World Development 138 (2021) 105205

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World Development
journal homepage: www.elsevier.com/locate/worlddev

Returns to education in Vietnam: A changing landscape

Seamus McGuinness a,b,c,⇑, Elish Kelly a,b,c, Pham Thi Thu Phuong d, Ha Thi Thu Thuy e,
Adele Whelan a,b
a
The Economic and Social Research Institute, Whitaker Square, Sir John Rogerson’s Quay, Dublin 2, Ireland
b
Department of Economics, Trinity College, Dublin, Ireland
c
IZA – Institute of Labor Economics, Bonn, Germany
d
Institute of Regional Sustainable Development, Vietnam Academy of Social Sciences, Viet Nam
e
National Centre for Socio-Economic Information and Forecast, Hanoi, Viet Nam

a r t i c l e i n f o a b s t r a c t

Article history: Using data from the Vietnam Household Living Standards Survey (VHLSS), this paper examines the
Accepted 11 September 2020 returns to education in Vietnam in 2002, 2008, 2010, 2012 and 2016, and how these returns have chan-
Available online 11 November 2020 ged over time. The returns to educations of men and women displayed a linear pattern in 2002, 2008 and
2010, with earnings rising with increased levels of education. The 2002 to 2010 period was one which
JEL Classification: saw particularly rapid increases in both the growth of educated labour supply and the returns to school-
I26 ing for both males and females. The results also suggest that there existed substantial excess demand for
J23
male and female graduate labour over the period. However, the situation changed radically during the
J24
O53
2010 to 2012 period, despite the economy continuing to grow, the supply of educated labour expanded
P20 at a much slower rate and the wage premiums to education declined. Consequently, during 2010 to 2012
any excess demand for educated labour was eliminated in both the male and female labour markets. The
Keywords: results show that the nature of labour demand altered rapidly during the 2010 to 2016 period, with the
Returns to education relative demand for educated labour slowing substantially, which suggests that the trajectory of the
Relative labour demand Vietnamese economy has not recently been driven by a growth in higher value-added firms demanding
Skill-biased technological change
ever higher quantities of educated labour. The periods 2012 to 2016 saw some stabilisation in the labour
Vietnam Household Living Standards Survey
market, with the returns to education remaining relatively unchanged, albeit at a much lower level com-
(VHLSS) data
Vietnam pared to 2010, and increases in the supply of educated workers to the labour market much lower than
before. The study raises important policy questions regarding the future direction of policy approaches
to both skills and FDI in Vietnam.
Ó 2020 Elsevier Ltd. All rights reserved.

1. Introduction grew in estimating the returns to education in countries transition-

The extensive research that has been undertaken on the returns
to education has established that, in line with the predictions of
the Becker (1964) human capital model, earnings rise with educa-
tional attainment and individuals earn a substantial premium from
gaining qualifications (see for example, Rumberger, 1980; Grubb,
1993; Psacharopoulos and Patrinos, 2004; Strauss and De la
Maisonneuve, 2009; Heckman et al., 2008; McGuinness et al.,
2009; Jensen, 2010). Most of the research in this area relates to
returns in developed countries. However, in the mid-1990s interest
⇑ Corresponding author at: The Economic and Social Research Institute, Whitaker
Square, Sir John Rogerson’s Quay, Dublin 2, Ireland.
E-mail addresses: seamus.mcguinness@esri.ie (S. McGuinness), elish.kelly@esri.
ie (E. Kelly), ptp110@gmail.com (T.T.P. Pham), hathuy212@gmail.com (T.T.T. Ha),
adele.whelan@esri.ie (A. Whelan).
ing from socialist systems to more liberal free market states.
The initial research in this area focused on Eastern European
countries, before and after the introduction of market reforms in
the late 1980 s (e.g., Rutkowski (1996) for Poland; Večerník
(1995) and Münich et al. (2005) for the Czech Republic; Orazem
and Vodopivec (1995, 1997) for Slovenia; and Brainerd (1998) for
Russia).1 In more recent times, increased attention has been paid
to estimating the returns to education in Asian countries that have
undergone significant economic reform. This includes China (see,
for example, Fang et al., 2012; and Gao and Smyth, 2015) and
Vietnam.2
1
See also Krueger and Pischke (1995) for Eastern Germany after unification with
West Germany.
2
Vietnamese studies are discussed seperately below.

https://doi.org/10.1016/j.worlddev.2020.105205
0305-750X/Ó 2020 Elsevier Ltd. All rights reserved.
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al.
More recently, based on a review of 705 studies spanning 1950
to 2014, it was found that every year of schooling undertaken
increases earnings by 8.8 per cent, and that the rate of return has
remained more or less constant over time and is similar for low,
middle and high income countries (Psacharopoulos and Patrinos,
2018). Barro and Lee (2013) estimate educational attainment for
146 countries to show that the average number of years of school-
ing is almost eight years. However, this varies across countries,
with it being eleven years for advanced countries and seven years
for developing countries. They also show that the proportion of the
population with tertiary education is 32 per cent in advanced
economies and 10 per cent in developing. This research by Barro
and Lee (2013) highlights that with development the average years
of schooling can be expected to increase, and also a higher propor-
tion of the population receiving tertiary level education.3
In relation to Vietnamese studies, Stroup and Hargrove (1969)
were one of the first to examine the returns to education. Focussing
specifically on rural South Vietnam, they found that an additional
year of schooling increased earnings by 17 per cent. Doan et al.
(2018) used Vietnamese Household Survey data to estimate the
returns to education between 1998 and 2014. They found that
the return to a year of schooling increased from 3.8 per cent in
1998 to 10.4 per cent in 2008 before falling back to 6 per cent in
2014.4 Older studies have generated a range of estimates. For exam-
ple, the estimated return to a year of education varied from 1.9 per
cent up to 7.5 per cent between 1993 and 1998 (Doan and Stevens,
2011; Nguyen, 2004; Liu, 2006; Pham and Reilly, 2007; Phan and
Coxhead, 2013).5 Moock et al. (2003), using earning data from the
1992–1993 Vietnam Living Standards Survey (VLSS), estimated the
average private rates of return to primary and university education
at 13 and 11 per cent, respectively, but only 4 to 5 per cent at sec-
ondary and vocational levels. Returns to higher education are
reported as higher for females: 12 per cent compared to 10 per cent
for males.
In relation to over time estimates, Gallup (2002) found that
returns to education in Vietnam increased from 1993 to 1998;
while Liu (2006), Pham and Reilly (2007), and Oostendrop and
Doan (2013) also reported increases for the period from 1998 to
2006. However, Phan and Coxhead (2013) found that returns to
education in Vietnam declined between the periods 1993 to 2002
and 2002 to 2008.
Vietnam is one of the only South East Asian emerging econo-
mies not to have gone into recession in the global economic down-
turn. The GDP growth rate has been remarkably steady at
approximately 6 per cent per annum over the past twenty years.
Regarding returns to education in Vietnam, the mixed findings that
have been derived to date are most likely due to the employment
of different estimation techniques across the various studies (e.g.,
Ordinary Least Squares versus Instrumental Variables) along with
differences in the defined sample and control variables included
in the estimated models.
This paper proposes to add to the literature in this area by esti-
mating the returns to education in Vietnam over four differing
timeframes from, 2002 to 2008, 2008 to 2010, 2010 to 2012, and
2012 to 2016. For the bulk of the first two periods, the Vietnamese
economy underwent significant changes and achieved high levels
of economic growth averaging at a rate of 6.7 per cent from 2002
3 ondary education. FDI was found to have a negative impact on ter-
This paper updates their earlier estimates of educational attainment from 107
countries (Barro and Lee, 2001).
4
These figures relate to the results from a standard OLS. The authors get slightly
different results after applying a Heckman selection correction.
5
Glewwe and Jacoby (2004) using panel data for the same time period (1993–
1998) find that school enrolment for children grew faster in households that
experienced greater increases in wealth. These findings were shown over and above
the effects for locality-specific factors such as changes in the education returns,
supply and quality of schools and the opportunity costs associated with schooling.
2
World Development 138 (2021) 105205
to 2010. The second period included an adjustment following the
global economic crises. However, with economic growth between
2010 and 2016, averaging at 6.4 per cent, only slowed marginally
(World Bank, 2019). Unlike previous studies, we map demand
and supply changes against each other to assess the extent to
which the labour market for workers with various levels of quali-
fications was in a state of imbalance and the degree to which the
patterns of relative demand altered following the global recession.
This study considers three aspects: (i) has the demand for labour
been continually skewed towards more educated workers over
time; (ii) the extent to which the global recession represents a
structural break in the relationship between education and earn-
ings; and (iii) the extent to which the pattern of results vary by
gender. Data from the Vietnamese Living Standards Survey (VLSS)
is used to conduct the analysis.
The remainder of the paper is structured as follows. Section 2
presents a summary of economic and labour market developments
in Vietnam between 2002 and 2016, along with some of its labour
market institutions. We focus specifically on those factors that may
have had an impact on the returns to education in Vietnam, such as
foreign direct investment (FDI) and minimum wage legislation. The
data, sample and methodologies used in the paper are discussed in
Section 3. The educational and earnings profile of Vietnamese
employees is presented in Section 4, while the economic returns
to education and results from our relative demand for labour anal-
ysis are presented in Sections 5 and 6 respectively. Finally, Section 7
concludes the paper.
2. Background context
2.1. Economic and labour market developments
Despite the negative effects of the 1997 to 1999 economic crisis,
as stated, in the succeeding years Vietnam has experienced strong
GDP growth rates averaging over 6 per cent annually (World Bank,
2019). Specifically, over the main timepoints we examine, from
2002 to 2010 and 2010 to 2016, the average growth rates were
6.7 per cent and 6.4 per cent respectively. The World Bank
upgraded Vietnam to a middle-income country in 2010. However,
it still remains a relatively poor country with incomes for the vast
majority, especially those in rural areas, being far below middle-
income levels.
The implementation of the 2001–2010 National Socio-
Economic Development Plan contributed to the economy’s perfor-
mance during the 2000s, as has FDI, upgraded infrastructure,
amended legal and policy systems, and increased participation in
the world economy. The latter grew considerably after Vietnam’s
accession to the World Trade Organization (WTO) in 2007, as did
FDI. Between 2007 and 2010, Vietnam attracted $123 billion in
FDI: this surpassed its previous successful period for FDI, which
was $20.8 billion between 2001 and 2005 (Quoc and Thi, 2018).
Vietnam has continued to attract significant FDI since 2010 (ILO
& ILSSA, 2018).
The presence of FDI in a country has been found to have a pos-
itive impact on human capital accumulation. In examining 16
Asian countries, for the period 1985 to 2010, Zhuang (2017) found
that an increase in FDI was associated with an increase in sec-
tiary education in the East Asian countries examined, unless the
FDI had came from OECD countries. While investment in education
has been a national policy priority for Vietnam, and it has now
achieved universal pre-school and primary education (Patrinos
et al., 2018), still only 23.7 per cent of its labour force had a voca-
tional or higher education qualification in 2017 (ILO & ILSSA, 2018).
Specifically, 9.5 per cent had a university or higher qualification,
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

3.2 per cent a college qualification, 5.4 per cent a middle-level
vocational schools qualification, and 3.5 per cent a primary voca-
tional schools qualification. Of the remaining labour force, 61.9
per cent were unskilled, 14.4 per cent had no certificate/degree,
and 2 per cent had short-term vocational training. While there
has been rapid expansion in the number of third-level colleges
and universities in Vietnam, and enrolments in both public and pri-
vate higher education institutions, these institutions are not neces-
sarily providing the courses that line up with the needs of the
labour market (Patrinos et al., 2018). As a result of this, skills mis-
matches is a growing issue in Vietnam, with the percentage of
workers with a university degree or higher qualification working
in secondary education level jobs growing from 15.4 per cent in
2012 to 22.2 per cent in 2017 (ILO & ILSSA, 2018). This issue
may, in turn, impact the wage return obtained by college and uni-
versity graduates.
Economic growth over the recent period in Vietnam, assisted by
international trade and FDI has stimulated the country’s labour
market. As can be seen from Table 1, labour force participation
increased between 2002 and 2016, from 72.5 per cent to 77.3 per
cent, with the male rate increasing at a slightly faster pace. Viet-
nam’s employment rate also accelerated over this period, increas-
ing from 71 per cent in 2002 to over 75 per cent in 2010, and it
remained stable at that rate in 2016. Again, male employment
increased at a slightly faster pace to females.
In general, unemployment tends to be low in Vietnam, fluctuat-
ing between 2 and 3 per cent over the 2002 to 2016 time period
(Table 1). There is, however, variation in the unemployment rate
by educational attainment. As can be seen from Table 2, which pre-
sents education specific unemployment rates between 2010 and
2016, unemployment tends to be highest among those with a pri-
mary, secondary or high school qualification, and lowest among
those with a vocational or college qualification and the unskilled.
Between 2010 and 2012, those with a university or higher qualifi-
cation also recorded a relatively low unemployment rate. The
unemployment rate for the most educated workers, with univer-
sity or college qualifications, increased between 2010 and 2016.
In contrast, the unemployment rates among some less qualified
workers (educated to primary, secondary and vocational level),
has been falling over the period.
These variations in unemployment rates by educational attain-
ment are likely due to the shift in the composition of economic
activity and employment away from agriculture towards services
and manufacturing that has taken place in Vietnam as the econ-
omy has become more open to trade and the inflow of foreign
investment. Table 3 shows the composition of employment by
industry in 2002, 2010 and 2016, separately for males and females.
Excluding agriculture, overall manufacturing, other services and
construction are the three largest sectors of employment. There
were increases in the percentage of both males and females
employed in manufacturing industries and commerce between
2002 and 2016, while the proportions employed fell in ‘other ser-
vices’ and mining and quarrying.
The change in the composition of employment over the period
will have been influenced by Vietnam’s National Socio-Economic
Development Plan. One of the objectives of this strategy has been
to increase industrialisation in Vietnam, and manufacturing and
other services are two of the priority industries in this regard
(Hung, 2004). Another factor influencing the large share of Viet-
namese employed in both manufacturing and other services is gov-
ernment strategies aimed at encouraging the movement of labour
from low-to-high productivity sectors, such as away from agricul-
ture, forestry and fishing and mining and quarrying to manufactur-
ing and other services. This compositional change in employment,
and consequential shift in the skill levels required by firms operat-
ing in the high productivity sectors, is likely to have had an impact
on the returns to education in Vietnam over the period. Based on
the education specific unemployment rates presented in Table 2,
it would appear that the industrial shift that has taken place in
Vietnam since 2010 has resulted in greater demand for individuals
with vocational qualifications, and also those with high school or
lower, than for individuals with a college, university or higher
qualification.
Given the role that FDI has played in Vietnam’s economic devel-
opment, Table 4 shows the composition of employment by owner-
ship type in 2002, 2010 and 2016. The proportion of males and
females employed in the Foreign sector has grown since 2002,
especially among females: 17.9 per cent were employed in this
sector in 2016, which was more than double the male percentage.
The largest share of male and female employment in 2016 was in

Table 1
Principal Changes in Vietnam’s Labour Market: 2002, 2010 and 2016 (%).

2002 2010 2016

Overall Male Female Overall Male Female Overall Male Female
Labour force participation rate 72.5 76.2 69.0 77.4 82.0 73.0 77.3 82.4 72.5
Employment rate 70.9 74.8 67.4 75.3 80.1 70.8 75.6 80.6 71.0
Unemployment rate 2.1 1.9 2.3 2.9 2.7 3.0 2.3 2.4 2.2

Source: Vietnam General Statistic Office and Institute of Labour Science and Social Affairs.

Table 2
Unemployment Rates by Educational Attainment: 2010–2016 (%).

2010 2011 2012 2013 2014 2015 2016

Unskilled 3.8 2.5 2.6 2.5 1.6 2.4 2.2
Primary 21.0 20.7 19.0 15.5 14.0 17.1 15.4
Secondary 27.4 25.8 24.2 21.9 21.1 20.0 19.5
High school 21.0 19.0 18.9 17.5 17.6 15.0 17.4
Vocational primary 4.4 5.8 6.8 8.4 3.1 3.3 3.0
Vocational secondary 5.3 5.6 6.8 6.7 3.1 2.0 1.4
Vocational college1 – – – – 1.5 1.0 0.9
College 2.7 4.4 5.4 6.6 7.7 8.8 9.7
University and above 6.1 7.6 10.1 14.0 16.5 16.3 17.5

Source: Labor Force Survey (LFS), (Vietnam General Statistic Office).

Note: 1 Vocational college information is not available in the official LFS reports until 2014.

3
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Table 3
Composition of non-farm employment by persons employed full-time by industries: 2002, 2010 and 2016 (%).

Male Male Male Female Female Female

2002 2010 2016 2002 2010 2016
Mining and Quarrying 3.9 1.9 1.7 1.6 1.0 0.5
Manufacturing 26.2 25.2 27.6 38.4 36.4 41.1
Electricity 1.7 1.8 1.9 0.5 0.9 0.8
Construction 21.6 22.0 21.4 3.8 3.2 2.6
Commerce 9.8 13.5 14.2 13.7 16.2 16.8
Transport 10.6 10.4 10.0 2.9 2.7 2.6
Finance 1.2 1.5 1.5 1.7 2.3 2.2
Other Services 25.0 23.7 21.7 37.4 37.3 33.4
100.0 100.0 100.0 100.0 100.0 100.0

Source: Calculated from Vietnam Household Living Standards Survey (VHLSS) 2002, 2010 and 2016.
Note: The Agricultural sector is excluded (see Section 4).

Table 4
Composition of Non-farm Employment by Persons Employed Full-time by Employment Sector: 2002, 2010 and 2016 (%).

Male Male Male Female Female Female

2002 2010 2016 2002 2010 2016
State 41.1 31.2 24.2 49.9 38.5 29.8
Private 54.6 62.8 67.9 42.1 48.6 51.9
Collective 1.4 0.8 0.7 1.3 0.8 0.4
Foreign 2.9 5.2 7.2 6.7 12.1 17.9

Source: Calculated from Vietnam Household Living Standards Survey (VHLSS) 2002, 2010 and 2016.

the private sector, and these shares have increased steadily since
2002. On the other hand, state and collective sector employment
have fallen between 2002 and 2016.6 The movement of employ-
ment out of the state and collective sectors into both the private
and foreign sectors between 2002 and 2016 reflects the macro shift
of Vietnam from a centrally planned to market economy.
Vietnam’s increased openness to international trade and indus-
trialisation has given rise towards rural to urban migration. Even
though the majority of the population still live in rural areas, the
population growth rate in urban areas is three times that of rural
areas because of this internal migration. Consequently, the annual
growth rate of the urban labour force is 2.5 per cent per year com-
pared to only 0.4 per cent for the rural labour force. As of 2017, the
urban labour force was 17.5 million and accounted for 32 per cent
of the total labour force (ILO & ILSSA, 2018). Many internal
migrants, however, find it hard to obtain jobs in the formal econ-
omy when they migrate to urban areas as such job opportunities
are limited (ILO & ILSSA, 2018). Consequently, many of them either
have to work in the informal economy or are unemployed. Their
unemployment rate is much higher than the national rate: it stood
at 9.3 per cent in 2016, which compares with 2.3 per cent for the
total population.
Due to increased international competition, and greater integra-
tion provided by free trade agreements, Vietnams’ productivity
levels have grown in recent years. However, they are still relatively
low. For example, using the constant 2011 Purchasing Power Pari-
ety (PPP) values, Vietnam’s labour productivity in 2016 gained US
$9,894. When comparing this to its neighboring Asian countries it
equalled approximately only 7 per cent of Singapore’s, 18 per cent
of Malaysia’s, 37 per cent of Thailand’s, 42 per cent of Indonesia’s,
57 per cent of the Philippines’, and 87 per cent of Lao’s. Strikingly,
the difference in labour productivity between Vietnam and its
neighboring countries continues to increase.7 This is because large
6
The collective sector is a typical sector under a centrally planned economy, which
was the case in Vietnam before ‘renovation’ (i.e., the move towards a more open
economy). The inclusion of this ownership type information in the analysis allows us
to explore how the shift from a centrally planned to a market economy affected
Vietnam’s labour market.
7 8
Data from the World Development Indicators (World Bank, 2017).
shares of its workforce are still employed in agriculture, forestry and
fishing, which are low productivity sectors. Even though there has
been a growth in employment in manufacturing industries in recent
years, and labour productivity is higher here than in agriculture, it
has not improved much in recent years as many of these industries
are concentrated in subsectors of the economy with relatively low
skilled labour that is used for processing and assembly work (ILO
& ILSSA, 2018).
Furthermore, even though three-quarters of the total number of
waged workers are in the non-state sector, these workers receive
lower wages and have lower productivity levels than those in the
state and FDI sectors. This is because many of these individuals
are in informal employment. Thus, even though most workers
can obtain a job easily, obtaining a quality job in Vietnam remains
challenging. This, in turn, will have implications for wages and eco-
nomic returns to education.
2.2. Vietnamese labour market institutions
Developments in Vietnam’s labour market is subject to both
Labour Codes and related institutions. Within the scope of this
paper, only institutions that directly impact the relationship
between wages and educational level are discussed. In particular,
we focus on their Labour Codes and minimum wage legislation.
The period 2002 to 2010 saw several emendations to Vietnam’s
Labor Codes8 in order to implement international regulations and
to better protect the rights of both employees and employers as Viet-
nam became a more open economy. Before this time period, the
1994 Labour Code saw the introduction of the minimum wage.
According to this Labour Code, a worker’s wage is determined by
negotiations between employer and employee representatives.
However, this negotiated wage is not allowed to be lower than the
minimum wage that is regulated on by the State, which is known
as the general minimum wage. According to the 1994 Labour Code,
the general minimum wage is the lowest payment to unskilled/un-
trained workers, fixed on the basis of cost of living to ensure that
employees performing the most elementary work in normal working
Specifically, in the years of 2002, 2006, and 2007.

4
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al.
conditions claim their basic work capacity. The National Wage Coun-
cil (NWC) of Vietnam was established in 2013 to replace the Ministry
of Labour as Vietnam’s minimum wage oversight body.9 The NWC is
tasked with addressing the concerns of minimum wage earners.
Each year they present their findings to the government, accompa-
nied by any recommended changes to the country’s minimum wage
rates.
Prior to 2006, the State had one general minimum wage (base
salary) that applied throughout the country. However, since 2006
(until 2012) there were FDI firm and non-FDI firm minimum wage
rates, which varied according to the region that the firm operated
in (Schmillen and Packard, 2016). The growth rate of the general
and regional minimum wages has been relatively high.10 For exam-
ple, over the past decade the general minimum wage grew at an
average annual rate of approximately 15 per cent. Furthermore,
the growth rate of minimum wages has been considerably higher
than the growth rate of productivity.
While it is regulated by law that the minimum wage be applied
to the whole labour market, in fact, it is mostly applied to the for-
mal sector including the state and private firms (Nguyen Viet
Cuong, 2010). However, even within the formal sector some
employees receive payments that are below the minimum wage.
Under weak enforcement measures, employers may choose to hire
a varied workforce, including some workers receiving the man-
dated minimum wage rate and others receiving less, either through
contracting or informally. Thus, this may impact on the returns to
education in Vietnam, depending on how employers implement
the minimum and general wage legislation, and also compliance
with the legislation. Between 2012 and 2017, Vietnam’s Labor
Codes have been further amended, supplemented or new codes
issued. The measures that have been introduced have the aim of
improving the legal environment for the labour market, and also
to assist the socio-economic development of the country. For
example, measures have been introduced to protect domestic
workers, to extend coverage of mandatory social insurance
schemes to cover workers with labour contracts of minimum one
full month, etc. (ILO & ILSSA, 2018).
3. Data, sample and measures
Data from the Vietnam Household Living Standards Survey
(VHLSS) are used for the analyses conducted in this paper. The
VHLSS is a nationally representative survey which was first imple-
mented in 1992. A second survey was carried out in 1998, and
since 2000 the survey has been conducted biennially. The VHLSS,
which is implemented by the General Statistics Office (GSO) of
Vietnam, is part of the living standards measurement study that
is carried out in more than 100 countries.11
VHLSS collects information on various aspects of the house-
holds’ living standards and individuals’ socio-economic status
including income, employment, education, and so on. A face-to-
9 conducted in this paper the VHLSS sample is restricted to include only those from 15
The NWC is made up of representatives from the Vietnam General Confederation
of Labor, the Vietnam Chamber of Commerce and Industry, the Vietnam Associations
of Small and Medium Enterprises and the Vietnam Cooperative Alliance. Each
committee member serves a five-year term.
10
The general minimum wage applies to the government officials and public
servants, people who receive salaries, allowances, and employees working in the
government bodies, public service organisations of the Communist Party and the
State, state-budget funded social-political organisations and agencies at the central,
provincial, district, and commune levels, and the armed forces. The regional minimum
wage applies to employees working in enterprises, cooperatives, farms, households,
individuals and institutions and organisations that use employees under labor
contract in accordance with the provisions of the Labor Code (Nguyen et al., 2017).
11
Assistance was received from the World Bank for the first few waves of the
survey.
5
World Development 138 (2021) 105205
face methodology is employed to carry out the survey and, conse-
quently, has a very high response rate (more than 90 per cent). The
micro data used for this study comprised of approximately 10,000
households in 2008, 2010, and 2012, and 30,000 households in
2002 and 2016. The data were weighted to ensure that the sample
was representative of the population.
In this paper, we focus on the working-age population, which
relates to those aged 15 to 65. Given that the focus of the study
is on identifying the returns to education and the demand for
labour, the sample consists of employees who were working more
than 14 hours per week.
Vietnam is primarily a rural country with a large share of all
workers in agriculture (57 per cent) and the majority of workers
(65 per cent) are self-employed. Given this, estimates here of the
returns to education are limited to the waged earners, thus exclud-
ing the self-employed sector, for which the VHLSS does not collect
complete earnings information, and also agricultural workers.
Those employed in the agricultural sector were excluded from
the analysis as their working arrangements tend to be more pre-
carious and, consequently, labour demand and educational returns
are less clear for this group of workers. After these data restric-
tions, the final unweighted employee samples include 11,090 indi-
viduals in 2002, 4509 in 2008, 4939 in 2010, 5162 in 2012, and
5598 in 2016.12 With these sample restrictions, the analysis relates
to approximately 28 per cent of all the workers: this must be borne
in mind when going through the results presented later in the
paper.13
For the educational returns analysis, our dependent variable is
the natural logarithm of hourly wages.14 The main independent
variables used were educational attainment, work experience, indus-
try,15 region,16 ownership type,17 marital status, and place of resi-
dence.18 Educational attainment is defined according to the
educational system in Vietnam, which is: i) no qualifications, ii) pri-
mary, iii) secondary, iv) high-school, v) vocational training, vi) col-
lege, vii) university, and viii) advanced degree. In this paper, due
to the declining numbers with basic qualifications, we merge the
lowest three levels into a category defined as ‘Secondary or below’.
In general, the structure of the education system in Vietnam,
which consists of public and non-public schools, colleges and uni-
12
In the years 2002 and 2016, data consisted of a boosted income household
samples. Specifically, the data sample in 2016 (2002) include 9,000 household
samples for income-expenditure and 36,000 (30,000) household samples for income.
In other years (2006–2012) there are 9000 household samples for income-
expenditure only. That is why the sample size in 2002 is higher than in other survey
years.The household size on average is about 3.8 – 4.
13
This 28 per cent figure is an average of all the waves of VHLSS data used in this
paper: 2002, 2008, 2010, 2012 and 2016. For the individual waves of data, the rate
varied between 21 and 33 per cent. This figure is slightly lower than that published in
the Labor Force Survey (LFS). For example, based on the LFS data, the percentage of
employees/waged earners has ranged between 30 and 41 per cent between 2007 and
2016. The reason for the discrepancy in the figures between the two sources is
because: (i) waged earners in LFS may include agricultural workers while our VHLSS
sample is refined to non-agricultural workers only; and (ii) the LFS includes all people
who are working regardless of their age and working hours, while for the analysis
to 65.
14
Hourly wage information is not available in the VHLSS, but it can be calculated
using the annual earnings and hours worked information that is captured in the
dataset. In this paper, the hourly wage formula that was used is: annual earnings / 12
months / (number of hours worked*22 days).
15
Classification of sector is based on the Vietnamese Standard Industrial Classifi-
cation 2007, which follows the International Standard Industrial Classification
(Version 4).
16
Vietnam is divided into 6 areas in the VHLSS data.
17
Ownership type consists of four categories: state, private, collective and foreign.
18
As a sensitivity check, we re-ran our analysis without the economic and
ownership type variables and there was no significant change in the estimates
associated with educational attainment.
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al.
versities, is broadly consistent with that found in other countries
(London, 2011). More specifically, the country’s education system
consists of two distinct components: (i) the academic system and
(ii) the technical and vocational system. The academic system con-
sists of 6 education levels: (1) pre-primary education;19 (2) primary
education;20 (3) lower-secondary education;21 (4) upper-secondary
education;22 (5) university;23 and (6) post graduate education.24
The technical and vocational system includes: (1) vocational train-
ing;25 (2) college-level technical, technological and specialist skills
training;26 (3) university-level technical, technological and specialist
skills training;27 and (4) post graduate training.28
Compared to other Asian economies, the Vocational Education
and Training (VET) sector in Vietnam is relatively new and is grow-
ing gradually over time. In 2006, there were a total of 861 VET
institutes in Vietnam: 262 VET schools and 599 VET centres.29 As
of 2017, there were a total of 1976 institutes: 395 VET colleges (20
per cent), 541 secondary VET schools (27 per cent), and 1040 VET
centres (52.6 per cent) (Viet, 2017). This is something that needs
to be kept in mind when the returns to vocational training results
are presented later in the paper.
4. Education and earnings profile of Vietnamese employees
The composition of employment by educational attainment for
males and females is reported in Table 5 for 2002, 2008, 2010,
2012 and 2016. We make use of a larger number of waves of data
to allow us to more easily pinpoint any major turning points in either
the educational composition of employment or the returns to
schooling.
In 2002, less than 15 per cent of male and female employees in
Vietnam had a university or advanced degree education. Instead,
the majority of the full-time employees in the workforce possessed
a high school or less qualification (69 per cent of males and 66 per
cent of females). However, the education profile of those in
employment has changed as the economy expanded over the
2002 to 2016 period. Specifically, the proportion of males with a
third-level qualification (i.e., university or higher) increased by
over 6 percentage points to approximately 20 per cent over the
period, with the bulk of the expansion taking place at a relatively
even pace between 2002 and 2012. There was little growth in
the proportion of male employees with third-level qualifications
between 2012 and 2016. There was much more rapid growth in
the share of females with university level qualifications which
increased from 11 per cent in 2002 to 25 per cent in 2016. In con-
trast to the male labour market, the proportion of females with
third-level education increased rapidly between 2012 and 2016.
19
This education is for children below 6 years of age and includes two types of
education; namely, preschool for children below 3 years of age and kindergarten for
children aged from 3 to 5.
20
The duration of this education level is 5 years (grade 1–5), and it is for pupils aged
from 6 to 10 years.
21
This education level lasts for 4 years (grade 6–9), and it is for pupils aged from 11
to 15 years.
22
This education level is for 3 years (grade 10–12), and is for pupils aged from 15 to
18 years.
23
This education level can take from 4 to 5 years, and is undertaken by those who
obtained an upper-secondary education certificate.
24
This education level is pursued by those who obtained a university degree.
25
This training lasts for 1 to 2 years (level 2 skilled workers).
26
The duration of this type of training depends on an individual’s previous
education and training qualifications.
27
The length of this type of training depends on an individual’s previous education
and training qualifications.
28
In addition, adults with a lower-secondary education certificate who desire to
learn professional or new skills can attend short-term vocational training, which lasts
less than a year.
29
Information obtained from the General Department of Vocational Training.
6
World Development 138 (2021) 105205
The share of vocationally qualified females increased from 17 to
22 per cent between 2002 and 2008, before declining to 12 per cent
in 2016, with much of this reduction occuring between 2012 and
2016. It is not clear what has driven the decline in the share of
vocationally qualified employees over the period, but possible
explanations include a decline in the dominance of vocationally
orientated sectors, demographic factors or continued educational
advancement among workers holding such qualifications. The
corollary of these developments is that the proportion of Viet-
namese employees with low levels of education (i.e., no qualifica-
tions, primary, secondary, and high school) has been falling. Within
both the male and female labour markets the share of employees
with such low levels of educational attainment, declined dramati-
cally between 2002 and 2016. For males, the share holding such
basic qualifications fell from 55 per cent in 2002 to 41 per cent
in 2012, with no notable decline observed between 2012 and
2016. With respect to females, the share of employees with the
lowest levels of schooling fell from 50 to 39 per cent between
2002 and 2010 before increasing to 40 per cent in 2012 and declin-
ing to 37 per cent by 2016. The share of vocationally qualified
males increased rapidy between 2002 and 2010 from 14 to 24
per cent, before falling back to 19 per cent in 2016.
Table 6 shows hourly wages by educational attainment in 2002,
2008, 2010, 2012 and 2016, separately for males and females.
Hourly wages are expressed in USD and have been deflated.30
Table 6 also shows how these wage levels have changed over time.31
As is seen in most countries, Vietnamese hourly earnings increase
with educational attainment. For example, in 2002 males (females)
with no qualifications earned 0.59 (0.49) USD per hour, rising to
1.90 (1.65) USD per hour for those with an advanced degree
education.
The pattern of change in hourly earnings growth could be gen-
erally characterised as increasing for more educated categories of
workers between 2002 and 2008, with the most substantial growth
for workers with a university qualification or an advanced degree.
While the hourly earnings of highly educated males continued to
grow strongly between 2008 and 2010, the data suggests that
the earnings of educated females and less educated males began
to fall back during that period. It would appear that earnings
growth among educated females began to decline somewhat
before that of males.
Within the male labour market, the hourly wages of workers
holding a university qualification increased by 16 per cent
between 2002 and 2008 and by 4 pecent between 2008 and
2010; the comparable figures for males with an advanced degree
were 10 and 48 per cent respectively. Thus while the hourly earn-
ings growth of males with a university qualification slowed
rapidly between 2008 and 2010, it accelarated rapidly for males
with an advanced degree. Between 2010 and 2012, the hourly
earnings of more educated males declined in a linear fashion, with
the earnings of males holding university and advanced qualifica-
tions falling by 12 and 28 per cent respectively. Between 2012
and 2016 the hourly earnings of all employees began to recover
somewhat, however, the pattern of growth appears to have
reversed relative to earlier periods. Specifically, the hourly earn-
ings growth of males with the three lowest levels of schooling
generally exceeded that of males holding university or advanced
qualifications.
30
GDP deflators from the World Bank were used: 41.7 for 2002; 84.0 for 2008; 100.0
for 2010; 134.5 for 2012; and 147.4 for 2016. The following exchange rates were
used: 2002: 1 USD = 15,280 VND; 2008: 1 USD = 16,302 VND; 2010: 1 USD = 18,613
VND; 2012: 1 USD = 20,828 VND; 2016: 1 USD = 21,935 VND.
31
The findings of Phan and Coxhead (2013) shows that while average real wages
rose from 1993 to 2008, most of this increase took place during the 1990s and an
obvious slowdown in wage growth was observed in the 2000s.
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Table 5
Composition of Non-farm Employment by Persons Employed Full-time by Education Level: 2002–2008, 2008–2010, 2010–2012, 2012–2016.

2002 2008 2010 2012 2016 2002–2008 2008–2010 2010–2012 2012–2016

% % % % % Percentage Point D Percentage Point D Percentage Point D Percentage Point D
Males:
Secondary or below 55.12 40.95 43.34 42.08 41.78 14.17 2.39 1.26 0.30
High school 14.21 13.59 10.74 10.94 12.8 0.62 2.85 0.20 1.86
Vocational training 14.44 24.76 23.76 22.33 19.45 10.32 1.00 1.43 2.88
College 2.46 4.22 4.07 4.93 5.84 1.76 0.15 0.86 0.91
University 13.16 15.77 16.87 18.37 18.64 2.61 1.10 1.50 0.27
Advanced degree 0.61 0.71 1.22 1.35 1.49 0.10 0.51 0.13 0.14
Females:
Secondary or below 49.9 35.85 38.8 40.86 36.79 14.05 2.95 2.06 4.07
High school 15.61 16.04 13.83 11.74 15.13 0.43 2.21 2.09 3.39
Vocational training 17.35 22.28 20.45 18.19 12.49 4.93 1.83 2.26 5.70
College 6.11 9.17 8.33 8.85 9.54 3.06 0.84 0.52 0.69
University 10.74 16.21 17.76 19.01 24.78 5.47 1.55 1.25 5.77
Advanced degree 0.29 0.45 0.83 1.35 1.27 0.16 0.38 0.52 0.08

Source: Calculations based on VHLSS data.

The pattern of growth for female earnings differed somewhat to
males. Hourly earnings growth was almost universal and positively
related to educational attainment between 2002 and 2008, how-
ever, the earnings of females holding both univeristy and advanced
degrees fell between 2008 and 2010. While the earnings of males
with advanced degrees grew rapidly between 2008 and 2010,
those of females holding these qualifications declined by over 30
per cent during the same period. As was the case for males, 2010
to 2012 saw declines in the hourly wages of the most educated
females, with the 2012 to 2016 period characterised by wage
growth across all levels of education. In line with the male pattern,
2012 and 2016 saw more rapid wage growth among workers with
the lowest levels of schooling; however, in contrast to males,
females with advanced degrees saw their hourly earnings increase
by 21 per cent over the period, helping to make up the the substan-
tial losses incurred during the 2008 to 2012.
Therefore, in summary, the pattern of increasing returns to edu-
cation observed during most of the 2002 to 2010 period seems to
have almost reversed in Vietnam, with the turning point appearing
to occur in 2008 for females and 2010 for males. While 2002 to
2008 can be easily characterised as one of increasing wage growth
for workers with higher levels of schooling, the hourly wages of
females (males) with univerity and advanced degrees fell between
2008 and 2012 (2010 and 2012) respectively. Between 2012 and
2016 while wages growth was positive for workers of all education
levels, the rate of growth was generally much higher among
employees with lower levels of schooling.
One factor likely to have helped preserve Vietnamese workers’
wages over the period, particularly for those with lower qualifica-
tions, is the increases that took place in the Vietnamese Minimum
Wage. The particularly strong wage growth for those with a college
and higher education qualification during the 2002 to 2010 period
points to an increasing demand for such workers as the economy
has grown between 2002 and 2010. The introduction of the FDI
and Non-FDI minimum wages in 2007 is likely to have played a
role in the observed wage increases over this time period as well.
This could also be potentially related to the relaxation of the com-
mand economy wage grid, which is discussed in more detail by
Phan and Coxhead (2013). However, the relative change in wages
during the later period of 2010 to 2012 is somewhat suprising, par-
ticularly given that the Vietnamese economy continued to grow
during those years in spite of low global growth. A fall in the
returns to education during periods of growth points to a number
of possibilities including an increase in employer power, whereby
firms are more fully able to capture rents from workers, or, alterna-
tively, a decline in productivity levels. We will discuss these issues
in more detail in the conclusion section (Section 7).
5. Returns to education in Vietnam 2002, 2008, 2010, 2012 and
2016
In this section of the paper, we apply the standard Mincer equa-
tion to explore the economic returns to education in Vietnam in
2002, 2008, 2010, 2012 and 2016. This equation can be specified
as follows:
J
X
ln W ij ¼ Q ij aj þ dxi þ cx2i þ k þ ei ð1Þ
j¼1
where W is hourly earnings in Vietnamese dongs (thousands);32 Q is
a set of dummy variables taking the value of 1 if a person holds a cer-
tain education qualification (e.g. vocational, college level, etc.) and 0
otherwise; X is a vector of personal characteristics (e.g. marital sta-
tus, industry, employment sector, region, urban–rural area, etc.); xi is
a proxy for potential work experience;33 k denotes a series of selec-
tion terms and ei is the error term. Separate male and female earn-
ings equations were estimated for both periods, the results for
which are presented in Tables 7 and 8 respectively. It should be
noted that our overall pattern of results hold when we include wide
ranging controls for sector, region, marital status etc.34
The male and female equations were augmented with a sample
selection control to account for the truncated nature of the labour
force data. The first reason relates to the fact that labour market
non-participants can be non-randomly distributed across charac-
teristics that are also correlated with earnings.35 We also account
for the possibility that our results are potentially influenced by a
32
1 USD = 21,570 VND (2015).
33
Our work experience variable is estimated (in years) as age minus 15 for those
with no qualifications, primary and secondary educational attainment; age minus 18
for those with high school; age minus 19 for those with vocational; age minus 20 for
those with college; age minus 22 for those with university and age minus 23 for those
with an advanced degree. The age of 15 is the minimum working age in Vietnam.
34
See Appendix Tables A1 and A2 for details.
35
We ran a two-step Heckman selection model for both male and female samples.
The first stage is a probit model predicting the likelihood of working among people
aged 15–65 of all employment statuses. The sample selection control is derived from
a stage one probit model of labour force participation (number of children in the
household were included as the additional variables in this stage one probit model).
Specifically, the number of children less than age 6 and the number of children aged 6
to 17. This control is then included in the earnings equation at the second stage to
account for the fact that not all people in the labour force participate in the labour
market, particularly those with lower levels of education. Thus, the omission of this
sample selection control would result in biased education return estimates.

7
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Table 6
Hourly Non-farm Wages of Males and Females Employed Full-time by Education Level in Vietnam: 2002, 2008, 2010, 2012 and 2016 (USD).

2002 2008 2010 2012 2016 Change Change Change Change

2002–2008 (%) 2008–2010 (%) 2010–2012 (%) 2012–2016 (%)
Males:
Secondary or below 0.59 0.62 0.62 0.62 0.76 6.73 1.06 0.24 22.78
High school 0.82 0.79 0.79 0.82 0.91 2.06 1.07 3.44 10.66
Vocational training 0.86 0.96 0.96 0.91 1.04 11.58 0.03 5.37 14.61
College 0.92 1.13 1.09 1.05 1.09 23.21 3.67 3.85 3.62
University 1.38 1.61 1.68 1.48 1.65 16.42 4.42 11.69 11.03
Advanced degree 1.90 2.10 3.10 2.23 2.36 10.14 47.97 28.00 5.88
Females:
Secondary or below 0.49 0.50 0.50 0.50 0.67 3.11 0.45 0.33 32.75
High school 0.68 0.67 0.61 0.64 0.80 9.52 7.74 4.44 24.57
Vocational training 0.79 0.76 0.80 0.76 0.92 0.69 5.77 5.17 21.10
College 0.93 1.14 0.94 0.97 1.01 1.70 17.54 2.72 4.71
University 1.18 1.41 1.37 1.22 1.24 15.63 3.18 11.20 2.19
Advanced degree 1.65 2.91 2.02 1.53 1.86 22.44 30.56 24.26 21.41

Source: Calculations based on VHLSS data (figures deflated).

Notes: GDP deflators from the World Bank were used: 41.7 for 2002; 84.0 for 2008; 100.0 for 2010; 134.5 for 2012; and 147.4 for 2016. The following exchange rates were
used: 2002: 1 USD = 15,280 VND; 2008: 1 USD = 16,302 VND; 2010: 1 USD = 18,613 VND; 2012: 1 USD = 20,828 VND; 2016: 1 USD = 21,935 VND.

second form truncation which relates to our decision to exclude agri-
cultural workers and those employed on a part-time basis from our
sample; we consequently estimate a second selection equation that
accounts for wage determining differences in observables between
our sample and this excluded component.36 Consequently, our mod-
els are augmented by two sample Heckman selection terms, Lambda
1 and Lambda 2. Lambda 1 accounts for differences in observables
relative to the inactive and Lambda 2 acccounts for differences in
the waged workers not included in our sample.
One factor that we were not able to control for in estimating our
earnings models, which is often included in female wage equa-
tions, is ‘time out of the labour market’, which can be particularly
important in explaining female wages (McGuinness et al., 2011).
However, in the case of Vietnam, female labor force participation
is less sensitive to child bearing and rearing, which results in
females spending very little time out of the labour market
(World Bank, 2012); thus, this factor is not as important when esti-
mating a Vietnamese female wage equation as it is for other
countries.
The male education return results (Table 7) display a linear pat-
tern, which is observed in most countries. Specifically, the returns
to education increase with higher levels of educational attainment.
This finding is consistent with previous studies on Vietnam (Liu,
2006; Pham and Reilly, 2007; Phan and Coxhead, 2013; and
Oostendrop and Doan, 2013). In 2002, males with a high school
education earned 24 per cent more compared to those with sec-
ondary level education or below. Relative to the reference category,
the 2002 returns for vocational, college, university and post-
graduate qualifications were 27, 55, 67 and 99 per cent,
respectively.37
There were some interesting changes in the returns to educa-
tion for males between 2002 and 2016. Consistent with the
descriptive evidence, between 2002 and 2008 the return to a uni-
versity degree increased by 12 percentage points to 79 per cent,
before increasing slightly between 2008 and 2010. The return to
a university degree fell by approximately 25 percentage points
between 2010 and 2012 before stabilising between 2012 and
36
We use the same specification for the first stage equation as that used for the
labour market participation models.
37
Please note, as Table 6 reports a log-level regression, the estimates included in the
text are in line with the table coefficients. However, when the outcome variable is log
transformed, it is natural to interpret the exponentiated regression coefficients. These
values included in the text are therefore estimates of the exponentiated regression
coefficients which can be calculated by using the following formula: exp(coefficient)-
1.
8
2016. By 2016, the return to a degree was some 9 percentage
points below the 2002 estimate. The rate of change in the return
to postgraduate qualifications was also remarkable; the premium
increased from 99 to 122 per cent between 2002 and 2010 before
falling back to around 95 per cent in both 2012 and 2016. Com-
pared to the reference category of secondary level education and
below, the wage premium to high school and vocational qualifica-
tions were 23 and 34 per cent respectively in 2010, however, by
2016 both returns had fallen by over 10 percentage points for both
levels of attainment. Relative to the reference category, the return
to a college level education increased from 55 to 61 per cent
between 2002 and 2010 before falling back to 36 per cent in
2016, with the majority of the decline in the premium occuring
between 2012 and 2016. The results emphasis a very dramatic
reversal in the returns to education between 2010 and 2012 for
males, a period during which the Vietnam economy continued to
grow strongly. With respect to the other covariates in the model,
there was no evidence of any substantial and sustained changes
in the returns to potential labour market experience.
Results from the female returns to education models for 2002,
2008, 2010, 2012 and 2016 are shown in Table 8. The results from
the female model reflect those found for males with respect to the
returns to education. Education premiums again follow a linear
pattern. The pattern with respect to university qualifications is
similar, if somewhat more sporadic, to that observed for males.
The returns to a degree did not change markedly between 2002
and 2008, however, it increased rapidly from 74 to 104 per cent
between 2008 and 2010 before falling to 86 and 82 per cent in
2010 and 2016 respectively. With respect to post-graduate qualifi-
cations, the wage premium increased from 124 to 141 per cent
between 2008 and 2010, before declining by 29 percentage points
between 2010 and 2012. The return to post-graduate degree sta-
bilised between 2012 and 2016. The returns to lower levels of
schooling also followed a pattern of substantial increases during
the 2002 to 2010 period, which were particularly rapid during
2008 to 2010, and substantial declines over the 2010 to 2016 per-
iod, with most of the adjustment occurring during 2010 to 2012.
The return to labour market experience fluctuated somewhat over
the period within the female labour market with no evidence of
any consistent trend.
Therefore, in summary, the evidence suggests that while the
returns to almost all levels of schooling increased rapidly for both
males and females between 2002 and 2010, the rates of return fell
back dramatically over the 2010 to 2012 period, with 2010 mark-
ing a clear turning point for most qualification levels across both
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Table 7
Returns to Education – Mincer Equations for Men: 2002, 2008, 2010, 2012 and 2016.

(1) (2) (3) (4) (5)

Men 2002 Men 2008 Men 2010 Men 2012 Men 2016
Education and experience controls:
Years worked 0.050*** 0.052*** 0.046*** 0.024*** 0.048***
(0.006) (0.009) (0.009) (0.009) (0.006)
Years worked squared 0.001*** 0.001*** 0.001*** 0.000** 0.001***
(0.000) (0.000) (0.000) (0.000) (0.000)
Education attainment (Ref: Secondary level or below):
High school 0.237*** 0.163*** 0.229*** 0.182*** 0.115***
(0.027) (0.053) (0.057) (0.044) (0.041)
Vocational training 0.272*** 0.282*** 0.336*** 0.161*** 0.198***
(0.030) (0.069) (0.053) (0.050) (0.053)
College 0.548*** 0.570*** 0.606*** 0.535*** 0.364***
(0.045) (0.082) (0.065) (0.049) (0.047)
University 0.669*** 0.794*** 0.812*** 0.564*** 0.580***
(0.031) (0.082) (0.071) (0.059) (0.058)
Graduate 0.989*** 1.084*** 1.223*** 0.955*** 0.948***
(0.093) (0.146) (0.141) (0.107) (0.097)
Selection Terms:
Lambda 1 0.058 0.035 0.205** 0.191** 0.026
(0.045) (0.077) (0.082) (0.082) (0.058)
Lambda 2 0.416*** 0.335 0.286 0.586*** 0.451**
(0.069) (0.245) (0.202) (0.157) (0.181)
Constant 1.756*** 1.870*** 2.048*** 2.487*** 2.394***
(0.074) (0.151) (0.119) (0.123) (0.100)
Observations 6,664 2,349 2,736 2,838 3,035
R-squared 0.259 0.319 0.321 0.316 0.296

Notes: Robust standard errors are reported in parentheses;

As this is a log-level regression, the precise estimates are calculated as exp(coefficient)-1.
*Significant at 10%; **Significant at 5%; ***Significant at 1%. Sample of non-farm and full-time employees.

labour markets. There is nothing to suggest that returns to educa-
tion recovered between 2012 and 2016, in fact, the wage premium
for some qualifications continued to decline over this period.
We have included a number of robustness tests within the
Appendix A. Tables A1 and A2 estimate the returns to education
using an expanded model specifcation that controls for a wide
range of factors including marital status, sector, region and owner-
ship type. While there were some marginal differences in the esti-
mated premiums associated with various levels of schooling
compared to those of our basic mincer equations, the trends in
terms of the educational wage premiums, and specifically the
declines that occurred from 2010 onwards, are completely
consistent.
Furthermore, in order to ensure that the trends in the returns to
education are universal in nature, and not driven by particular
areas, we have estimated separate models for the Mekong River
Delta and Red River Delta regions. The regions were chosen on
the basis of having workable data samples that would allow for
reliable estimation. Tables A2–A6 report the models for the Red
River Delta regions for females and males respectively. The results
reflect the national picture, with the rates of return to higher levels
of educational attainment declining between 2010 and 2012 after
experiencing sharp increases. However, in contrast to the national
picture, for some qualifications, the turning points differed from
2010. With respect to the Red River Delta for males, the falls in
the premium to university and post-graduate qualifications were
more similar to those observed nationally, however, the declines
in the returns to posgraduate qualifcations were more modest.
There was more substantial falls in the returns to college level
qualifications which declined by 42 percentage points between
2010 and 2012. For females, the declines were more substantial
across the three highest levels of educational attainment. Addition-
ally, the return to postgraduate qualifications began falling after
9
2008. The declines in returns in the Mekong River Delta were more
signficant than those observed nationally or in the Red River Delta.
For males, educational wage premiums increased sharply between
2002 and 2012 before falling off sharply thereafter to the point
where no wage premium was observed for high school or voca-
tional qualification by 2016. A similar, somewhat more extreme,
picture emerged for females with the returns to almost all qualifi-
cations falling to zero by 2016.
6. Relative demand for labour in Vietnam 2002–2010
It is obvious from our earlier analysis that a number of complex,
and sometimes seemingly contradictory developments have been
occurring within the Vietnamese labour market over recent years.
Between 2002 and 2016, the economy in Vietnam has continued to
grow and the share of educated labour in employment has
expanded with it. Consistent with the predictions of Skilled Bias
Technological Change (SBTC) whereby the growth in labour
demand is skewed towards educated workers, the period 2002–
2010 saw significant increases in the returns to higher levels of
education and training. However, despite continued economic
growth, the pattern of rising returns to higher levels of education
and training appeared to have largely reversed between 2010
and 2016. Furthermore, the unemployment rate among more edu-
cated workers has risen in more recent years which is also points
towards a reversal of previous patterns.
Given such developments, our estimated wage equations, or an
analysis of education specific unemployment rates, cannot tell us
anything about the extent to which the demand and supply of labour
were in balance in any period and, more specifically, the degree to
which the fundamental labour demand and supply relationship has
altered radically over time. Changes in rates of return point to move-
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Table 8
Returns to Education – Mincer Equations for Women: 2002, 2008, 2010, 2012 and 2016.

(1) (2) (3) (4) (5)

Women 2002 Women 2008 Women 2010 Women 2012 Women 2016
Education and experience controls:
Years worked 0.068*** 0.046*** 0.103*** 0.076*** 0.092***
(0.008) (0.014) (0.015) (0.012) (0.009)
Years worked squared 0.001*** 0.001** 0.002*** 0.002*** 0.002***
(0.000) (0.000) (0.000) (0.000) (0.000)
Education attainment (Ref: Secondary level or below):
High school 0.151*** 0.017 0.228*** 0.116** 0.177***
(0.034) (0.075) (0.065) (0.049) (0.040)
Vocational training 0.307*** 0.195* 0.525*** 0.398*** 0.396***
(0.048) (0.104) (0.081) (0.105) (0.067)
College 0.859*** 0.534*** 0.817*** 0.723*** 0.634***
(0.043) (0.114) (0.064) (0.050) (0.044)
University 0.764*** 0.744*** 1.037*** 0.860*** 0.819***
(0.055) (0.124) (0.091) (0.121) (0.082)
Graduate 1.190*** 1.237*** 1.409*** 1.119*** 1.155***
(0.135) (0.280) (0.178) (0.142) (0.114)
Selection Term:
Lambda 1 0.193*** 0.099 0.268* 0.329** 0.471***
(0.073) (0.106) (0.149) (0.135) (0.098)
Lambda 2 0.790*** 1.378*** 0.592*** 0.726*** 0.459**
(0.083) (0.335) (0.205) (0.260) (0.227)
Constant 1.408*** 1.829*** 1.140*** 1.581*** 1.631***
(0.109) (0.212) (0.201) (0.216) (0.151)
Observations 4,417 1,738 2,013 2,176 2,403
R-squared 0.253 0.369 0.317 0.327 0.303

Notes: Robust standard errors are reported in parentheses.

As this is a log-level regression, the precise estimates are calculated as exp(coefficient)-1.
*Significant at 10%; **Significant at 5%; ***Significant at 1%. Sample of non-farm and full-time employees.

ments in demand at the intensive margin, while unemployment rates
indicate changes at the extensive margin. Neither indicator can suffi-
cient indentify changes in underlying equilibrium relationships over
time. To address this question, we estimate the change in the
demand for educated labour relative to the lowest qualifications ref-
erence category. This work is undertaken using the methodology
developed by Katz and Autor (1999), which has been applied in a
number of studies (e.g., Harkness and Machin, 1999; Liu, 2006;
McGuinness, et al., 2009) to identify the direction and strength of rel-
ative labour demand. The approach is based on a number of strong
assumptions that are centered on a constant elasticity of demand;
therefore, the approach is not flawless. However, it still provides a
good picture of the general nature of relative labour demand.
The relative demand for labour between 2002, 2008, 2010, 2012
and 2016 is estimated using Eq. (2):
DW ij

DSij
 market and graduates in the female labour market. During the per-
DD W ij
þ r1 Sij
¼ 1
ð2Þ
D r
where W is the wage return to a particular education level over the
lowest qualification base case, which come from Tables 7 and 8; i
and j denote the separate education groups used in the calculation;
S represents the relative labour market shares; and r is the
assumed rate at which employers can substitute between the differ-
ent types of labour. Following other authors, such as McGuinness
et al. (2009), we assume that r will take the value of 1.4. However,
research shows that relative labour demand analyses are generally
not responsive to different values of r (Harkness and Machin,
1999).38
In terms of the results, a positive value indicates that the
relative demand for skilled labour is growing faster than relative
supply, a negative value that relative supply of skilled labour is
growing more rapidly, and the greater the imbalance between rel-
ative demand and relative supply the further the value will be from
zero.
Results from the computation of Eq. (2) are presented in Table 9,
which reports not only relative wage and supply changes for the
periods 2002–2008, 2008–2010, 2010–2012 and 2012–2016 but
also the relative yearly demand for each education qualification.39
The results show that despite rapid increases in the relative supply
of educated workers, the demand for all categories of educated
labour grew faster than that of unskilled labour in the period from
2002 to 2008. The level of relative demand was particularly high
for mid-skilled labour (vocational and college) in the male labour
iod 2008 to 2010 the pattern of higher relative demand for educated
labour continued in the female labour market, with relative demand
particularly high for graduates and postgraduates. The 2008 and
2010 period the male labour market saw the relative demand for
skilled and unskilled workers come more into balance, with the
exception of the labour market for postgraduate workers for which
relative demand levels continued to be exceptionally high.
Consistent with our more descriptive analysis, the 2010 to 2012
period marked a substantial turning point in the relative demand
for more educated workers. During 2010 to 2012 the share of edu-
cated males in employment continued to grow more rapidly than
that of unskilled workers, while in the female market supply

38
As a robustness check we re-estimated our results, from Table 9, with differing
values of r. Specifically, for 2002, 2010 and 2012 we used values between 0.7 and 2.8
(half and double the value of 1.4 respectively) to confirm that the relative labour
demand was not responsive to different values of r: our results, as reported, did not
change.
39
For instance, take the reported figures for males 2002 to 2008 for High School \
Secondary level and below. Relative supply is calculated as the % change in the high
school to secondary or below employment share ratios in both years taken from
Table 4 i.e. ((13.59/40.95)/(14.21/55.12))*100=28.73. Relative demand is taken as the
high school wage premiums for both periods in Table 6 i.e. (23.7–16.3)= 7.4.

10
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al.
growth was limited to workers with postgraduate qualifications. At
the same time as the relative supply of educated labour continued
to expand, albeit at a slower rate than previously, the wage pre-
mium associated with various levels of schooling fell substantially
pointing to a shift away from unmet demand for educated workers.
The one exception to the trend was for females with postgraduate
qualifications, whose relative demand continued to be positive
during 2010 to 2012 despite continued increases in relative supply.
Nevertheless, the 2010 to 2012 period appears to have marked a
clear turning point in the demand for educated workers in
Vietnam.
Finally, the 2012 to 2016 period is best characterised as one of
stabilisation in the male labour market, whereby there has been a
significant slowdown in the relative supply of more educated
workers and a stabilisation of returns. The wage premiums for edu-
cated workers changed little over the period 2012 to 2016, despite
having experienced large declines in the previous period. Within
the female labour market, the change in the wage premium for
graduates was slightly positive from 2012 to 2016, despite signifi-
cant increases in relative supply, indicating a continued stronger
demand for graduates relative to unskilled workers. However, as
was the case within the male labour market, the female graduate
wage premium remained substantially below its 2010 peak.
Thus, we can summarise the situation as one whereby the 2002
to 2010 period saw a rapid shift in the relative demand away from
unskilled towards skilled labour, during which the rapidly expand-
ing supply of workers with higher levels of schooling was unable to
meet labour market requirements. The pattern quickly reversed
itself during 2010 to 2012, which saw a movement of demand
away from educated labour despite a significant slowdown in rel-
ative supply. For males, the period 2012 to 2016 is best charac-
terised as one of stabilisation during which the labour market for
graduate labour appears to have moved closer to equilibrium dur-
ing a period of low growth in both the education wage premia and
relative supply. During 2012 to 2016, the female labour market has
continued to absorb increased flows in the relative supply of grad-
uates without incuring any further large falls in the graduate wage
premium.
7. Conclusion
Using data from the VHLSS, this paper examined the returns to
education in Vietnam over a number of different time frames from
2002 to 2016. The paper also assesses how the change in demand
for educated labour relative to those with secondary level qualifica-
tions or below changed over time. In Vietnam, the GDP growth rate
has been remarkably steady at approximately 6 per cent per annum
over the past twenty years. For the bulk of the period from 2002 to
2010 the Vietnamese economy underwent significant changes and
achieved high levels of economic growth averaging at a rate of 6.7
per cent. The latter periods included an adjustment following the
global economic crises. However, economic growth, averaging at
6.4 per cent, only slowed marginally (World Bank, 2019).
The male and female education returns displayed a linear pat-
tern in 2002, 2008 and 2010, with earnings rising with increased
levels of education. The 2002 to 2010 period was one which saw
particularly rapid increases in both the growth of educated labour
supply and the returns to schooling for both males and females.
The results also suggest that there existed substantial excess
demand for male and female graduate labour over the period.
However, the situation changed radically during the 2010 to
2012 period, despite the economy continuting to grow, the supply
of educated labour expanded at a much slower rate and the wage
premiums to education declined. Consequently, during 2010 to
2012 any excess demand for educated labour was eliminated in
both the male and female labour markets. The periods 2012 to
11
World Development 138 (2021) 105205
2016 saw some stabilisation in the labour market, with the returns
to education remaining relatively unchanged, albeit at a much
lower level compared to 2010, and increases in the supply of edu-
cated workers to the labour market much lower than before. So
what are the potential explanations for this apparent shift in cir-
cumstances and, in particular, why have we not observed any sub-
stantial improvements in the returns to education during 2012 to
2016?
An obvious explanation for the lower relative demand for edu-
cated labour is an increase in the dominance of lower value-added
firms within the economy. China is slowly losing its cost advantage
and many companies are looking to diversify their operations by
expanding into other Asian countries. Such developments may play
a favorable role allowing Vietnam to sustain its high growth rate.
However, it does have implications for returns to education and
the incentive for individuals to invest in their human capital. Many
Chinese companies have already chosen to relocate their factories
(in particular, labour-intensive manufacturing firms) across the
border into Vietnam (Yang, 2016). The draw of low value-added
production is evident, in terms of the cost and availability of
labour. However, growth based on the accumulation of factor
inputs will eventually experience diminishing returns and, as such,
does not constitute a sustainable strategy for continued growth.
Given Vietnam’s stage of development, a transition to a
productivity-driven growth trajectory is vital for past rates of eco-
nomic growth to be sustained into the future.
The decline in returns to schooling over the 2010 to 2016 period
should be a particular concern for policy as the trend will tend to
lower incentives among individuals to invest in education. There
is a risk that the economy could move towards a low-skilled equi-
librium whereby lower returns create lower investment in human
capital, which is more likely to attract inflows of lower skilled
employment, further lowering the returns to education and,
thereby, giving rise to a ‘low skills trap’ situation. This, in turn,
could give rise to a ‘middle income trap’, which is where a coun-
try’s economic growth is stalled and it is unable to move to the
next level of economic development partly because of inadeque-
cies in high levels of human capital, either in terms of supply short-
ages, or what is being supplied not matching the labour market
needs of more higher wage activities.
As mentioned, Vietnam has undertaken significant investment
in its education system, and there has been rapid expansion in
the number of public and private third-level institutions, along
with enrollments. Nevertheless, less than a quarter (23.7 per cent)
of its labour force had a vocational or higher education qualifica-
tion in 2017 (ILO & ILSSA, 2018). In addition, concern has been
expressed that these institutions are not necessarily providing
courses that line up with the needs of the labour market (ILO &
ILSSA, 2018; Patrinos et al., 2018). As a result, skills mismatches
is a growing issue in Vietnam, with the percentage of workers with
a university degree or higher qualification working in secondary
education level jobs growing from 15.4 per cent in 2012 to 22.2
per cent in 2017 (ILO & ILSSA, 2018). Thus, this could be part of
the reason for the decline in the returns to higher levels of educa-
tion in Vietnam between 2010/2012 and 2016. If so, it is important
that higher education institutions are incentivised to improve the
quality and the relevance of the course being provided to ensure
that they match with labour market needs and to enable Vietnam
to move to the next level of economic development and focus on
high-end economic activity.
It is important that policy makers do their utmost to ensure the
continued flow of high-quality FDI and investment so as to main-
tain the growth of high-quality employment, thereby facilitating
increasing labour market returns and incentives to invest in educa-
tion, along with continued economic growth and development
within the country. Vietnam could also consider examining the
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Table 9
Annual Average Relative Demand40

2002–2008 Wage change (%) Supply change (%) Relative demand per annum
Men:
High school/ Secondary or below 7.40 28.73 3.06
Vocational/ Secondary or below 1.00 130.80 22.03
College/ Secondary or below 2.20 130.90 22.33
University/ Secondary or below 12.50 61.30 13.13
Graduate/ Secondary or below 9.50 56.67 11.66
Women:
High school/ Secondary or below 13.40 43.03 4.04
Vocational/ Secondary or below 11.20 78.74 10.51
College/ Secondary or below –32.50 108.90 10.57
University/ Secondary or below 2.00 110.08 17.88
Graduate/ Secondary or below 4.70 115.99 20.43

2008–2010 Wage Change (%) Supply Change (%) Relative demand per annum
Men:
High school/ Secondary or below 6.60 25.33 8.04
Vocational/ Secondary or below 5.40 9.33 0.88
College/ Secondary or below 3.60 8.87 1.91
University/ Secondary or below 1.80 1.08 1.80
Graduate/ Secondary or below 13.90 62.36 40.91
Women:
High school/ Secondary or below 21.10 20.33 4.61
Vocational/ Secondary or below 33.00 15.19 15.51
College/ Secondary or below 28.30 16.07 11.78
University/ Secondary or below 29.30 1.23 21.13
Graduate/ Secondary or below 17.20 70.42 47.25

2010–2012 Wage change (%) Supply change (%) Relative demand per annum
Men:
High school/ Secondary or below 4.70 4.91 0.84
Vocational/ Secondary or below 17.50 3.20 13.85
College/ Secondary or below 7.10 24.76 7.41
University/ Secondary or below 24.80 12.15 11.29
Graduate/ Secondary or below 26.80 13.97 11.78
Women:
High school/ Secondary or below 11.20 19.39 17.54
Vocational/ Secondary or below 12.70 15.54 16.66
College/ Secondary or below 9.40 0.89 6.14
University/ Secondary or below 17.70 1.64 11.57
Graduate/ Secondary or below 29.00 54.45 6.92

2012–2016 Wage Change (%) Supply Change (%) Relative demand per annum
Men:
High school/ Secondary or below 6.70 17.84 2.11
Vocational/ Secondary or below 3.70 12.27 1.77
College/ Secondary or below 17.10 19.31 1.16
University/ Secondary or below 1.60 2.20 1.11
Graduate/ Secondary or below 0.70 11.16 2.54
Women:
High school/ Secondary or below 6.10 43.13 12.92
Vocational/ Secondary or below 0.20 –23.74 6.01
College/ Secondary or below 8.90 19.72 1.81
University/ Secondary or below 4.10 44.77 9.76
Graduate/ Secondary or below 3.60 4.48 2.38

Source: Own calculations based on the VHLSS 2002, 2008, 2010, 2012, and 2016.
Sample of non-farm and full-time employees.

human capital focussed economic growth strategy that Singapore
pursed to see if such an approach could be adopted to enable it
to continue its economic development. Specifically, Singapore
achieved its structural transformation by focussing on upgrading
the skills of its workforce and emphasising higher value-added
economic activities. As part of this strategy, it incentivised
companies to invest in the human capital development of their
workers.40 This enabled Singapore to avoid low skills and middle
40
It should be noted that changes in the supply composition will incorporate a
number of factors, principally rising educational attainment and a reduction in the
agricultural sector, but also the impacts of older workers retiring out of the labour
market and changes in the labour force participation rate.
income traps, and its GDP per capita grew from USD $5,041 when
it transitioned to independence in 1965 to USD $60,742 in 2011
(Saner and Yiu, 2014).41
Given the development experiences of other Asian countries, it
is reasonable to expect a shift in labour demand from predomi-
nantly manual jobs, towards more skill-intensive jobs that will
require increased skills and competencies. For example, Vietnam’s
Law on High Technology strategy (originally passed in 2009)
specifies a list of high-tech products that are given investment
priority and are entitled to benefit from corporate tax rates of
41
2011 PPP US dollars.

12
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al.
10 per cent for the first 15 years of operation (compared to the
normal rate of 22 per cent). This has led to multinational high-
tech companies such as Apple, Bosch, Intel, LG Electronics, Micro-
soft, Nokia and Samsung setting up operations in Vietnam. This,
in turn, is contributing to a positive shift in the country’s occupa-
tional structure. Specifically, the proportion of manual workers is
declining from 40.8 per cent in 2013 to 37.5 per cent in 2017,
while there is an increase in the occupations requiring technical
professions (ILO & ILSSA, 2018). In addition, expansion in infras-
tructure will need to be complemented by significant improve-
ments in efficiency and quality to close growing infrastructure
gaps that constrain competitiveness. It is important that policy
in Vietnam refocuses toward higher value-added activtities in
order to sustain returns to human capital, which is a vital aspect
in ensuring that the country has sufficient capacity for continued
growth and development.
CRediT authorship contribution statement
Seamus McGuinness: Funding acquisition, Conceptualization,
Methodology, Supervision. Elish Kelly: Supervision, Data curation,
Software, Formal analysis, Investigation. Pham Thi Thu Phuong:
13
World Development 138 (2021) 105205
Data curation, Software, Formal analysis, Investigation. Ha Thi Thu
Thuy: Data curation, Software, Formal analysis, Investigation. Adele
Whelan: Data curation, Software, Formal analysis, Investigation.
Declaration of Competing Interest
The authors declare that they have no known competing finan-
cial interests or personal relationships that could have appeared
to influence the work reported in this paper.
Acknowledgements
This is a joint research between the Economic and Social
Research Institute (ESRI), Ireland and the National Centre for
Socio-Economic Information and Forecast (NCIF), Ministry of Plan-
ning and Investment, Vietnam. We would like to thank Irish Aid,
Department of Foreign Affairs, Ireland for funding this joint
research (Grant ID: CIRL00761), and colleagues from both research
institutes for their contributions to the research work. Sincere
thanks also to three anonymous referees for their insightful and
helpful comments on an earlier draft of this paper.
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Appendix A

Table A1
Returns to Education – Mincer Equations with additional controls for Men: 2002, 2008, 2010, 2012 and 2016.

(1) (2) (3) (4) (5)

Men 2002 Men 2008 Men 2010 Men 2012 Men 2016
Education and experience controls:
Years worked 0.045*** 0.056*** 0.053*** 0.030*** 0.048***
(0.006) (0.009) (0.009) (0.009) (0.007)
Years worked squared 0.001*** 0.001*** 0.001*** 0.001*** 0.001***
(0.000) (0.000) (0.000) (0.000) (0.000)
Education attainment (Ref: Secondary level or below):
High school 0.158*** 0.149*** 0.163*** 0.154*** 0.114***
(0.026) (0.052) (0.058) (0.045) (0.041)
Vocational training 0.238*** 0.314*** 0.322*** 0.193*** 0.212***
(0.029) (0.071) (0.054) (0.054) (0.060)
College 0.591*** 0.683*** 0.667*** 0.581*** 0.368***
(0.049) (0.088) (0.068) (0.051) (0.048)
University 0.615*** 0.821*** 0.834*** 0.614*** 0.623***
(0.032) (0.086) (0.074) (0.065) (0.066)
Graduate 1.010*** 1.130*** 1.253*** 1.028*** 0.991***
(0.092) (0.149) (0.127) (0.105) (0.099)
Marital status (Ref: Single):
Married 0.105*** 0.054 0.094*** 0.065** 0.024
(0.025) (0.038) (0.036) (0.031) (0.034)
Widowed 0.131 0.135 0.191 0.085 0.145
(0.116) (0.092) (0.117) (0.116) (0.110)
Divorced 0.040 0.072 0.143 0.022 0.026
(0.087) (0.077) (0.168) (0.086) (0.053)
Separated 0.002 0.101 0.079 0.071 0.029
(0.147) (0.121) (0.157) (0.121) (0.076)
Economic industries (Ref: Manufacturing):
Mining and quarrying 0.155*** 0.432*** 0.277*** 0.168** 0.190***
(0.038) (0.082) (0.088) (0.068) (0.057)
Electricity 0.106** 0.157** 0.056 0.022 0.104*
(0.051) (0.077) (0.080) (0.058) (0.054)
Construction 0.011 0.161*** 0.069* 0.049* 0.033
(0.021) (0.030) (0.036) (0.025) (0.025)
Commerce 0.007 0.076* 0.037 0.028 0.041
(0.031) (0.043) (0.040) (0.030) (0.029)
Transport 0.123*** 0.140*** 0.070 0.086** 0.080**
(0.027) (0.041) (0.043) (0.040) (0.037)
Finance 0.053 0.188 0.147 0.400*** 0.212**
(0.073) (0.115) (0.114) (0.111) (0.085)
Other Services 0.180*** 0.078* 0.253*** 0.102*** 0.033
(0.024) (0.041) (0.046) (0.039) (0.033)
Location (Ref: Rural):
Urban 0.147*** 0.070*** 0.131*** 0.048** 0.034*
(0.016) (0.025) (0.024) (0.019) (0.019)
Sector types (Ref: Private):
State 0.186*** 0.066* 0.065 0.010 0.040
(0.022) (0.037) (0.040) (0.036) (0.030)
Collective 0.128* 0.087 0.178 0.454*** 0.052
(0.071) (0.102) (0.124) (0.116) (0.163)
Foreign 0.391*** 0.221*** 0.183*** 0.124*** 0.172***
(0.045) (0.047) (0.058) (0.040) (0.031)
Location (Ref: Red river Delta):
Northern Midland and Mountainous 0.134*** 0.132*** 0.139*** 0.127*** 0.055*
(0.027) (0.043) (0.041) (0.038) (0.031)
North Central & South Central Coast 0.006 0.064* 0.147*** 0.132*** 0.051*
(0.020) (0.034) (0.036) (0.028) (0.027)
Central Highland 0.054 0.009 0.126** 0.084 0.074
(0.048) (0.062) (0.059) (0.056) (0.054)
South East 0.461*** 0.222*** 0.222*** 0.123*** 0.118***
(0.023) (0.033) (0.035) (0.029) (0.026)
Mekong River Delta 0.129*** 0.044 0.065* 0.095*** 0.106***
(0.024) (0.035) (0.037) (0.029) (0.027)
Selection Term:
Lambda 1 0.036 0.064 0.070 0.091 0.050
(0.048) (0.089) (0.089) (0.100) (0.074)

14
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Table A1 (continued)

(1) (2) (3) (4) (5)

Men 2002 Men 2008 Men 2010 Men 2012 Men 2016
Lambda 2 0.426*** 0.451* 0.327 0.567*** 0.343*
(0.068) (0.244) (0.205) (0.164) (0.205)
Constant 1.497*** 1.622*** 1.889*** 2.362*** 2.316***
(0.074) (0.164) (0.117) (0.141) (0.123)
Observations 6,651 2,349 2,736 2,838 3,035
R-squared 0.369 0.379 0.395 0.370 0.338

Notes: Robust standard errors are reported in parentheses; As this is a log-level regression, the precise estimates are calculated as exp(coefficient)-1; *Significant at 10%;
**Significant at 5%; ***Significant at 1%. Sample of non-farm and full-time employees.

Table A2
Returns to Education – Mincer Equations with additional controls for Women: 2002, 2008, 2010, 2012 and 2016.

(1) (2) (3) (4) (5)

Female 2002 Female 2008 Female 2010 Female 2012 Female 2016
Education and experience controls:
Years worked 0.058*** 0.039*** 0.099*** 0.069*** 0.085***
(0.009) (0.014) (0.014) (0.011) (0.009)
Years worked squared 0.001*** 0.001* 0.002*** 0.002*** 0.002***
(0.000) (0.000) (0.000) (0.000) (0.000)
Education attainment (Ref: Secondary level or below):
High school 0.072** 0.057 0.151** 0.095* 0.107***
(0.032) (0.073) (0.066) (0.051) (0.039)
Vocational training 0.295*** 0.120 0.512*** 0.425*** 0.362***
(0.053) (0.103) (0.084) (0.102) (0.066)
College 0.771*** 0.452*** 0.849*** 0.718*** 0.635***
(0.049) (0.118) (0.073) (0.055) (0.050)
University 0.697*** 0.567*** 0.959*** 0.863*** 0.759***
(0.061) (0.125) (0.096) (0.119) (0.082)
Graduate 1.164*** 1.099*** 1.320*** 1.100*** 1.064***
(0.146) (0.286) (0.160) (0.142) (0.112)
Marital status (Ref: Single):
Married 0.038 0.066** 0.120*** 0.073** 0.122***
(0.028) (0.033) (0.041) (0.031) (0.029)
Widowed 0.018 0.030 0.036 0.009 0.010
(0.054) (0.115) (0.100) (0.090) (0.068)
Divorced 0.091 0.003 0.037 0.029 0.086
(0.072) (0.088) (0.088) (0.064) (0.054)
Separated 0.097 0.145 0.011 0.003 0.134
(0.100) (0.240) (0.122) (0.113) (0.207)
Economic industries (Ref: Manufacturing):
Mining and quarrying 0.197*** 0.287*** 0.209 0.188* 0.047
(0.062) (0.090) (0.136) (0.112) (0.111)
Electricity 0.133* 0.153 0.017 0.047 0.163**
(0.073) (0.113) (0.180) (0.099) (0.078)
Construction 0.098** 0.235** 0.148 0.130** 0.173***
(0.039) (0.100) (0.093) (0.058) (0.056)
Commerce 0.051 0.101** 0.091* 0.032 0.005
(0.035) (0.044) (0.052) (0.038) (0.032)
Transport 0.206*** 0.293*** 0.266** 0.052 0.139**
(0.064) (0.100) (0.115) (0.071) (0.071)
Finance 0.070 0.424*** 0.314*** 0.377*** 0.371***
(0.071) (0.094) (0.113) (0.064) (0.065)
Other Services 0.053** 0.006 0.038 0.000 0.086**
(0.025) (0.042) (0.050) (0.039) (0.036)
Location (Ref: Rural):
Urban 0.142*** 0.026 0.117*** 0.062** 0.063***
(0.021) (0.028) (0.031) (0.024) (0.020)
Sector types (Ref: Private):
State 0.204*** 0.254*** 0.140*** 0.101*** 0.001
(0.026) (0.042) (0.050) (0.036) (0.034)
Collective 0.247*** 0.045 0.187 0.011 0.168*
(0.080) (0.082) (0.144) (0.210) (0.093)
Foreign 0.296*** 0.217*** 0.360*** 0.232*** 0.289***
(0.040) (0.035) (0.047) (0.030) (0.026)
Location (Ref: Red river Delta):
Northern Midland and Mountainous 0.013 0.076* 0.124** 0.082** 0.011
(0.032) (0.043) (0.054) (0.037) (0.033)
North Central & South Central Coast 0.002 0.032 0.146*** 0.130*** 0.094***
(0.027) (0.043) (0.044) (0.034) (0.029)

(continued on next page)

15
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Table A2 (continued)

(1) (2) (3) (4) (5)

Female 2002 Female 2008 Female 2010 Female 2012 Female 2016
Central Highland 0.028 0.037 0.053 0.154*** 0.010
(0.058) (0.075) (0.074) (0.055) (0.045)
South East 0.515*** 0.224*** 0.323*** 0.180*** 0.122***
(0.030) (0.038) (0.044) (0.034) (0.029)
Mekong River Delta 0.174*** 0.006 0.064 0.092** 0.100***
(0.031) (0.039) (0.048) (0.038) (0.032)
Selection Term:
Lambda 1 0.200*** 0.130 0.326** 0.372*** 0.520***
(0.072) (0.101) (0.138) (0.128) (0.097)
Lambda 2 0.657*** 1.343*** 0.757*** 0.605** 0.644***
(0.083) (0.321) (0.210) (0.262) (0.213)
Constant 1.124*** 1.655*** 0.919*** 1.426*** 1.496***
(0.115) (0.205) (0.192) (0.204) (0.148)
Observations 4,405 1,738 2,013 2,176 2,403
R-squared 0.366 0.433 0.402 0.396 0.389

Notes: Robust standard errors are reported in parentheses; As this is a log-level regression, the precise estimates are calculated as exp(coefficient)-1; *Significant at 10%;
**Significant at 5%; ***Significant at 1%. Sample of non-farm and full-time employees.

Table A3
Returns to Education in the Red River Delta Region – Mincer Equations for Men: 2002, 2008, 2010, 2012 and 2016.

(1) (2) (3) (4) (5)

Men 2002 Men 2008 Men 2010 Men 2012 Men 2016
Education and experience controls:
Years worked 0.050*** 0.059*** 0.062*** 0.019 0.043***
(0.011) (0.020) (0.014) (0.017) (0.011)
Years worked squared 0.001*** 0.001** 0.001*** 0.000 0.001***
(0.000) (0.001) (0.000) (0.000) (0.000)
Education attainment (Ref: Secondary level or below):
High school 0.233*** 0.149** 0.216** 0.303*** 0.124**
(0.049) (0.075) (0.097) (0.071) (0.059)
Vocational training 0.393*** 0.305*** 0.380*** 0.289*** 0.277***
(0.065) (0.100) (0.066) (0.083) (0.060)
College 0.550*** 0.675*** 0.710*** 0.456*** 0.293***
(0.086) (0.122) (0.159) (0.116) (0.073)
University 0.728*** 0.823*** 0.805*** 0.696*** 0.694***
(0.069) (0.115) (0.103) (0.139) (0.076)
Graduate 1.116*** 1.265*** 1.217*** 1.257*** 1.173***
(0.130) (0.214) (0.187) (0.174) (0.155)
Selection Term:
Lambda 1 0.095 0.013 0.224* 0.331* 0.064
(0.083) (0.176) (0.125) (0.175) (0.101)
Lambda 2 0.809 0.065 2.552* 0.287 0.732
(0.553) (0.975) (1.520) (0.911) (1.072)
Constant 1.639*** 1.709*** 2.098*** 2.452*** 2.358***
(0.150) (0.284) (0.181) (0.255) (0.134)
Observations 1,700 603 705 670 749
R-squared 0.328 0.329 0.393 0.376 0.318

Notes: Robust standard errors are reported in parentheses; As this is a log-level regression, the precise estimates are calculated as exp(coefficient)-1; *Significant at 10%;
**Significant at 5%; ***Significant at 1%. Sample of non-farm and full-time employees.

16
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Table A4
Returns to Education in the Red River Delta Region – Mincer Equations for Women: 2002, 2008, 2010, 2012 and 2016.

(1) (2) (3) (4) (5)

Women 2002 Women 2008 Women 2010 Women 2012 Women 2016
Education and experience controls:
Years worked 0.029 0.019 0.042 0.044*** 0.059***
(0.020) (0.022) (0.026) (0.016) (0.016)
Years worked squared 0.000 0.000 0.001 0.001** 0.002***
(0.000) (0.001) (0.001) (0.000) (0.000)
Education attainment (Ref: Secondary level or below):
High school 0.163*** 0.298*** 0.304*** 0.231*** 0.117
(0.055) (0.096) (0.098) (0.078) (0.086)
Vocational training 0.276*** 0.110 0.335*** 0.362*** 0.051
(0.072) (0.104) (0.125) (0.093) (0.078)
College 0.510*** 0.553*** 0.425*** 0.474*** 0.163
(0.084) (0.154) (0.147) (0.095) (0.099)
University 0.723*** 0.860*** 0.918*** 0.769*** 0.432***
(0.088) (0.136) (0.141) (0.100) (0.074)
Graduate 1.180*** 1.403*** 1.080*** 1.066*** 0.842***
(0.183) (0.116) (0.198) (0.128) (0.141)
Selection Term:
Lambda 1 0.307** 0.210 0.303 0.040 0.260*
(0.121) (0.160) (0.215) (0.125) (0.135)
Lambda 2 0.623 0.534 0.471 0.417 2.657***
(0.998) (0.750) (0.572) (0.475) (0.743)
Constant 1.740*** 1.938*** 1.884*** 1.971*** 2.392***
(0.285) (0.227) (0.317) (0.174) (0.171)
Observations 1,004 409 458 490 565
R-squared 0.353 0.388 0.353 0.309 0.217

Notes: Robust standard errors are reported in parentheses; As this is a log-level regression, the precise estimates are calculated as exp(coefficient)-1; *Significant at 10%;
**Significant at 5%; ***Significant at 1%. Sample of non-farm and full-time employees.

Table A5
Returns to Education for the Mekong River Delta Region – Mincer Equations for Men: 2002, 2008, 2010, 2012 and 2016.

(1) (2) (3) (4) (5)

Men 2002 Men 2008 Men 2010 Men 2012 Men 2016
Education and experience controls:
Years worked 0.038*** 0.020 0.033 0.050*** 0.037***
(0.012) (0.015) (0.023) (0.016) (0.013)
Years worked squared 0.001*** 0.000 0.001 0.001*** 0.001**
(0.000) (0.000) (0.001) (0.000) (0.000)
Education attainment (Ref: Secondary level or below):
High school 0.140* 0.091 0.499*** 0.331** 0.112
(0.073) (0.108) (0.187) (0.134) (0.125)
Vocational training 0.370*** 0.315*** 0.425*** 0.409*** 0.029
(0.078) (0.095) (0.133) (0.098) (0.131)
College 0.429*** 0.393** 0.842*** 0.687*** 0.350***
(0.104) (0.193) (0.181) (0.087) (0.133)
University 0.555*** 0.628*** 0.918*** 0.817*** 0.327**
(0.078) (0.132) (0.141) (0.100) (0.166)
Graduate 0.761*** 0.809*** 1.210*** – 0.544*
(0.183) (0.102) (0.245) (0.304)
Selection Term:
Lambda 1 0.023 0.311** 0.333 0.057 0.046
(0.092) (0.130) (0.273) (0.162) (0.125)
Lambda 2 0.386*** 0.441* 0.104 0.106 0.682**
(0.109) (0.227) (0.309) (0.187) (0.346)
Constant 1.860*** 2.279*** 2.008*** 1.942*** 2.517***
(0.158) (0.217) (0.290) (0.207) (0.237)
Observations 1,294 373 531 573 571
R-squared 0.181 0.343 0.346 0.373 0.272

Notes: Robust standard errors are reported in parentheses; As this is a log-level regression, the precise estimates are calculated as exp(coefficient)-1; *Significant at 10%;
**Significant at 5%; ***Significant at 1%. Sample of non-farm and full-time employees.Graduate variable omitted because of collinearity in Model (4).

17
S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

Table A6
Returns to Education for the Mekong River Delta Region – Mincer Equations for Women: 2002, 2008, 2010, 2012 and 2016.

(1) (2) (3) (4) (5)

Women 2002 Women 2008 Women 2010 Women 2012 Women 2016
Education and experience controls:
Years worked 0.037*** 0.059*** 0.104*** 0.065*** 0.062**
(0.009) (0.013) (0.028) (0.017) (0.024)
Years worked squared 0.001*** 0.001*** 0.002*** 0.002*** 0.001*
(0.000) (0.000) (0.001) (0.000) (0.001)
Education attainment (Ref: Secondary level or below):
High school 0.076 0.036 0.375** 0.140 0.137
(0.093) (0.142) (0.158) (0.146) (0.110)
Vocational training 0.425*** 0.712*** 0.786*** 0.610*** 0.127
(0.102) (0.173) (0.193) (0.123) (0.287)
College 0.919*** 1.151*** 1.304*** 0.729*** 0.654***
(0.077) (0.132) (0.129) (0.123) (0.113)
University 0.897*** 1.380*** 1.196*** 1.094*** 0.332
(0.121) (0.147) (0.194) (0.120) (0.337)
Graduate – 2.474*** 1.794*** 1.422*** 0.453
(0.120) (0.290) (0.214) (0.410)
Selection Term:
Lambda 1 0.187* 0.570*** 0.469 0.484** 0.214
(0.098) (0.131) (0.307) (0.207) (0.327)
Lambda 2 0.545*** 0.512* 0.798** 0.480* 1.884***
(0.096) (0.299) (0.310) (0.269) (0.585)
Constant 1.586*** 1.024*** 0.819* 1.353*** 2.255***
(0.142) (0.205) (0.419) (0.231) (0.524)
Observations 923 295 387 436 447
R-squared 0.229 0.464 0.376 0.280 0.334

Notes: Robust standard errors are reported in parentheses; As this is a log-level regression, the precise estimates are calculated as exp(coefficient)-1; *Significant at 10%;
**Significant at 5%; ***Significant at 1%. Sample of non-farm and full-time employees.
Graduate variable omitted because of collinearity in Model (1).

Table A7
Descriptive Statistics for 2002, 2008, 2010, 2012, 2016.

2002 2008 2010 2012 2016

Variable Obs. Mean Obs. Mean Obs. Mean Obs. Mean Obs. Mean
Wages: Wage 11,085 11.34 4,408 13.72 4,822 16.29 5,077 17.53 5,514 21.50
Ln (Wage) 11,081 2.16 4,408 2.36 4,822 2.50 5,077 2.65 5,514 2.88
Gender: Men 25,672 0.52 9,847 0.50 9,662 0.50 9,715 0.50 9,669 0.50
Women 25,672 0.48 9,847 0.50 9,662 0.50 9,715 0.50 9,669 0.50
Age (in years) 25,672 29.47 9,847 30.34 9,662 31.23 9,715 31.75 9,669 33.39
Experience: Years worked 25,672 13.06 9,847 12.27 9,662 13.81 9,715 14.25 9,669 15.77
Years worked squared 25,672 367.76 9,847 313.18 9,662 375.45 9,715 394.48 9,669 454.39
Education: No qualifications 25,672 0.14 8,938 0.00 9,379 0.07 9,488 0.07 9,425 0.06
Primary 25,672 0.21 8,938 0.17 9,379 0.14 9,488 0.15 9,425 0.15
Secondary 25,672 0.31 8,938 0.31 9,379 0.27 9,488 0.25 9,425 0.27
High school 25,672 0.19 8,938 0.26 9,379 0.22 9,488 0.22 9,425 0.20
Vocational training 25,672 0.08 8,938 0.14 9,379 0.15 9,488 0.14 9,425 0.11
College 25,672 0.02 8,938 0.03 9,379 0.04 9,488 0.04 9,425 0.05
University 25,672 0.06 8,938 0.09 9,379 0.10 9,488 0.11 9,425 0.14
Graduate 25,672 0.00 8,938 0.00 9,379 0.01 9,488 0.01 9,425 0.01
Economic Industries: Manufacturing 11,098 0.31 4,520 0.30 4,956 0.30 5,174 0.31 5,613 0.33
Mining and quarrying 11,098 0.03 4,520 0.02 4,956 0.01 5,174 0.01 5,613 0.01
Electricity 11,098 0.01 4,520 0.02 4,956 0.01 5,174 0.02 5,613 0.02
Construction 11,098 0.15 4,520 0.13 4,956 0.14 5,174 0.13 5,613 0.12
Commerce 11,098 0.11 4,520 0.13 4,956 0.15 5,174 0.15 5,613 0.17
Transport 11,098 0.08 4,520 0.07 4,956 0.07 5,174 0.06 5,613 0.06
Finance 11,098 0.01 4,520 0.02 4,956 0.02 5,174 0.02 5,613 0.02
Other Services 11,098 0.30 4,520 0.31 4,956 0.29 5,174 0.30 5,613 0.27
Location: Urban 25,672 0.45 9,847 0.45 9,662 0.46 9,715 0.47 9,669 0.48
Sector Types: Private 11,084 0.50 4,520 0.53 4,956 0.57 5,174 0.59 5,613 0.60
State 11,084 0.45 4,520 0.36 4,956 0.34 5,174 0.31 5,613 0.27
Collective 11,084 0.01 4,520 0.03 4,956 0.01 5,174 0.01 5,613 0.00
Foreign 11,084 0.04 4,520 0.08 4,956 0.08 5,174 0.09 5,613 0.12
Region: Red river Delta 25,672 0.23 9,847 0.22 9,662 0.23 9,715 0.23 9,669 0.22
Northern Midland and Moutainous 25,672 0.11 9,847 0.13 9,662 0.11 9,715 0.10 9,669 0.11
North Central and South Central Coast 25,672 0.23 9,847 0.20 9,662 0.22 9,715 0.22 9,669 0.21
Central Highland 25,672 0.04 9,847 0.05 9,662 0.05 9,715 0.05 9,669 0.05
South East 25,672 0.16 9,847 0.20 9,662 0.18 9,715 0.19 9,669 0.20
Mekong River Delta 25,672 0.22 9,847 0.20 9,662 0.20 9,715 0.21 9,669 0.21
Children: Number less than age 6 25,672 0.28 9,847 0.29 9,662 0.35 9,715 0.36 9,669 0.39
Number of children aged 6–17 25,672 1.15 9,847 0.03 9,662 0.61 9,715 0.01 9,669 0.01

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S. McGuinness, E. Kelly, Thi Thu Phuong Pham et al. World Development 138 (2021) 105205

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