In the next five years, 83 million jobs are predicted to be lost, 69 million new jobs are projected to be created. The labor market is undergoing drastic changes due to the impacts of new technology and social trends.
The Covid-19 pandemic has completely changed the shape of the global labor market. From the shift in labor supply and demand to working habits, such changes have happened dramatically in just a few years that the labor market is completely different from what it was pre-pandemic. Plus, the rapid progress in artificial intelligence has also altered the labor market. And many other trends that have transformed the labor market, including investments in green transition of businesses, broader application of ESG standards, supply chain localization, aging populations in developed and emerging markets, stricter regulations of data use and technology, etc.
All these trends will continue to alter the labor market in the future, which means we need to closely watch the evolution to anticipate what’s next and be prepared for new waves of change. That is imperative not only for employers but also for employees.
The future of labor demand
Around the world, the spring of 2020 saw an unprecedented sharp decline in the number of jobs. After that, most economies have recovered strongly, leading to some of the tightest labor markets in history. As a result, wages have elevated, the supply of labor has been short, and the number of job openings has been huge. These have characterized the labor market in 2022-2023.
In Vietnam, as the economic recovery rolls on, the labor market and employment have also witnessed positive changes. Moreover, the implementation of socio-economic recovery and development program under Resolution 11/NQ-CP with specific solutions, such as supporting workers to return to the labor market, and those currently employed in enterprises across the country, contributed to making the labor market robuster in 2022. Even in a more challenging economic background of 1H23, the number of employed workers increased by 902,000 people y-o-y, the unemployment rate in the working age was down 0.12 percentage point y-o-y.
According to HSBC’s forecasts, most labor markets around the world will see unemployment rates edging up in 2023-2024. However, if we look further, 83 million jobs are projected to be lost due to changes in sectoral labor demand, at the same time, 69 million new jobs are projected to be created in the next five years. That translates to a 2% reduction in employment, or 14 million jobs. The roles that are likely to see many jobs created include AI and machine learning specialist, sustainability specialist, business intelligence specialist, information security analyst, FinTech engineer, etc. The roles that are likely to see most jobs lost include security guard, cashier and ticket clerk, postal service clerk, bank teller, admin and exec secretary, etc.
The drivers of these changes are numerous. Most notably, the transition towards a greener, more sustainable future is expected to drive more jobs to be created. The shift of supply chains is also likely to add more jobs in the years to come.
Slowing global economic growth has also been the reason why many businesses expect to operate with fewer workers. The trend was reflected in Vietnam’s labor market in Q2/2023. The decline in orders has affected labor in the industrial sector, especially in the textile and garment industry, the wood processing industry and the manufacturing of electronic products, computers and optical products. The number of employees in these industries decreased compared to the previous quarter by 142,500, 16,900 and 30,200 people, respectively. The recovery of tourism led to a recovery in the service sector, and at the same time, the labor structure also witnessed a sharp shift from industrial and construction to the service sector. This sector accounted for 39.7% of Vietnam’s labor market, recording an increase of 349,000 people compared to the previous quarter.
The role of technologies
The soaring interest in AI in 2023 has shown that these technological advancements will play a big role in shaping the labor market in the years to come. Most notably, automation will affect in-person work, robots are expected to replace workers in factories, warehouses, on production lines or waiting tables. This trend was accelerated during the pandemic by such changes as cheaper and more available automated process, less human contact and so on. Automation could be a barrier to wage inflation spiral, when wages cross certain thresholds while the cost of replacing them with automated process is cheaper, businesses will go for automation. That means technological innovations could have an impact on labor supply-demand balance.
Many of us often consider technological progress through the lens of “robots replacing human” and jobs being lost. However, looking from a different perspective, new technologies also contribute to more jobs being created. It is expected to see more jobs created in big data analytics, climate change mitigation technology, environmental management technologies, encryption and cybersecurity, biotechnology, agritech, digital platforms and applications, etc. in the future. The question is whether businesses can hire the right workers with the right skills to meet these new needs. To address this question, many businesses have already had plans to train and upskill their workforce to ride the trend. For example, at HSBC, we have rolled out the Future Skills training program to equip the necessary skills for future employability, the Sustainability Academy to provide the necessary knowledge for sustainability-related jobs, etc. In 2022, HSBC Vietnam employees completed 1,841 sustainability-related training items, accounting for 9.6% of the bank’s total completed training items of the year. In particular, the Climate Pact training program with a focus on climate change has attracted the participation of both leaders and employees, including our CEO and me myself.
The future of working style
Once again, we need to remind ourselves of the Covid-19 as an important factor that has hugely changed the way we work during and post pandemic. During the most vigorous lockdowns, HSBC Vietnam managed to maintain its operations with more than 90% of employees working from home. When the pandemic subsided, we’ve continued our hybrid working model which enables our people to work from anywhere (as long as their roles allow) or at the office. We have the data security governance in place coupled with tools to empower our staff do their job remotely, which in turn helps them balance their work and personal life. More importantly, we want to affirm the trust in our employees as we believe that they can perform well anywhere.
Currently, many businesses are seeing a higher office re-entry rate. Particularly, in Asia, this office attendance rates have increased nearly to pre-pandemic levels while it’s down 20% on average in Europe and office re-entry rates in some U.S. cities have been more than -50%, with San Francisco reaching almost -60%.
That said, we continue to hear more firms, especially those in the tech sector, trying to bring workers back to the office. For example, Google has just updated its working policy, including being in the office three days a week in its performance evaluation criteria and suggesting that workers who are working remotely completely consider returning back to the office. Similarly, Apple also announced that the company expects employees to be in the office at least three days a week because they believes “face-to-face collaboration is necessary for the company’s culture and the future of the company”.
Undeniably, bringing workers back to the office offers certain benefits. A study published by Nature from Melanie Brucks & Jonathan Levav found that face-to-face meetings lead to a 15% more innovation. Engagement activities are also more effective when held in person rather than through online platforms.
However, there is also evidence showing that hybrid work model leads to better outcomes than forcing workers to work in a fixed place. A study from economists at Stanford University based on measuring productivity from within the firms found that hybrid working has no impact on overall output compared to working full time in the office. Research also indicates that employee satisfaction and talent retention can be improved positively because workers can save commuting time between work and home, completing both their work and personal to-do lists.
All of this shows that there is no one-size-fits-all approach for every business, every role, and every worker. Some jobs will be better done at home, without being affected by noisy surroundings such as making reports, analyzing data, etc. Some jobs require more people to discuss and contribute ideas like in event organizing. Some jobs require human contact, such as medical care roles. Some people choose to spend an hour to go to work, others rent an apartment closer to their workplace. So what will work for both employers and employees? Nick Bloom, Stanford University Professor of Economics, advises that companies figure out how many days employees genuinely need in the office and aim for that—no more and no less. Evaluate how long employees in each team need for all their weekly face-to-face meetings, trainings, presentations, mentoring events, lunches, and client meetings. The rest of the time they should be home.
Besides, flexibility in work is not only about the place where we work, it also comes in the form of flexible working hours. HSBC Group policy allows employees to discuss and arrange working hours with their line managers. In order to decide how much flexibility we can give to our people, the three key criteria for consideration include: how we can best meet customers’ needs, team engagement and individual preferences.
Conclusion
The above changes of the labor market will open up a lot of opportunities to increase productivity contributing to economic growth, enabling women to join the workforce, opening up opportunities for businesses to tap into the talent pool from all over the world and vice versa, workers also have more opportunities regardless of geographical location. More importantly, these trends also remind both employers and employees to be ready for future changes.
(*) Tran Thi Nguyet Oanh, Head of HR, HSBC Vietnam
