A Critical Bottleneck in Vietnam’s Industrial Expansion
Vietnam has long been celebrated as a rising star in global manufacturing, attracting billions of dollars in foreign direct investment (FDI) with its stable politics, strategic location, and historically low labor costs. However, this rapid economic expansion is colliding with a significant structural challenge. The country is facing an acute shortage of skilled labor, threatening to slow down its ambitious growth trajectory and raising questions about the sustainability of its current development model. From bustling industrial parks in Bac Ninh to high-tech zones in Ho Chi Minh City, factories are struggling to fill critical positions, forcing companies to rethink their operational strategies and pushing wages higher.
This shortage is not merely a temporary blip caused by seasonal fluctuations or the post-pandemic recovery. It represents a deeper shift in the labor market, driven by changing worker expectations, demographic trends, and the evolving nature of foreign investment in Vietnam. As global supply chains relocate and the country aims to move up the value chain, the gap between the skills workers possess and those demanded by modern industry is widening. The situation has become urgent enough to warrant intervention from the highest levels of government and a strategic re-evaluation of how Vietnam prepares its workforce for the future.
The Reality on the Factory Floor
The human cost of this labor shortage is visible daily in industrial hubs across the country. In Bac Ninh province, which attracted $5.5 billion in FDI in 2025, the struggle to find workers is palpable. Nguyen Phuong Thao, a human resources director at a battery manufacturing company, exemplifies the frustration felt by many employers. For over a month, she has been attempting to hire 150 technical workers but has managed to secure only 60 applicants.
“At this point, the only solution is to keep raising costs,” Thao said, referring to the escalating expenses of higher wages, referral fees, and sign-on bonuses required to attract talent. Her company, which produces lithium-ion batteries for electric vehicles and consumer electronics, recently opened a new factory. Despite offering instant bonuses and even resorting to recruiting through TikTok livestreams, it has filled only about 40% of its demand. The most difficult roles to fill are those requiring technical skills, team leadership, or foreign-language proficiency, which have drawn almost no applicants.
The problem is compounded by exceptionally high turnover rates. At some factories, as many as 40% of new hires quit within just three days. This volatility forces companies to recruit two or three times their actual staffing needs to ensure they have enough people on the production line. It creates a cycle of constant onboarding and training that drains resources and disrupts productivity. The Korean Chamber of Commerce in Vietnam (KOCHAM) has noted that South Korean manufacturers are struggling to recruit skilled workers and mid-level managers, particularly in industrial provinces like Bac Ninh and Thai Nguyen.
“Competition for human resources will become more intense as foreign investment continues to grow,” said Ko Tae Yeon, chairman of KOCHAM.
The Paradox of the Unfilled Position
Perhaps the most perplexing aspect of this shortage is the paradox it presents. Across the country, thousands of job advertisements remain unanswered. A report from the recruitment platform TopCV indicates that nearly 70% of companies have increased hiring, yet the applicant pool remains shallow. According to analysis by The Vietnamese, the market is witnessing a notable disconnect where companies constantly advertise positions, yet workers show little interest.
Wages, traditionally Vietnam’s main competitive advantage, are increasingly viewed by workers as insufficient to justify the rigors of factory life. While advertised salaries for factory workers might range from 8 to 12 million dong per month in major cities, workers often point out that these figures include overtime pay, allowances, and bonuses. The actual base salary for a new worker can be as low as 5.2 million dong, only slightly above the regional minimum wage. After deducting expenses for rent, food, and transportation in expensive cities like Ho Chi Minh City or Hanoi, workers are often left with minimal savings.
This economic reality has triggered a shift in worker behavior. The “reverse migration” trend, where workers leave cities for their rural hometowns, has accelerated since the COVID-19 pandemic. The experience of lockdowns and job losses during the pandemic fundamentally changed how many perceive factory work. Instead of enduring separation from family and high living costs in industrial zones, many have returned to rural areas where living expenses are lower and support networks are closer. Furthermore, the rise of the gig economy offers alternatives that provide greater flexibility and autonomy, such as ride-hailing or delivery services, even if the pay is comparable to factory work.
The Garment Sector’s Specific Struggles
The labor shortage cuts across various sectors, but the garment and textile industries face unique pressures. Crystal Martin Vietnam, which employs over 10,000 people, illustrates the dilemma. As orders rise, the company needs to recruit thousands of workers, but applicant numbers remain low.
Nguyen Van Chi, chairman of the company’s labor union, explained that garment work requires precision and manual skill, and training a new worker takes two to three months. Additionally, most factories avoid hiring new workers over the age of 40, further shrinking the available labor pool. To widen its reach, the company has turned to social media, using Facebook and TikTok livestreams to answer questions about wages and benefits in real-time. This modern approach to recruitment highlights the lengths to which companies must go to capture the attention of potential employees.
Beyond the Factory Gates: The High-Tech Skills Gap
While the shortage of assembly line workers grabs headlines, a more profound challenge is emerging in high-tech sectors. Vietnam is positioning itself as a key player in the global semiconductor supply chain, attracting major investments from giants like Intel, Amkor, and Hana Micron. However, the semiconductor industry demands a workforce with specialized engineering skills that Vietnam currently lacks.
According to VietnamPlus, the country currently has about 15,000 semiconductor specialists. This figure falls drastically short of the government’s target of 50,000 specialists by 2030. A World Bank report has emphasized that strengthening human capital is essential for Vietnam to move up the semiconductor value chain. The shortage is not just in quantity but in the specific type of expertise required. For example, there is a limited number of “full-stack” engineers capable of handling end-to-end chip design, from front-end processes to commercialization. Most Vietnamese engineers currently specialize in a single stage of the process, mainly back-end work.
This skills gap poses a risk to Vietnam’s ambition to become a high-income economy by 2045. The World Bank’s “Viet Nam 2045” report warns that the country’s reliance on low-skilled labor is becoming a constraint. Only about 5% of the manufacturing workforce is currently considered high-skilled. As global value chains shift toward digitization and sustainability, the demand for workers with advanced technical competencies in science, technology, engineering, and mathematics (STEM) is skyrocketing, outpacing the current supply.
The Impact on Investment and Competitiveness
The labor shortage has direct implications for Vietnam’s attractiveness to foreign investors. The U.S. State Department’s 2024 Investment Climate Statement explicitly lists “a shortage of skilled labor” as one of the challenges Vietnam faces. While political stability and trade agreements draw investors in, the inability to find qualified staff can deter them from expanding operations or committing to complex, high-value projects.
For existing businesses, the shortage drives up operational costs. Companies are forced to pay increasingly generous incentives. At Thao’s battery company, new hires who stay for four months receive a VND9 million (US$342) bonus, and employee referrals earn VND4 million. These amounts are more than double those offered a year ago. While these measures help attract workers in the short term, they can create resentment among existing staff and squeeze profit margins. Higher labor costs could eventually weaken the competitiveness of Vietnamese firms compared to regional rivals like Cambodia or Bangladesh, where labor costs may remain lower for longer.
Strategic Responses and Solutions
Addressing this multifaceted problem requires a coordinated response from both the government and the private sector. The Vietnamese government has recognized the urgency and has launched several initiatives. The semiconductor human resource development program aims to train 50,000 engineers by 2030, with plans to establish national laboratories and institutional labs to facilitate hands-on learning.
Experts emphasize that upskilling the workforce is a joint responsibility. Pham Ngoc Toan, a director at the Institute on State Organizational Sciences, noted that if skills are not upgraded, the gap between what workers have and what the market needs will continue to widen. This aligns with findings from the IMF, which suggests that reducing skill mismatches and vocational skill shortages is crucial for improving labor productivity.
Private companies are also adapting their strategies. Some are shifting focus from aggressive external hiring to retaining skilled internal staff. Thao’s company, for instance, now focuses on maintaining monthly incomes of VND13-15 million and paying additional monthly bonuses to employees who complete a full year and meet performance targets.
“That way, our production lines don’t have to be constantly rebuilt,” Thao said.
Other firms are investing in training programs and partnerships with vocational schools to create a pipeline of qualified workers. The adoption of digital tools for workforce management and automation is also being explored to offset labor shortages in certain repetitive tasks. However, automation brings its own set of challenges and requires significant capital investment.
The Path Forward for Vietnam’s Workforce
The labor shortage serves as a critical signal for Vietnam’s economic development. It marks the end of the era where “cheap labor” alone could drive growth. To sustain its FDI boom and achieve its goal of becoming a high-income nation, Vietnam must successfully transition to a productivity-led growth model.
This transition involves a cultural shift in how work is valued. Workers are increasingly demanding not just fair wages, but better working conditions, work-life balance, and clear career progression. Companies that can offer these benefits, alongside technical training, are likely to fare better in the war for talent. The government’s role in improving vocational education, aligning curricula with industry needs, and strengthening social safety nets will be pivotal.
Ultimately, the skills shortage is a problem that Vietnam must solve to unlock its full potential. The country has successfully navigated previous economic transformations, such as the Doi Moi reforms of the late 1980s. By addressing the current labor market challenges through comprehensive reform and investment in human capital, Vietnam can turn this potential bottleneck into an opportunity to build a more resilient, innovative, and skilled workforce for the decades ahead.
Key Points
- Vietnam is experiencing a critical shortage of skilled labor, affecting major industrial hubs like Bac Ninh and Ho Chi Minh City.
- Companies are facing high turnover rates, with some reporting 40% of new hires quitting within three days.
- Factories are raising wages and offering significant sign-on bonuses to attract workers, driving up operational costs.
- The shortage extends beyond basic manufacturing to high-tech sectors like semiconductors, where there is a lack of specialized engineers.
- Worker expectations are shifting due to rising living costs, the availability of gig economy jobs, and a “reverse migration” to rural areas post-pandemic.
- The government and private sector are investing in training and upskilling programs to bridge the skills gap and support economic growth.
