Wave of layoffs expected to last through the year

About 5,200 out of nearly 9,560 businesses surveyed said they would cut more than 5% of their workforce between now and the end of 2023.

The forecast was stated by the Private Economic Development Research Board (Board IV, under the Prime Minister's Advisory Council for Administrative Procedure Reform) in a survey report on business difficulties and economic prospects at the end of 2023 sent to the Prime Minister.

Of the nearly 9,560 businesses surveyed at the end of April, 82% said they would reduce their scale, suspend or stop operations in the second half of the year. More than 7,300 businesses said they were still operating, but 71% of them planned to cut jobs (about 5,200 companies), most in the construction and industrial sectors. Most of the businesses cutting jobs are non-state-owned, and half of them operate in Ho Chi Minh City and Binh Duong . Businesses said the biggest challenge they are facing is orders.

According to Board IV, the wave of layoffs may continue in the last months of 2023 due to macro and internal difficulties of enterprises. Along with cutting staff, nearly 30% of enterprises said that their revenue will be halved, only about 2.5% of units tend to increase.

Assessing the difficulties partly due to internal factors, businesses suggested that the Government, in addition to pumping money into the economy, should increase investment to improve the quality of universityeducation in a modern direction. Vocational training needs to be flexible and linked to practice to improve the quality of human resources and increase labor productivity.

Businesses also want to reduce labor costs by reducing social insurance contributions, union dues or considering new personal income tax rates to match reality. At the end of April, eight business associations proposed reducing the rate of contributions to the Death Pension Fund from 22% to 16-20%, but raising the base contribution to 70-90% to match the actual income of workers.

Regarding access to loans, businesses recommend that the Government significantly reduce interest rates for loans for renting and buying social housing so that the majority of workers and laborers have the opportunity to access credit capital. During the process of workers borrowing capital, the State should consider a mechanism for businesses to participate in guaranteeing them instead of having to go through the complicated approval process under the "policy" category as it is now.

Committee IV also noted the desire for state agencies to limit inspections of enterprises and production and business establishments; only inspect no more than once a year, and not issue new documents that create additional tax, fee, and administrative procedure burdens for enterprises.

Pouyuen workers (HCMC) after work, June 2021. Photo: Nhu Quynh — Pouyuen workers (HCMC) after work, June 2021. Photo: *Nhu Quynh*

The survey results coincide with the forecast of the Ministry of Labor, War Invalids and Social Affairs in a report sent to the Government in mid-May, about a wave of large-scale labor cuts in the coming time if inflation and economic difficulties do not improve.

Thus, the labor cuts may last until the end of 2023 instead of until the end of June as many previously predicted. This situation has occurred since mid-2022, when a series of domestic enterprises lost orders at the end of the year because major markets such as the US, Europe, and Japan reduced consumer demand; raw material difficulties, and increased costs.

The layoffs mainly occurred in labor-intensive enterprises such as textiles, footwear, wood processing, seafood, electronic components processing, and mechanics. For example, from the beginning of the year to July 8 (expected), Pouyuen Company - the enterprise with the largest number of employees in Ho Chi Minh City will have two large-scale layoffs - more than 8,000 people. Most of the workers being laid off have an elementary education, are female, and more than 50% are over 40 years old. The reason given by this enterprise is "shrinking production, lack of orders".

In the first quarter of 2023 alone, more than 149,000 workers nationwide lost their jobs due to a decrease in business orders, an increase of nearly 13% compared to the previous quarter, most of whom were FDI enterprise workers in provinces with many industrial and processing zones such as Dong Nai, Binh Duong, Bac Ninh, and Bac Giang.

Hong Chieu

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