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Here’s One Way Vietnam Can Ease Labor Shortage Woes

Amid Vietnam’s ongoing struggles with a labor shortage, fostering factory-employee relationships might be key.

Businesses are straining to return to full operations after tens of thousands of workers fled the industrial hub of Ho Chi Minh City for their ​​home provinces following a lifting of months-long Covid-19-induced mobility restrictions in October.

“The fourth wave of Covid-19 infections have seriously affected the labor market, with a high unemployment rate,” Prime Minister Pham Minh Chinh told lawmakers earlier this month as the country’s economy recorded its sharpest quarterly contraction to date.

But authorities will collaborate with businesses and workers to roll out the necessary measure to ensure “sufficient laborer supplies by the end of this year or early next year” and restore its supply chain, Chinh said. The government will also offer financial support for workers’ travel and accommodations while accelerating its vaccination program so all adults 18 and older will be fully inoculated by the end of the year.

Better Work Vietnam, a multi-stakeholder initiative founded by the International Labour Organization and the International Finance Corporation, says it’s also training managers and workers to address the “overall workforce hesitance” to return.

“Better Work is supporting factories with training, providing managers and workers with soft skills to help them harmonize industrial relations, which are especially needed amid the current Covid-19 context,” said Le Bich Ngoc, a training officer at the organization, whose members include Asos, Gap, H&M and Zara owner Inditex. “Factories are working on finding ways to recruit new workers and get back their workforce somehow.”

The labor shortfall is threatening to derail the growth of the Vietnamese garment industry, once the world’s second-largest exporter of clothing after China. The total number of workers in export processing zones and industrial parks in Ho Chi Minh City is down 46 percent to 135,000, a senior official told the New York Times. Roughly 6 percent of workers at Pouyuen Vietnam, a subsidiary of Taiwan’s Pou Chen Corp., the world’s largest athletic footwear manufacturer, have quit, a manager told Reuters, resulting in production delays and disruptions.

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Even a small number of absent workers can spell big problems in the long run, analysts from BofA recently noted. “Just because a factory has 80 percent of its workers back does not necessarily mean 80 percent output if those with complementary skills are lacking,” they wrote in a research note.

Already, several retailers, stung by slowed or paused orders after infections and deaths surged due to the delta variant, have divulged plans to shift manufacturing closer to their U.S. and European markets.

Crocs, for instance, is opening new facilities in Indonesia and India. Steve Madden, pulling away from the Southeast Asian nation, has moved half of its footwear production to Brazil and Mexico. Mango has told Reuters that it has “accelerated” its process of expanding production in countries such as Morocco, Portugal and Turkey.

Nike, which lost 10 weeks of production due to the lockdown, is one outlier. At the international climate talks in Glasgow, CEO Noel Kind told Pham that the sportswear giant will continue to invest and expand production in Vietnam.

During the worst of the wave, 40.9 percent of businesses in the production heartland halted operations, while 53.7 percent implemented the health ministry’s “three-in-one spot” guidelines, which required employees to eat, sleep and work in the same location, for a portion of their workforce, according to a September survey conducted by the Vietnam Textile and Apparel Association and the Vietnam Leather, Footwear and Handbag Association.

Factories that have established a strong rapport with their workers over the years, including implementing updated labor codes, saw a higher number of workers stay in their jobs during the crisis, Better Work Vietnam said. Factories with good factory-employee relationships as a result of Better Work’s training and affiliation have also been “more resilient in these difficult times.”

Together with authorities, Better Work Vietnam has been conducting seminars with factory managers throughout the pandemic, helping some 500 participants investigate and resolve grievances, identify the underpinning causes of industrial disputes and understand procedures for seeking redress under Vietnamese law.

“Dialogue among all parties is more crucial than ever to keep going at this point,” Le said. “Better Work is providing managers and workers with soft skills to help them harmonize industrial relations.”