Vietnam is at a very important crossroads in its development, as a result of both internal and external factors.
Internally, while it still benefits from a demographic dividend (defined as a rise in percentage of working-age population), this is expected to end by the year 2040 (according to United Nations statistics).
Population of Young, Working-aged and Elderly, Vietnam
Source: United Nations statistics
Total population of the country is expected to peak at around 110m by 2049 with the rise in the elderly population accelerating as that happens.
To be fair, this is a direct result of Vietnam’s success in providing better healthcare and better nutrition, resulting in an increased life expectancy which sharply increased to 75 years in 2023 from just 55 years in 1975.
Vietnam has an extremely tight labour market with the unemployment rate hovering at just 2.2%. With the peaking of the labour force, companies operating in Vietnam need to start working on the following:
- Re-tooling of jobs to reduce labour dependency. Companies can do this via upskilling of the workforce and introduction of productivity enhancing technologies
- Jobs re-mapping to better engage the informal workforce the elderly provide. Though retired, Vietnam’s elderly, like the elderly of many countries, do participate informally in the economy. What they do not need or want is full-time employment though many still desire to contribute economically and socially
- Strengthen their employee value proposition. Companies need to understand that attracting and retaining talent is not going to be as easy. The workforce of today looks for more than what the previous generation did as they progress up the Maslow’s hierarchy of needs. At Great Place To Work, we see an increased interest to understand how to do this as more and more local and multinational companies participate in our programs but there is still a lot to do if companies are going to get ready for a post-2040 era of a declining workforce
Externally, the geopolitical environment poses both an opportunity and a risk to Vietnam. The world is becoming more insular, and this is likely to accelerate in the United States. While Vietnam has thus far escaped the more punitive measures the US intends to enforce on other countries, it remains on the US Treasury’s monitoring list for countries with a significant current account surplus which reached $112bn in the 4 quarters through June 2024. The continued migration of manufacturing from China will only serve to increase this surplus and it is unclear whether or when Vietnam could also be subject to the same pressure to reduce that deficit. As opposed to other countries, Vietnam has few options to do so as there is minimal ability to increase the demand for US-made goods.
On the topic of China, the next 15 years (and in fact more) will coincide with a sharp decline in the China labour force. Vietnam’s 4m increase in working age population from 2025 to 2040 pales in comparison to China’s projected 124m decline over that same period. Vietnam’s challenge is to attract the kind of work that does not increase its current account surplus with the US materially which means that it needs to foster a greater integration and working relationship with its neighbours in South-East Asia.
Population of Young, Working-aged and Elderly, China
Source: United Nations statistics
Taken together, the next 15 years for Vietnam are extremely critical, not just for the country but for the companies operating in it. The good news is that Vietnam is working off a position of strength, but it needs to be proactive and it needs to start now. Together with other companies who partner with Great Place To Work, we seek to help the country realize its fullest potential and to foster a society where work is a joy and not a chore. Doing right by your people is better for business, better for Vietnam and better for the world.
