Educational and family background determinants to employments wage in vietnam luận văn thạc sĩ

EDUCATIONAL and FAMILY BACKGROUND DETERMINANTS TO EMPLOYMENT’S WAGE IN VIETNAM Academic Supervisor: Dr Nguyen Van Phuong Student: Tang Thi Bich Hien ACKNOWLEDGEMENT First of all, I would like to thank Dr Nguyen Van Phuong, my Academic Supervisor, for his valuable comments and assistance Without his support and encourage, my thesis would not be finished I would like to special thank Prof Nguyen Trong Hoai, our respectable Dean, who has been interested in our studying during the Master course Supports from the Vietnam-the Netherlands Programme for MA in Development Economics’ staff and classmates are fully acknowledged ' Hochiminh city, Mar 2011 Tang Thi Bich Hien DECLARATION I declare that “Educational And Family Background Deteririinants to Employment’s Wage In Vietnam” is my own work, that is has not been submitted to any degree or examinations at any other universities, and that all the sources used or quoted are indicated and acknowledged by complete references ABSTRACT Data from the Vietnamese Household Living Standards Surveys are used to estimate the determinants impact on employee’s wage The analysis suggests that educational attainment strongly affects the wage The additional level of schooling years positive changes the wage It also found that wages have increased according to worker’s age, and a married person is paid higher than other person The findings recommend that parents got better education have positive interaction to their children’ wages when they enter labour market TABLE OF CONTENTS ACKNOWLEDGEMENT I ABSTRACT TABLE OF CONTENTS iv LIS LIST OF TABLES v: LIS LIST OF FIGURES vi LIST OF ACRONYMS vii CHAPTER 1: INTRODUCTION 1.1 Research goals and objectives 1.2 Research questions CHAPTER 2: LITERATURE REVIEW Theoretical frameworks 2.2 Previous empirical studies CHAPTER 3: OVERVIEW OF VIETNAM LABOUR MARKET 13 3.l Employment by age and gender .14 • 3.2 Employment divided by regions .17 3.3 Employment with education and training 18 3.4 Employment by status .2 3.5 Unemployment .23 CHAPTER 4: THE MODEL 26 Statistics descriptive analysis of VHLSSs 32 CHAPTER 6: ESTIMATING RESULTS .35 I Results analysis .35 6.2 Test of education attainment dependence 39 6.3 Test of family background dependence 40 6.4 Measurement of goodness-of-fit 40 CHAPTER 7: CONCLUSION 41 ¶ Conclusion .4 7.2 Poli cy implications 41 7.3 itations Lim 43 REFERENCES 44 APPENDIX 46 Regression results 46 Definitions 49 LIST OF TABLE Table 1: Labour force participation 14 Table 3.2: Labour force divided by sex, regions (%) 17 Table 3.3: Labour force classified by education (%) 19 Table 3.4: Distributions of status in employment by sex 22 Table 3.5: Unemployed workers (person) 23 • Table 4.1: Variable description 29 Table 5.1:Mean of wage, age, parents’ education and employees’ siblings 33 Table 5.2: Group of determinants by binary characteristics in year 2008 by percentage .34 Table 1: Models of Log Hourly Wages .35 Table Al: Construction of Duncan index variable 51 Table A2: Youth labour force participation rates (%) 52 Table A3 : Labour force classified by sexes and regions 53 Table A4: Unemployed workers by age-bands (person) 54 Table A5: Distributions of status in employment by sex 55 LIST OF FIGURE Figure l : GDP growth rate (%) 13 • Figure 3.2: Workforce classified by age-bands (person) 16 Figure 3.3: Employed worker’s skills (%) .20 Figure 3.4: Workforce vs employed workers (thousand of person) 24 LIST OF ACRONYMS GDP Gross Domestic Product GSO General Statistics Office ILO International Labour Organization MOLISA Ministry of Labour, Invalids and Social Affairs UNDP United Nations Development Programme VCCI Vietnam Chamber of Commerce and Industry VHLSS Vietnamese Household Living Standards Survey WTO World Trade Organization CHAPTER INTRODUCTION The Doi Moi reforms are widely credited with improving incentives for production and growth Economic integration and the transition to a socialistoriented market economy provide both challenges and opportunities for the people in Vietnam Under Doi Mot Renovations, the opening up of Viet Nam to a coiilpetitive global marketplace, with rapid changes in information technologies, capital flows, mass media and culture The transition to a market economy in Viet Nam involved a drastic modification of young men and women’s transition from school-to-work Today, many youth enter the labour market resulting in labour is a critical aspect of Vietnam's development strategy in overcoming persistent poverty and enhancing further economic growth as set out in a number of documents, such as the country's ten year national strategy for socio-economic development (20012010) with its second five year socioeconomic development plan (2006-2010) One of main objectives for Vietnam is to further strengthen its economy and prepare the country for further integration into the world community that need numerous skilled employments Meanwhile, education has played an important role in preparing knowledge for an employment prior to joining labour market The linkages between the education and training system and the labour market have to be strengthened to close the gap between the skills in demand and the skills offered on the labour market It is said that a person’s successes in seeking a job after quitting school is remarkable affected by the period he have stayed at school As a result, individuals with high levels of education are able to find work more easily, to command higher wages within a given occupation, occupational mobility and also to improve their chances of upward Harmon and Walker (1995) suggest that educational attainment is the main observed determinant of occupational status, which directly influences earnings Vietnam has been viewed as labour endowment but low productivity because of unskilled or semi-skilled employment Consequently, being employment or unemployment is not large distance For example, if an employment gets higher education, he enables to adapt easily with changes of technology in a firm, so that he has more opportunities to be hired again Additionally, Hamilton et at (2000) proves that workers who receiving more training will receive higher income because their training costs are lower than others without or less training Adversely, he will become unemployment if his company makes changes in technology By finding contribution of education on employment’s wage we can stress the impact of schooling to individual at initial stages On other hand, children are affected by their family background Father, mother and siblings create an environment that help a member better, otherwise adversely effect by their interactions Meghir (2005) finds that one of factors is parents’ education Practically, parent with good education and pay more time for children can be instructor that encourage them to better study and confident in choosing a work If we combine two ideas above, we can find an interesting relationship between wage and family background of a person after quitting school Within this framework, the purpose is to determine the extent to which parents’ schooling outcomes feed through into children’s schooling The determinants effect on wage of an employee is obtained by running ordinary least squared model I have utilized data of VHLSS 2006 and 2008 for my thesis The next section will introduce previous relevant empirical studies Section III will present about Vietnam labour market Section IV explores the model and introduces the data in Sections V The empirical findings are reported in Section VI with several sensitivity tests are undertaken, and Section VII provides concluding comments 1.1Research goals and objectives The mentioned suggestions aim to improvement education of employees They are initial help workers more opportunities to find out works as well as improve the labour endowment advantage Next, they can affect the ratio of wages and salaries group and vulnerable group in employed workers leading to preventing widespread poverty 7.3 Limitations In my thesis, the Adjusted R' is over 0.2 Thus, hourly wage is explained approximately 20% by independent variables in the mode That is caused by the restrictions of data set which are mentioned in chapter as well as the restriction of number of variables Next, I have selected between mother’s education and father’s education, which one is higher as proxy variable for parents’ education because there is not full data of both mother and father for each employee because of lack of spouse’s information in cases such as widow, widower or divorce Therefore, I cannot independent test effect of education of mother and father on employee’s wage Thirdly, occupation of household’s head is scored as Duncan (1961) with modification in selection works for each group according to VHLSS’s occupation codes That index was originally constructed by the US data, so it would wake differences in implication, even though there were adjustments The limitations may be a chance for further research 43 REFERENCES • Ashenfelter, Orley and Zimmerman J.David, 1997 Estimates of the Returns to Schooling from Sibling Data: Fathers, Sons, and Brothers The Review of Economics and Statistics, Vol 79, No Betts, R Julian, 2001 The Impact of School Resources on Women's Earnings and Educational Attainment: Findings from the National Longitudinal Survey of Young Women Journal of Labor Economics, Vol 19, No 3, pp 635-657 Buchinsky, Moshe and Leslie, Phillip, 2009 Educational Attainment and the Changing U.S Wage Structure: Dynamic Implications on Young Individuals’ Choices Available at: http://www.stanford.edu/=p1es1ie/educ.pdf Dang, Nguyen Anh; Le, Bach Duong and Nguyen, Hai Van, 2005 Youth employment in Viet Nam: Characteristics, determinants and policy Responses Economic and Labour Market Analysis Department, ILO Ganzeboom et al, 1992 A Standard International Socio-Economic Index of occupational Status Social Science Research 21, pp.1-56 “ Gaviria, Alejandro, 2002 Intergenerational mobility, sibling inequality and borrowing Constraints Economics of Education Review 21, pp 33 l —340 General statistic office of Vietnam, http://www.gso.gov.vn Halvorsen and Palmquist, 1980 The Interpretation of Dummy Variables in Semilogarithmic Equations The American Economic Review, Vol 70, No 3, pp 474-475 Hamilton, Jonathan; ‘Thisse J Franpois and Zenou Yves, 2000 Wage Competition with Heterogeneous Workers and Firms Journal of Labor Economics, Vol 18, No 3, pp 453-472 Harmon, Colm and Walker, Ian, 1995 Estimates of the Economic Return to Schooling for the United Kingdom The American Economic Review, Vol 85, No 5, pp 1278-1286 Levine, David and Mazumder, Bhashkar, 2007 The Growing Importance of Family: evidence from Brothers’ Earnings,” Industrial Relations , Vol 46, No Meghir, Costas, 2005 Educational Reform, Ability, and Family Background The American Economic Review, Vol 95, No 1, pp 414-424 Mincer, J and S Polachek, 1974 Family Investment in Human Capital: Earnings of Women Journal of Political Economy, Vol 82, No.2, pp.76-108 44 - Minimum wage 2006, 2008 MOLISA Available at: http://www.mo1isa.Nov.vn/docs/VBPL/detai1VBPL/tabid/213/DocID/47/TabModu1 eSettingsId/450/1anvuaue/vi-VN/Default.aspx Accessed: Jan, 2011 Population and Housing survey 2009, General statistic office Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, 2007 International Conference of Labour Statisticians, 5th edition, pp 108 and 339 Solon, Gary, 2002 Cross-Country Differences in Intergenerational Earnings Mobility Journal of Economic Perspectives, Volume 16, Number 3, pp 59— 66 Solon, Gary et a1., 1991 The effect of family background on economic status: a longitudinal analysis of sibling correlations The Journal of Human Resources Solon, Gary, 1991 Intergenerational income mobility in the United Sates The American Economic Review, pp 393-408 Stevens and Featherman, “A Revised Socioeconomic Index of Occupation Status.” University of Wisconsin, CDE Working paper 79-48 Tan Duc, 2010 Cheap employment: disadvantages from advantages Vietnam Economy, 15 Jun Vu Quynh, 2010 Labour shortages: the answer is wage Vietnam Economy, 25 May Wooldridge, 2002 Econometric Analysis of Cross Section and Panel Data Massachusetts Institute of Technology Press 45 APPENDIX Separately regression results in 2006 and 2008 1) 2006 • eststo, title(” “): reg ln wage age married ethnicity ED parents education siblings Duncan index urban South East if in 1ac5> 15& in 1ac5 F — 0.0000 Adj R2 = 0.248 Root MSE =.45623 Robust ln_wage | ’ ’ age | Coef Err [95% Conf IntervalJ Std .0178837 0025179 7.10 0.000 012946 0228214 married | 0977344 029396 3.32 0.001 040088 1553807 ethnicity | 0971864 0327715 2.97 0.003 0329208 1614521 ED | 1844392 0151367 12.18 0.000 1547557 2141227 parents_ed-n | 0057902 0065868 0.88 0.379 -.0071267 0187072 -.0054261 0077631 -0.70 0.485 -.0206497 0097975 Duncan_index | -.0006977 0007478 -0.93 0.351 -.002164 0007687 siblings | urban | South_East | _cons | 0266522 0244483 0.276 - 12 915 0745959 2064053 0252154 8.19 0.000 1569573 2558533 6626957 0688372 9.63 0.000 5277041 7976B74 46 Testing of multi-colinearity vif Variable | VIF I/VIF parents_ed-n | 1.49 669336 ED | 1.44 693160 age | 1.38 0.722334 married | 1.24 0.807447 urban | 1.19 0.838617 Duncan_index | 1.16 0.860285 siblings | 1.08 0.924932 South_EasL | 1.07 0.935888 ethnicity | 1.02 0.981038 Mean VIF | 1.23 2) 2008 eststo, title(" "): reg ln wage age married siblings Duncan index urban South East ethnicity ED parents education if in l ac5> 15& m4ac1a== l & m1ac3—=3 [pw— wt9], robust (sum of wgt is 5.4026e+06) Linear regression Number of obs = 2232 F( 9, 2222) = 60.49 Prob > F — 0.0000 Adj R'— 0.258 Root MSE =.51293 47 in 1ac5exes Male r«malc Source: MOLISA labour and employment surveys and GSO population estimates 52 Table A3 : Labour force classified by sexes and regions 2006 Regions Total (People) 4,778 3,663 Male People) (%) 49.00 2,341 1,816 2008 Female (People) 2,437 Total (%)JPeople) 51.00 4,710 2,425 South Central Coast Source: VHLSS 2006, 2008 669 1,206 49.81 49.73 Female (People) (% 2;387 50 674 57 Highlands South East Urban Male People) (%) 49.32 2,323 2,500 49.23 9,026 49.70 6,350 48.62 5,035 2,48249.29 2,553 50.77 Table A4: Unemployed workers by age-bands (person) Reasons 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 SP-59 Total Studying/ 1,769 761 2,599 Not old enough aged _ ._ ._ 31 27 10 82 73 36 2,000 1,029 213 1 75 find a job Total p 13 Source: VHLSS 2008 54 15 _ q sq , 10 14 10 259 Table A5: Distributions of status in employment by sex 2006 Status in employment Male Female 69 Employer 0.34 (people) 34 49.28 ' 35 50.72 ! 2008 Total Female (people) 87 0.43 40 45.98 Male 47 54.02 1,185 family 8,980 44.1 Self-employment 2,205 10.83 3,709 58.7 1,295 41 1,975 9.85 39.1 20,357 100 Source: VHLSS 2006-2008 55 5,535 ... studying the determinants of wage because of: • Consisting of all provinces of Vietnam • Containing all necessary information about demography characteristics educational attainment and family background. .. determine to apply OLS in examining education and family background determinants to employment’s wage One of strong points of mv studv are I use cross-sectional data in two years which can eliminate... the other hand, to the extent that the stock of human capital due to prior investments in training increases the productivity of new investments in on-the-job training, additional investments