Educational Returns and Decent Work in Vietnam: Analyzing Firm Ownership Types in an Emerging Digital Economy

• In Event: Changes in in higher education and TVET

Proposal

Conventional labor market models have demonstrated the statistical significance of education in predicting earnings, occupational success, and, more recently, decent work outcomes. However, these models have mainly focused on wage earners in formal economies, potentially overlooking the complexities of developing countries with significant informal sectors. This study examines the relationship between education and decent work outcomes in Vietnam, a rapidly developing country with a large informal economy that is increasingly transitioning towards a digital society.
As Vietnam embraces digital transformation across various sectors, including education and the labor market, understanding the role of education in securing decent work becomes even more crucial. The digital economy is reshaping the skills demanded by employers, potentially altering the returns to education and the nature of decent work itself. This study aims to shed light on these dynamics in the context of Vietnam's evolving economic landscape.
Using data from the Vietnam Household Living Standards Survey (VHLSS) 2020, we investigate the returns to education in terms of four compensation-related decent work dimensions: hourly wages, official contracts, social insurance, and paid leave. These indicators not only reflect traditional measures of labor market success but also capture aspects of job quality that are particularly relevant in the context of an emerging digital economy, where work arrangements are becoming more diverse and potentially precarious.
We employ an instrumental variable approach, using the worker's mother's education level as an instrument for years of schooling to address the potential endogeneity issues. This approach helps mitigate bias from unobserved factors that might influence both education and labor market outcomes. The choice of maternal education as an instrument is based on its strong correlation with an individual's educational attainment while being unlikely to directly affect labor market outcomes except through its impact on education.
Our analysis reveals heterogeneous effects of educational returns across different firm ownership types, including individual, private, state-owned, and foreign investment. This categorization allows us to capture the diverse nature of Vietnam's economy, from traditional state-owned enterprises to emerging private sector companies at the forefront of digital innovation.
To account for Vietnam's rapid advances in education and the changing nature of work in a digital society, we control for cohort effects in our analysis. This allows us to distinguish between the impact of increased years of schooling and the general upward trend in educational attainment, as well as to capture potential shifts in the value of education as the economy becomes more digitalized.
We find that additional years of schooling generally lead to positive returns across all ownership types, but the magnitude and significance of these returns vary. State-owned enterprises show the highest returns to education for wages, possibly reflecting the continued importance of formal qualifications in this sector. Private firms demonstrate the strongest relationship between education and non-wage decent work indicators, suggesting that they may be more responsive to the diverse skill sets fostered by education in a digital age.
Interestingly, our results indicate that returns to education in foreign investment firms are particularly high for digital literacy skills, highlighting the importance of aligning educational curricula with the demands of an increasingly globalized and digitalized economy.
These findings contribute to our understanding of the school-to-work transition in Vietnam and highlight the importance of considering firm ownership when analyzing educational returns in the context of an emerging digital society. Our results have implications for education and labor market policies in Vietnam and potentially other developing countries undergoing similar digital transformations.
The study underscores the need for a nuanced approach to education policy that considers the varying demands of different sectors in a digitally transforming economy. For instance, while traditional educational pathways remain essential, there's an increasing need for digital skills and adaptability across all sectors. This suggests that educational institutions in Vietnam may need to evolve curricula and teaching methods to better prepare students for the changing nature of work in a digital society.
Moreover, the heterogeneous returns of education across firm types indicate that labor market policies may need to be tailored to address sector-specific challenges in ensuring decent work. For example, while state-owned enterprises show high returns to education in terms of wages, they may need to improve in providing non-wage aspects of decent work to remain competitive in attracting talent in the digital age.
By examining the link between education and decent work across different firm ownership types in the context of Vietnam's digital transformation, this study provides insights into the factors driving productivity and occupational selection in an evolving economy. These findings can inform policymakers and researchers about the complex relationship between education, decent work, and economic development in the context of a rapidly growing yet still developing digital economy.
In conclusion, as Vietnam continues its journey towards a digital society, understanding the changing dynamics of educational returns and decent work becomes increasingly important. This study contributes to this understanding, providing a foundation for future research and policy decisions aimed at ensuring that Vietnam's workforce is well-equipped to thrive in the digital age while enjoying the benefits of decent work.

Authors

• Seonkyung CHOI, Hiroshima University

• Ryuto Minami, Graduate School of International Cooperation Studies, Kobe University