review and adjust minimum wage in line with labor productivity, economic growth, and competitiveness of enterprises and subsistence needs of workers The Vietnam Chamber of Commerce and Industry shall organize and enumeration to list and synthesize official and unofficial costs of enterprises, compared with regional and international enterprises and propose solutions to reduce costs for enterprises Results: Several firms reveal that they get easier to following administration procedures conducted by Resolution’s solutions The reforms of administrative procedures in many localities has achieved good results, some administrative procedures have excess the targets set by Resolution No.19 and local commitment In particular, establishment duration reduced to days (less than day compared to what committed) According to the survey of VCCI from more than 1,000 firms in the early period in 2017, it shows 80% of firms think they follow the tasks and solution in Resolution No.35 quite well More than 1,098 feedbacks from enterprise community have been received and transited to government agencies There are 850 feedbacks have been responded and solved The response rate is 77.4% 12 | P a g e Here under is survey results from enterprises after one year of implementation: Limitations: Business costs in Vietnam are basically high, compared to other countries in region, such as Singapore and Malaysia In particular, Cost of access to electricity in Vietnam is 49 times higher than that in the Philippines Cost 13 | P a g e of paying taxes is 39.1% of profit, which is the highest level among ASEAN and double than Singapore Cost of compliance with export documents is also the highest level and nearly times higher than Singapore and three times higher than Philippines Logistics costs still account for high proportion in the cost structure of businesses in Vietnam For example, the shipping cost for a container from Hai Phong harbor to Hanoi harbor is three times higher than the cost of transporting one container from China and Korea to Vietnam The unofficial costs: According to the report of Provincial Competitiveness Index PCI – 2016 of VCCI, 66% of 11,000 enterprises confirm to pay these costs Generally, this issue has not been improved through years For inspection and examination of those enterprises with two or more inspections per year, there is 52.4% of enterprises reveal that the contents of the examination are the similar Feedback from relevant bodies: Government shall focus on inspecting and rejecting policies that allow the government agencies to deeply intervene in markets, such as land market, labor market, capital market, technology market and industrial market Consider suggestions and proposals to the National Assembly to amend the Land Law, in the direction of establishing people’s property rights to land and assets on land First, Government shall strictly deal with cases of suspended planning leading to obstructing the firm business, have flexible mechanism to adjust land prices in accordance with profitability Source: Business forum 5, 2017 Financial journal 10, 2016 List of tables 14 | P a g e Table Global labour force and population figures, selected groups Source: World and regional trends in labour force participation, ILO Table Indicators of height and weight by gender in Vietnam, Japan and Korea in 2014 Table The structure of jobseekers in the employment portal by sex and professional qualification Source: Ministry of Labor - Invalids and Social Affairs2017 .8 15 | P a g e List of Figure Figure Median age by country, 2015 Source: Wikipedia Figure Global labour force participation by age group and sex Source: World and regional trends in labour force participation, ILO 16 | P a g e