Changing wage structure and education in Vietnam 1993-1998: The roles of demand

This paper examines the changes in relative earnings of workers with different education levels during Vietnam’s transition. It is found that females enjoy a higher return to education than males do in 1998, reversing the situation observed five years ago. A large fall in the returns to vocational training for males, amid the rapid growth in the representation of better-educated females in the private sector where education is valued higher could be responsible for what have occurred. A direct assessment of the role of demand using a simple demand and supply framework developed by Katz-Murphy (1992) is undertaken. The result suggests an increase in the relative demand for better-educated workers appears to play an important role in explaining the earnings differentials between workers of different education groups. Education reform to better suit the needs of the post-reform emerging market, on-the-job training for workers, as well as equal access to education are some policy options that hold the key to reduce wage inequality between different education groups.