Education occupation mismatch in vietnam determinants and effects on earnings

UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM ERASMUS UNVERSITY ROTTERDAM INSTITUTE OF SOCIAL STUDIES THE NETHERLANDS VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS EDUCATION-OCCUPATION MISMATCH IN VIETNAM: DETERMINANTS AND EFFECTS ON EARNINGS BY PHAN THI THANH THAO MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, August 2016 UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM ERASMUS UNVERSITY ROTTERDAM INSTITUTE OF SOCIAL STUDIES THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS EDUCATION-OCCUPATION MISMATCH IN VIETNAM: DETERMINANTS AND EFFECTS ON EARNINGS A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By PHAN THI THANH THAO Academic Supervisor: Dr TRUONG DANG THUY HO CHI MINH CITY, August 2016 CERTIFICATION “I certify that the substance of this thesis has not already been submitted for any degree and have not been currently submitted for any other degree I certify that to the best of my knowledge and help received in preparing this thesis and all sources used have been acknowledged in this thesis.” PHAN THI THANH THAO ACKNOWLEDGEMENTS The process of writing a thesis is a collaborative experience involving the support and helps from many people I want to express my gratitude to those who give me the tremendous support to complete this thesis I am deeply indebted to my parents for their invaluable supports and constant reminders The sentence I hear every day is “lose weight and finish your thesis, daughter” I really appreciate for their efforts in reminding a very lazy girl like me And their boundless love are motivation for my endeavor in building up my life more interesting and valuable I wish to express my heartfelt gratitude to my supervisor Dr Truong Dang Thuy for his valuable suggestions during the time I write this thesis He has also encouraged and reminded me to pursue this topic from the initial ideas to the final completion I am really thankful him for his guidance and patience Finally, after finishing this thesis, I realize that each success is a process of continuous effort And more difficulties you overcome, more values you get for your life Phan Thi Thanh Thao August, 2016 ABSTRACT We examine the education-occupation mismatch in horizontal and vertical respects; and their impacts on earnings of Vietnamese workers We start by clarifying definitions and causal reasons of mismatch between education and occupation: in major and level Analyzing survey data from 267 workers, we find that the mismatch between schooling major and working field which is caused by unavailability of job in the schooling field (demand-related horizontal mismatch) has a negative effect on earnings And the mismatch between schooling major and working field caused by remaining reasons (supply-related horizontal mismatch mismatch) has no statistically significant impact on earnings Interestingly, a horizontal mismatch because of supply-related reasons for workers who learned science major has a positive effect on earnings Furthermore, when examining the effect of vertical mismatch, a negative effect of under-education on wage is found whereas over-educated years have no significant effect on wage From policy perspective, we recommend that people should avoid major mismatch for best earnings However, in case individuals learn science and work in mismatched career voluntarily, their earnings will be better than ones in adequate career Moreover, students should avoid over-education to reduce the waste of resources unless they want to study more for their own preferences Contents INTRODUCTION 1.1 Problem statement 1.2 Research objectives 1.3 Main research questions 1.4 Organization of the study LITERATURE REVIEW 2.1 Mismatch in major between career and schooling (horizontal educationoccupation mismatch) 2.1.1 Definition 2.1.2 Determinants of horizontal education-occupation mismatch 2.2 Over-education and under-education (Vertical education-occupation mismatch) 2.2.1 Definition 2.2.2 Determinants of vertical education-occupation mismatch 11 2.3 Effect of education-occupation mismatch on earnings 14 2.3.1 Mincer’s earnings model 14 2.3.2 Wage effect of horizontal education-occupation mismatch 17 2.3.3 Wage effect of vertical education-occupation mismatch 18 METHODOLOGY AND DATA 20 3.1 Empirical models 20 3.1.1 Horizontal mismatch and earnings 20 3.1.2 Vertical mismatched and earnings 25 3.2 Data source 28 RESULTS 29 4.1 Descriptive statistics 29 4.1.1 Horizontal education-occupation mismatch 29 4.1.2 Vertical education-occupation mismatch 40 4.2 Regression results 48 4.2.1 Horizontal education-occupation mismatch 48 4.2.1.1 Determinants of horizontal education-occupation mismatch 48 4.2.1.2 Effect of horizontal education-occupation mismatch on earnings 53 4.2.2 Vertical education-occupation mismatch 59 4.2.2.1 Determinants of vertical education-occupation mismatch 59 4.2.2.2 Effects of vertical education-occupation mismatch on earnings 63 CONCLUSION AND POLICY IMPLICATION 71 5.1 Conclusions 71 5.2 Policy implications 73 5.3 Limitations 74 REFERENCES 76 APPENDIX 81 LIST OF TABLES Table 1: Descriptive statistics of continuous variables 29 Table 2: Age among horizontal mismatched groups 30 Table 3: Schooling years among horizontal mismatched groups 30 Table 4: Experience in current firm among horizontal mismatched groups 31 Table 5: Experience in current working field among horizontal mismatched groups 31 Table 6: Reasons for mismatch among horizontal mismatched groups 32 Table 7: Education level among horizontal mismatched groups 33 Table 8: Schooling major group and horizontal mismatched groups 33 Table 9: Gender and horizontal mismatched groups 34 Table 10: Marital status among horizontal mismatched groups 34 Table 11: Number of children and horizontal mismatched groups 35 Table 12: Mobility status among horizontal mismatched groups 35 Table 13: Long-term health status among horizontal mismatched groups 36 Table 14: Firm type and horizontal mismatched groups 37 Table 15: Working place among horizontal mismatched groups 37 Table 16: Immigration status among horizontal mismatched groups 38 Table 17: Earnings level among horizontal mismatched groups 39 Table 18: Fulltime/part-time job and horizontal mismatched groups 39 Table 19: Age of vertical mismatched groups 40 Table 20: Schooling years among vertical mismatched groups 41 Table 21: Experience in current firm among vertical mismatched groups 41 Table 22: Experience in current field among vertical mismatched groups 42 Table 23: Gender and vertical mismatched groups 42 Table 24: Education level of vertical mismatched groups 43 Table 25: Schooling major group among vertical mismatched groups 44 Table 26: Marital status among vertical mismatched groups 44 Table 27: Number of children among vertical mismatched groups 45 Table 28: Firm type and vertical mismatched groups 46 Table 29: Fulltime/part-time job among vertical mismatched groups 46 Table 30: Mobility status among vertical mismatched groups 47 Table 31: Long-term health status among vertical mismatched groups 47 Table 32: Working place among vertical mismatched groups 48 Table 33: Immigration status among vertical mismatched groups 48 Table 34: Determinants of horizontal mismatched education: Ordinal logistic regression 50 Table 35: Marginal effect of determinants of horizontal mismatched education 51 Table 36: Effects of horizontal mismatched education on earnings 55 Table 37: The earnings effects of mismatch by schooling majors 58 Table 38: Determinants of over-educated years 61 Table 39: Effects of vertical mismatched education on earnings (Duncan and Hoffman model) 64 Table 40: Effects of vertical mismatched education on earnings (Verdugo and Verdugo model) 69 LIST OF GRAPHS Graph 1: Distribution of over-education (Duncan and Hoffman model) 60 Graph 2: Distribution of under-education (Duncan and Hoffman model) 60 Graph 3: Effects of vertical mismatched education on earnings 67 Graph 4: Effects of vertical mismatched education on earnings for male and female 68 done by researcher to find out the matched level between respondent’s schooling major and working field To make this method successful, researcher must be well-known about that field It means they have to know about schooling major, what subjects are trained in this major, what that major actual train to students Furthermore, more details knowledge about current jobs need to be clarified Based on these knowledge, researchers have base to conclude the level of mismatch respondents are in: completely match, partly mismatch or completely mismatch This method seems possible for researches with small scope – a specific major For instance, “determinants and effects on earnings of education-occupation mismatch in Vietnamese accountants” is a possible future research 75 REFERENCES Abel, J R., & Deitz, R (2015) Agglomeration and 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of Partly Matched group) H0: Mean (Age of Completely Matched group) = Mean (Age of Completely Mismatched group) Schooling years H0: Mean (Schooling years of Completely Matched group) = Mean (Schooling years of Partly Matched group) H0: Mean (Schooling years of Completely Matched group) = Mean (Schooling years of Completely Mismatched group) Experience in current firm H0: Mean (Experience years of Completely Matched group) = Mean (Experience years of Partly Matched group) H0: Mean (Experience years of Completely Matched group) = Mean (Experience years of Completely Mismatched group) Experience in current working field H0: Mean (major experience years of Completely Matched group) = Mean (Major experience years of Partly Matched group) 3.15 0.00 Reject H0: Mean (Major experience years of Completely Matched group) = Mean (Major experience years of Completely Mismatched group) 3.56 0.00 Reject 81 APPENDIX Table A 2: Chi-squared test for determinants of horizontal mismatched education p-value Accept / Reject H0 (α=10%) No difference in reasons for mismatched among mismatched group 0.010 Reject No difference in educated levels among mismatched group 0.571 Accept No difference in learning majors among mismatched group 0.003 Reject No difference in gender among mismatched group 0.039 Reject No difference in marriage status among mismatched group 0.529 Accept No difference in children quantity among mismatched group 0.610 Accept No difference in activity status among mismatched group 0.982 Accept No difference in long-term health status among mismatched group 0.049 Reject No difference in firm types among mismatched group 0.262 Accept No difference in working place among mismatched group 0.159 Accept No difference in immigration status among mismatched group 0.104 Accept No difference in income among mismatched group 0.024 Reject No difference in full-time/part-time job among mismatched group 0.078 Reject H0 82 APPENDIX Table A 3: t-test for determinants of vertical mismatched education H0 t-test Age H0: Mean (Age of Fixed Educated group) = Mean (Age of 1-level 0.88 undereducated group) H0: Mean (Age of Fixed Educated group) = Mean (Age of 1-level -1.67 overeducated group) H0: Mean (Age of Fixed Educated group) = Mean (Age of 2-levels -1.08 overeducated group) H0: Mean (Age of Fixed Educated group) = Mean (Age of 3-levels -0.36 overeducated group) Schooling years H0: Mean (Schooling years of Fixed Educated group) = Mean -0.33 (Schooling years of 1-level undereducated group) H0: Mean (Schooling years of Fixed Educated group) = Mean -1.55 (Schooling years of 1-level overeducated group) H0: Mean (Schooling years of Fixed Educated group) = Mean -0.73 (Schooling years of 2-levels overeducated group) H0: Mean (Schooling years of Fixed Educated group) = Mean -0.54 (Schooling years of 3-levels overeducated group) Experience in current firm H0: Mean (Experience years in current firm of Fixed Educated group) = Mean (Experience years in current firm of 1-level -0.48 undereducated group) H0: Mean (Experience years in current firm of Fixed Educated group) = Mean (Experience years in current firm of 1-level -0.55 overeducated group) H0: Mean (Experience years in current firm of Fixed Educated group) = Mean (Experience years in current firm of 2-levels 0.12 overeducated group) H0: Mean (Experience years in current firm of Fixed Educated group) = Mean (Experience years in current firm of 3-levels 1.16 overeducated group) Experience in current working field H0: Mean (Experience years in current major of Fixed Educated group) = Mean (Experience years in current major of 1-level 1.02 undereducated group) H0: Mean (Experience years in current major of Fixed Educated group) = Mean (Experience years in current major of 1-level -0.77 overeducated group) H0: Mean (Experience years in current major of Fixed Educated group) = Mean (Experience years in current major of 2-levels -0.71 overeducated group) H0: Mean (Experience years in current major of Fixed Educated group) = Mean (Experience years in current majors of 3-levels 0.37 overeducated group) 83 p-value Accept/Reject H0 (α=10%) 0.40 Accept 0.10 Reject 0.31 Accept 0.75 Accept 0.75 Accept 0.12 Accept 0.49 Accept 0.64 Accept 0.64 Accept 0.58 Accept 0.91 Accept 0.34 Accept 0.34 Accept 0.44 Accept 0.49 Accept 0.74 Accept APPENDIX Table A 4: Chi-squared test for determinants of vertical mismatched education p-value Accept / Reject H0 (α=10%) No difference in overedu among education level 0.000 Reject No difference in overedu among schooling major group 0.204 Accept No difference in overedu between male and female 0.184 Accept No difference in overedu between single and married 0.635 Accept No difference in overedu among children quantity 0.003 Reject No difference in overedu among activity status 0.006 Reject No difference in overedu among long-term health status 0.940 Accept No difference in overedu among firm type 0.021 Reject No difference in overedu among working places 0.534 Accept No difference in overedu among immigration status 0.795 Accept No difference in overedu among income level 0.171 Accept No difference in overedu between fulltime and part-time job 0.422 Accept H0 84 APPENDIX QUESTIONNAIRE Bằng cấp cao bạn là/ Your highest degree is  Tiểu học / primary education  Trung học sở / junior high school  Trung học phổ thông / high school  Trung cấp nghề / vocational certification  Cao đẳng / college  Cử nhân/ Kỹ sư Đại học / bachelor  Thạc sĩ / master  Tiến sĩ / doctor Tính từ bắt đầu bậc tiểu học, tổng cộng số năm bạn học năm/ How many years you were in school Ngành học bạn (tương ứng với bậc học cao bạn)/ What is your schooling major (in highest and latest degree)  Kinh tế / Economic  Truyền thơng / Communications  Hành - nhân / Administration - Human resource  Công nghệ thông tin / Information and Technology  Kiến trúc – Mỹ thuật / Architecture and Fine arts  Khoa học nông nghiệp/ Agriculture science  Cơng nghệ Sinh học – Hóa học / Biological -Chemical sciences  Nghiên cứu khoa học tự nhiên (Toán, vật lý, ) / Natural science (Mathematics, Physical, ect)  Y dược / Medicine and Pharmacy  Giáo dục / Education  Ngôn ngữ học / Languages 85  Luật / Law  Kỹ thuật (cơ, điện, ) / Mechatronic Technology  Xây dựng / Civil Engineering  Môi trường / Environment  Thể dục - Thể thao / Sport  Du lịch - Khách sạn - Vận tải / Hospitality - Transport  Ẩm thực / Cuisine Hình thức doanh nghiệp bạn làm việc / Type of enterprise you are working for  Cơ quan nhà nước, phủ / Government institute  Doanh nghiệp có vốn nhà nước / State owned enterprise  Doanh nghiệp vốn tư nhân / Private enterprise  Doanh nghiệp có vốn đầu tư nước ngồi / FDI enterprise  Tự kinh doanh / Self-employed business Quy mô công ty bạn làm việc / How many employees in your enterprise?  Dưới 25 nhân viên / Less than 25 employees  Từ 25 đến 50 nhân viên / From 25 to 50 employees  Từ 50 đến 100 nhân viên/ From 50 to 100 employees  Từ 100 đến 500 nhân viên/ From 100 to 500 employees  Trên 500 nhân viên / More than 500 employees Bạn làm việc công ty tháng / How many months have you been working in current firm? Hình thức cơng việc bạn / Is your job fulltime or part-time?  Bán thời gian / Part-time  Toàn thời gian / Fulltime Thu nhập hàng tháng từ lương bạn triệu đồng / tháng / How much is your monthly wage? 86  Dưới triệu / Less than mil VND  Từ – triệu / From to mil VND  Từ – 10 triệu / From to 10 mil VND  Từ 10 – 15 triệu / From 10 to 15 mil VND  Từ 15 – 20 triệu / From 15 to 20 mil VND  Từ 20 – 25 triệu / From 20 to 25 mil VND  Từ 25 – 35 triệu / From 25 to 35 mil VND  Từ 35 - 50 triệu / From 35 to 50 mil VND  Trên 50 triệu / More than 50 mil VND Đánh giá mức độ liên quan công việc bạn ngành học bạn (kiến thức chuyên môn, kỹ đào tạo) / Does your current job relate to your schooling major (knowledge and skills)  Hồn tồn liên quan / Totally match  Có số phần liên quan / Partly match  Hoàn tồn khơng liên quan / Totally mismatch 10 Mọi người cần cấp trình độ để làm công việc bạn / What is actual required degree to work your job?  Trung học phổ thông / high school  Trung cấp nghề / vocational certification  Cao đẳng / college  Cử nhân/ Kỹ sư Đại học / bachelor  Thạc sĩ / master  Tiến sĩ / doctor 11 Nếu công việc bạn phần liên quan không liên quan đến ngành học, bạn lại chọn cơng việc / Why you chose this job even though it is partly related or totally unrelated to your schooling major  Lương cao có hội thăng tiến / High salary and promotion 87  Môi trường làm việc thân thiện / Friendly working environment  Công việc lĩnh vực hút bạn / Job in new major interesting you  Học hỏi nhiều từ công việc / Learn more from current job  Địa điểm làm việc thuận tiện / Convenient working place  Lý gia đình / Family reasons  Khơng thể tìm cơng việc liên quan đến ngành học/bằng cấp / Cannot find a related job  Lý khác / Another reasons 12 Nếu bạn làm công việc khơng liên quan tới ngành học, bạn có ý định tìm cơng việc khác liên quan tới ngành nghề bạn học không? / If your job unrelates to your schooling major, you attend to find another job  Có / Yes  Khơng / No 13 Bạn bắt đầu làm việc lĩnh vực năm / How many years have you been working in current field? 14 Bạn sinh năm bao nhiêu? In which year were you born? 15 Giới tính bạn / What is your gender?  Nam / Male  Nữ / Female 16 Tình trạng nhân / How is your marriage status?  Độc thân / Single  Đã kết hôn / Married 17 Bạn có người / How many children you have? 18 Trong dài hạn, tình trạng sức khỏe bạn? How about your long-term health status?  Rất khỏe / Excellent  Khỏe / Good  Trung bình / Average 88  Kém / Poor 19 Tình trạng khả vận động / Do you have activity-limitation  Không giới hạn vận động / No  Hơi giới hạn / A little  Rất hạn chế vận động / Yes 20 Địa thường trú bạn tỉnh / Where is your permanent address? 21 Hiện tại, bạn làm việc tỉnh / Which city/province are you working? 89 ... 48 4.2.1.1 Determinants of horizontal education- occupation mismatch 48 4.2.1.2 Effect of horizontal education- occupation mismatch on earnings 53 4.2.2 Vertical education- occupation mismatch. .. Definition 2.1.2 Determinants of horizontal education- occupation mismatch 2.2 Over -education and under -education (Vertical education- occupation mismatch) 2.2.1 Definition... 4.2.2.1 Determinants of vertical education- occupation mismatch 59 4.2.2.2 Effects of vertical education- occupation mismatch on earnings 63 CONCLUSION AND POLICY IMPLICATION 71 5.1 Conclusions