UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACT OF EDUCATION ON UNEMPLOYMENT INCIDENCE: MICRO EVIDENCE FROM VIETNAM BY LE THI YEN THANH MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, DECEMBER 2012 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACT OF EDUCATION ON UNEMPLOYMENT INCIDENCE: MICRO EVIDENCE FROM VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By LE THI YEN THANH Academic Supervisor: Prof. PHAM KHANH NAM HO CHI MINH CITY, DECEMBER 2012 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CERTIFICATION “I certify that the work of this thesis has not already been submitted for any degree and has not been currently submitted for any other degree. I certify that to the best of my knowledge and any help received in preparing this thesis, and all sources used, have been acknowledged in this thesis.” LE THI YEN THANH LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGMENTS Firstly, I would like to send my deep gratitude to my supervisor, Dr. Pham Khanh Nam for his kindest help to my thesis.
I thought I might have given up due to the busy activity at work. Thank to his motivation, patience and enthusiasm, I could continue and complete my thesis on time. He spent his precious time helping me search for materials, books and studies related to my thesis. My thesis could not have been completed without his support, guidance, advice and comments.
With all my heart, I gratefully send my sincere thanks for all he did to help me to complete this thesis. Besides my supervisor, my best gratitude also goes to Dr. Nguyen Van Chon who provided me with valuable advice and comments during the time I wrote the thesis. I also take this chance to express my sincere thanks to Dr.
Nguyen Trong Hoai who tightly monitored my thesis schedule and encouraged me to complete this thesis on time. In addition, I would like to thank my friends, Anh Khang, Huyen, Binh, Hong and all classmates of MDE 16 for their kind help and assistance during my thesis. Finally, I would like to thank my parents, my boyfriend and my young sister for all their support and encouragement during the time I was doing my research. Le Thi Yen Thanh December 2012 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT Unemployment is one of the major challenges which lead to the unsustainability in our economy and society.
To deal with high unemployment, education is considered as one of the best solutions because it reduces the unemployment probability by preparing knowledge and skills for people before they participate in the labor market. This thesis aims to analyze the link between education and unemployment by examining the impact of educational attainment on unemployment probability when considering other control variables at the micro level such as gender, age, marital status, health status, regional level and family economic condition, using the secondary data from Vietnam Household Living Standards Survey 2008 (VHLSS2008). The analysis is conducted by running logit model. The findings confirm that educational attainment has a significantly negative effect on unemployment risk.
The thesis also points out that women are more likely to enter unemployment spell than men at the same educational level. In addition, age, ethnic, health status, marriage, being household head, geographic location, household expenditure and number of young children also play a statistically important role on unemployment. From the results, the study gives some policy recommendation. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABBREVIATIONS VHLSS : Vietnam Household Living Standards Survey FDI : Foreign Direct Investment GSO : General Statistics Office MOLISA : Ministry of Labor – Invalids and Social Affairs OR : Odds Ratio LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS CHAPTER ONE: INTRODUCTION.
Structure of the Thesis .4 CHAPTER TWO: LITERATURE REVIEW. Review of Empirical Studies.17 CHAPTER THREE: RESEARCH METHODOLOGY.24 CHAPTER FOUR: EMPIRICAL ANALYSIS. Labor Force and Unemployment Situation of Vietnam. Labor Force in Vietnam.
Unemployment in Vietnam. Interpretation and Discussion .51 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER FIVE: CONCLUSION AND RECOMMENDATION. Research Limitations and Further Research Suggestions .62 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 3. Summary of dependent and independent variables .1: Structure of unemployed population by the highest educational attainments and by gender in 2010 and 2011 (%) .2: Regression results of the logit models.
The estimation of unemployment probability, given initial probalibity P0. Odds ratio and unemployment probability of women at different educational attainments with initial probability at 10%, 50% and 90%. Odds ratio and unemployment probability of men at different educational attainments with initial probability at 10%, 50% and 90%. Odds ratio and unemployment probability of men and women with initial probability at 10%, 50% and 90% at the same educational attainment .45 LIST OF FIGURES Figure 3.
Conceptual framework of the study.1: The share of labor force by residence from 2000 to 2011 (%) .2: The share of labor force by gender from 2000 to 2011 (%) .3: Age structure of labor force by residence in 2011 (%) .4: Share of labor force by education/training levels in 2011 by residence .5: Rate of trained labor force by gender in 2011 (%) .6: Structure of trained labor force by regions in 2011 (%) .7: Unemployment rate by age groups in 2010 and 2011 (%) .8: Age structure of unemployed population by gender in 2011 (%) .9: Age structure of unemployed population by residence in 2011 (%) .10: Unemployment rate by the educational attainment in 2010 and 2011 .11: The unemployment rate by regions during the period of 2008-2011 .32 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.12: Unemployment rate by educational attainment in 2008 (%) .13: The share of Labor force by educational attainment interacted with gender in 2008 (%) .14: Unemployment rate by educational attainment interacted with gender in 2008 (%) .15: Unemployment rate by age groups in 2008 (%) .16: Unemployment rate by gender in 2008 (%) .17: The share of labor force by regions in 2008 (%) .18: Unemployment rate by regions in 2008 (%) .19: Unemployment rate by urban/rural residence in 2008 (%) .20: Unemployment rate by married status in 2008 (%).21: Unemployment rate by ethnic in 2008 (%) .22: Unemployment rate by household head status in 2008 (%). Unemployment rate by number of children aged below 16 in 2008 (%) .40 LIST OF APPENDICES Appendix 1: The share of labor force by gender and by residence from 2000-2010 .62 Appendix 2: Age structure of labor force in urban/rural residence by gender in 2011 .62 Appendix 3: Structure of labor force by level of education and vocation training in 2011 (%) .63 Appendix 4: Rate of trained labor force by residence and gender in 2011(%) .63 Appendix 5: Rate of trained labor force by education levels in 2011 (%).63 Appendix 6: Unemployment rate by age groups in 2010 and 2011 (%).63 Appendix 7: Age structure of unemployed population by residence and by gender in 2011 (%) .64 Appendix 8: Unemployment rate by the educational attainment in 2010 and 2011 .64 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Appendix 9: The unemployment rate by regions during the period of 2008-2011 .64 Appendix 10: Descriptive statistic .65 Appendix 11: Testing relationship between unemployment and educational level .66 Appendix 12: The relationship between gender and education (%) .66 Appendix 13: Testing relationship between unemployment and gender interacted with education (%) .67 Appendix 14: The share of labor force by Gender and educational attainment in 2008 .67 Appendix 15: Unemployment rate by Gender and educational attainment (%) .67 Appendix 16: Testing relationship between unemployment and age groups.68 Appendix 17: Testing relationship between unemployment and gender .68 Appendix 18: testing relationship between unemployment and regions.69 Appendix 19: Relationship between unemployment and rural/urban residence .69 Appendix 20: Testing the relationship between unemployment and married status .70 Appendix 21: Testing the relationship between unemployment and ethnic .70 Appendix 22: Testing the relationship between unemployment and household head .71 Appendix 23: Testing the relationship between unemployment and number of children below 16.71 Appendix 24: Descriptive statistics .72 Appendix 25: Correlation testing .73 Appendix 26: Regression results from Logit model .75 Appendix 27: Calculation of interaction variables between gender and educational attainments .76 Appendix 28: Wald Test .79 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER ONE INTRODUCTION 1. Problem Statement Two major challenges which the Vietnamese government is facing now are unemployment and low-quality educational system. The unemployment brings some adverse effects on the economy and society.
If people are unemployed, they lack of wherewithal to buy goods and services. Then consumption and production of goods and services are down, leading to the result that the economy goes down. Effects of unemployment are social too. Crime rate rises because people are not able to meet their needs through work, divorce rate is often higher as people cannot solve their financial problems and the homelessness rises as well.
In addition, if the unemployment is high, less people pay taxes and the government has to spend more on unemployment benefits. It is also one of the reasons contributing to higher government expenditure, leading to budget deficit. Vietnamese labor force has over 54.1 million people at the point of July 2011, which accounts for 58.5% of total population. The labor force includes 50.35 millions of employed people, accounting for 97.05 millions of unemployed people, accounting for 2.
Moreover, that around 1.6 million people participate in the labor force every year pressures the government to create more jobs for the growing unemployed population (GSO, 2011). In addition, according to the Ministry of Planning and Investment, total Foreign Direct Investment (FDI) of Vietnam in 2011 went down compared with FDI in 2010, while global FDI increased in the same period. This is the sad reality that Vietnam’s FDI has showed the opposite direction with upward trend of global FDI. Beside some macro reasons such as poor infrastructure, outdated policies, high inflation, the low-quality labor force in Vietnam is also one the of the major causes of the FDI reduction.
As we know, Vietnam has an abundant cheap labor force. This is one of the main advantages of Vietnam to attract FDI flow. However, today the 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com current global labor demand is higher and more sophisticated. In addition, that the worldwide economy is on the road to develop more capital-intensive industries as well as that the labor price in Vietnam is increasing make this advantage erode rapidly.
Most of FDI in high-tech industries have not been made in Vietnam, but China, due to the problems of finding skilled labor who can meet their requirements of labor qualification. Even though the minimum wage in China is much higher than the minimum wage in Vietnam, most of investors come to China to invest in. Moreover, the Chinese government has constantly strived to invest in education to improve their labor quality. Thus, education has played an important role in labor market.
It prepares knowledge and skills for people to join the labor market. The unemployment rate reduces for individuals who have more education. It means that the higher the educational attainment is, the lower the unemployment risk is. Moreover, there is an issue that labor force needs to gain the skills which match the skill demands of industries and reflect the composition of the Vietnamese labor market.
According to World Bank (1999), education is the most powerful instrument for poor countries to escape from high unemployment and poverty.