What can a college graduate expect in Vietnam's job market today? That depends on whether she has a family member employed by the state, according to a new study by Ian Coxhead
and AAE alumna Diep Phan
(Ph.D. '08). Nepotism is not only accepted, but it's just about the only way one can enter state employment, with its much higher wages and benefits.
In Vietnam, the state still employs a large proportion of the skilled labor force, even in sectors like manufacturing, financial services and retailing. State firms are favored for
credit from state-owned banks, leaving private firms, which have created most of the job growth in recent years, at a disadvantage. Because they can't borrow to invest in up-to-date equipment and technology, private firms also can't make good use of highly skilled workers. So they hire mainly at the lower end of the skill and wage scale.
"As long as this dichotomous labor market persists, Vietnam will see a deepening inequality of income and opportunity between those who have the right family connections and those who lack them," says Coxhead. "We've found a wage gap between state and non-state employees of 2-5 percent per year of education received. Given schooling costs, people who have no prospect of state employment have little incentive to invest in post-secondary education."
Photo by Dong Tam Le (AAE M.A. 2012)
Coxhead and Phan find that families with state-sector connections spend much more on their children's education, even after controlling for differences in household income, parents' education and other factors. "This unequal system does not bode well for long-run economic progress," says Coxhead.
What can be done to slow the trajectory toward increasing inequality? Many changes are needed, but educational reform would be a start. Currently, most college-level education is oriented toward providing "credentials" needed for state jobs rather than learning as such, and consequently is of low quality. Vietnam's own education ministry estimates than only 30% of college graduates acquire the skills they need for the job market.
Some efforts are underway to help the country modernize its curricula. In one such initiative, Wisconsin's AAE
contributed to a multi-year training project with the economics and business faculties of the Vietnam National University of Agriculture
(VNUA). From 2009-14, UW faculty visited VNUA to teach in a wide range of courses, and VNUA faculty reciprocated, visiting Madison for classroom observation and related experiences.
The first cohorts of students have now graduated from VNUA's program. Their career paths will be a first test of the capacity for change.
Read the published work here