VZCZCXRO7704
RR RUEHDT RUEHPB
DE RUEHHM #0691/01 3640725
ZNR UUUUU ZZH
R 300725Z DEC 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC 6198
INFO RUEHHI/AMEMBASSY HANOI 4088
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY 6441
RUCPDOC/USDOC WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000691 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV ELAB ETRD VM
SUBJECT: COMFORTS OF A COOLER LABOR MARKET OFFSET BY SKILLED STAFF 
SHORTAGE IN HCMC 
 
REF: HCMC 204 
 
HO CHI MIN 00000691  001.2 OF 002 
 
 
¶1. (SBU) Summary: At year's end, Ho Chi Minh City employers are 
grappling with two distinct human resources trends rising from 
the economic tumult in 2009.  The global economic downturn has 
given them the upper hand in negotiations with unskilled labor, 
resulting in flat blue collar wages and cuts in benefits.  In 
stark contrast, business professional salaries are up by 16 
percent as demand for managerial, sales and accounting skill 
continues to outstrip the meager supply that Vietnam's 
educational system can produce.  In this mix, the planned 
January 1, 2010 increase in the minimum wage worries many who 
see the move eroding one of Vietnam's main competitive 
advantages in the battle to attract investment -- low cost 
labor.  End Summary. 
 
 
 
Exports Down, Giving Employers the Upper Hand 
 
--------------------------------------------- 
 
¶2. (SBU) Vietnam's largest human resources consulting firm, 
Navigos Group, conducts salary surveys year-round and publishes 
an annual report benchmarking human resources HR and salary 
trends by occupation and industry.  Director of Navigos Group's 
HR Advisory Services, Winnie Lam told EconOff that current 
remuneration trends indicate a "massive" shift in the labor 
market dynamic from 2008 to 2009.  2008 saw hundreds of strikes 
as high inflation (28 percent in August) eroded workers standard 
of living.  At the same time, employers in some southern 
provinces were struggling to find enough workers to enable them 
to fill their orders.  In the last year, labor intensive 
export-oriented firms experienced an average 60 percent decline 
in orders, Lam said, forcing many to focus on reducing their 
labor costs.  Despite shrinking demand for exports, nominal 
wages for unskilled labor remained flat in 2009, buoyed by 
inflation, Vietnam's law on minimum wage, and the practice of 
informally indexing salaries to the national minimum wage, Lam 
explained.  She noted that in Vietnam employers often opt to cut 
employee benefits rather than adjust salary because salary 
adjustments require government approval.  As a result, average 
employee benefits have fallen by 50 percent since last year 
among the companies Navigos surveyed.  Cutting benefits but 
maintaining or even slightly increasing salaries during a period 
of financial uncertainty may seem counterintuitive, but this 
helps companies reduce payroll costs while staying in compliance 
with Vietnam's laws, she said. 
 
 
 
¶3. (SBU) Employers are now more judicious in hiring, Lam 
continued.  They allow positions to remain vacant longer, taking 
more time to find the right candidates.  For example, the 
average recruitment time has doubled; where finding a new hire 
used to take two weeks, now takes a month.  They also hold 
firmer on salary offers.  Whereas companies used to be willing 
to pay 120 percent of their initial salary offer for a candidate 
performing at 70 percent, they now hold the line on salaries and 
expect a "120 percent" candidate.  Companies are more willing to 
fire underperforming employees and reduce payroll through 
attrition.  In general employers are feeling less rushed, 
compared to 2008 when it was just about getting bodies in the 
door.   Unskilled workers read the news and understand the 
balance between supply and demand, Lam concluded, and have 
tempered their expectations in the short term. 
 
 
 
Meanwhile Skilled Labor Demand Continues to Outstrip Supply 
 
--------------------------------------------- -------------- 
 
¶4. (SBU) Laborers are being squeezed by current conditions, but 
HCMC's professionals are on the other side of the equation. 
Vietnamworks.com, the country's largest online job service, uses 
posting data to quantify demand for various skills.  While the 
white collar labor market was somewhat softer in 2009, demand 
for sales professionals picked up by 12.5 percent in the second 
quarter of 2009, followed by accounting/finance, engineering, 
administrative/clerical, and IT-software.   The biggest gap 
between labor supply and demand, however, remains in the top 
management category - and the mismatch is reflected in higher 
salaries.  According to Navigos survey, aggregate white collar 
salaries in 2009 actually increased by 16.5 percent and that 
increase has been driven by the 22 percent jump in top 
management salaries. 
 
 
HO CHI MIN 00000691  002.2 OF 002 
 
 
 
 
¶5. (SBU) Both new investment and localization strategies -- 
reducing costs by replacing expensive expat managers with 
Vietnamese professional staff -- drive increasing demand for 
local white collar workers, making it more and more difficult to 
find strong local candidates.  Ms. Pham Thi My Le, CEO of the HR 
firm Le and Associates, said the talent deficit is so acute that 
larger companies are replacing high-priced westerners with 
Filipinos, Singaporeans and Malaysians for key positions like 
marketing managers, sales managers, brand managers, copywriters, 
finance managers.  Vietnamworks.com confirmed they also see this 
trend toward the "local international hire" in their online 
postings.  They also noted the increase of overseas Vietnamese 
returning to Vietnam with needed skills and experience and, best 
of all for employers, are already in country so do not add 
additional relocation costs. 
 
 
 
"Social Justice" or "Blunting Vietnam's Competitive Edge"? 
 
--------------------------------------------- ------------- 
 
¶6. (SBU) From the first of the year 2010, Vietnam's minimum 
monthly wage will increase under a Ministry of Labor decree.  At 
state-run and domestic companies in HCMC, the minimum wage will 
rise to $54.50 US$ per month; at foreign-invested factories to 
$74.40 US$ per month.  While the increase in minimum wages 
reflects a GVN attempt to protect those near the bottom of the 
wage ladder, a number of the large, labor-intensive industries 
face extreme price pressure and argue that the wage increase 
will make it harder for them to continue to compete, effectively 
driving investors and jobs to other countries. 
 
 
 
Comment 
 
------- 
 
¶7. (SBU) Despite the shifting human resource dynamics many 
employers aren't feeling relief, the Consulate General included, 
because the in-demand skill-sets are the very human resources we 
need.  Although the HR survey results lag behind an uptick in 
economic activity, in part spurred by GVN's economic stimulus 
package, the overall trend still seems to hold.  While media 
reports indicate that demand for low-skilled labor is again 
gaining traction, particularly seasonal demand ahead of the Tet 
holiday, exporters are being affected differently and, in 
general, still remain cautious in hiring. 
 
 
 
¶8. (U) The cable was coordinated with Embassy Hanoi. 
FAIRFAX