Free Essay

Management

In: Business and Management

Submitted By bombyx
Words 28628
Pages 115
82940 v2

Skilling up Vietnam: Preparing the workforce for a modern market economy Vietnam Development Report 2014
Main Report

November 2013

2 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Contents
Executive Summary ...................................................................................................................................... 7 Overview – Skilling up Vietnam: Preparing the workforce for a modern market economy ...................... 11 Skills and development in Vietnam ........................................................................................................ 11 Looking back: Vietnam’s shift away from agriculture and the role of education .............................. 11 Looking ahead: Modern jobs and changing skill needs ...................................................................... 13 What skills are in demand today (and will be in 2020)? ........................................................................ 15 Defining “skills”................................................................................................................................... 15 How are cognitive, behavioral and technical skills formed? .............................................................. 16 Preparing the workforce for a modern market economy .................................................................. 17 Step 1: Promoting school readiness through early childhood development ..................................... 18 Step 2: Building the cognitive and behavioral foundation in general education ............................... 20 Step 3: Building job-relevant technical skills through a more connected system.............................. 23 Summary................................................................................................................................................. 28 Chapter 1: Vietnam’s economic transformation and the role of education .............................................. 31 Trends in Vietnam’s labor market since đổi mới.................................................................................... 31 The role of education in Vietnam’s labor market................................................................................... 36 Looking ahead: Skill needs for an industrializing Vietnam ..................................................................... 42 Summary................................................................................................................................................. 46 Chapter 2: Skills for current and future jobs .............................................................................................. 49 Shifting the dialogue: from education to skills ....................................................................................... 50 What do we mean by skills? ................................................................................................................... 55 What skills are in demand and used in the urban labor market? .......................................................... 60 Summary................................................................................................................................................. 66 In depth: What are cognitive, behavioral and technical skills and how are they measured? ............... 67 In depth: Gender and skills in Vietnam .................................................................................................. 71 In depth: Comparing skills in Ho Chi Minh City and Hanoi ..................................................................... 73 In depth: Social and behavioral skills in Vietnam ................................................................................... 75 Chapter 3: Skills formation and the importance of the early years ........................................................... 77 What do we know about the formation of cognitive, social and technical skills? ................................. 77 Sensitive and critical periods for building a skill..................................................................................... 79 New skills are built off earlier skills and benefit from previous investments .................................... 82

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 3

Behavioral skills feed into cognitive skills and vice versa ................................................................... 83 Step 1: School readiness through early childhood development........................................................... 83 Effective parenting for children aged 0-3 ........................................................................................... 85 High quality preschool for children aged 3-6 ..................................................................................... 88 Summary................................................................................................................................................. 89 Chapter 4: Cognitive and Behavioral Foundation Skills in the General Education System ........................ 91 General education in Vietnam at a glance ............................................................................................. 92 Step 2: Building the cognitive and behavioral foundation in general education ................................... 95 More schooling ................................................................................................................................... 95 Better schooling.................................................................................................................................. 99 More involvement of parents and communities in schooling ......................................................... 105 Summary............................................................................................................................................... 106 In depth: Education and skills development in Korea .......................................................................... 107 Chapter 5: Technical skills to promote employability .............................................................................. 111 Technical skills development in Vietnam at a glance ........................................................................... 111 Step 3: Building job-relevant technical skills through a more connected system................................ 116 Better information ............................................................................................................................ 117 Adequate incentives ......................................................................................................................... 121 Enhanced capacity ............................................................................................................................ 125 Summary............................................................................................................................................... 128 In depth: Developing occupational skills standards in Vietnam’s tourism sector................................ 129 References ................................................................................................................................................ 131 Endnotes ................................................................................................................................................... 137

4 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Acknowledgements
This report was prepared by a World Bank team led by Christian Bodewig and consisting of Reena Badiani-Magnusson, Kevin Macdonald, David Newhouse and Jan Rutkowski. Emanuela di Gropello and Mai Thi Thanh were core team members at the concept stage and helped shaped the analytical agenda for the report. Chapter 1 was authored by David Newhouse, Christian Bodewig and Reena BadianiMagnusson. Chapter 2 was authored by Reena Badiani-Magnusson, Jan Rutkowski and Kevin Macdonald. Chapter 3 was authored by Reena Badiani-Magnusson and Christian Bodewig with inputs from Kevin Macdonald. Chapters 4 and 5 were authored by Christian Bodewig with inputs from Kevin Macdonald. Shang Gao and Kai Partale (Tourism Sector Specialist at the European Union-funded “Environmentally and Socially Responsible Tourism Capacity Development Programme”) prepared “in depth” sections on Korea and on occupational standards in the tourism sector, respectively. Vo Kieu Dung prepared a box on the University or Danang and partnerships with industry. Nguyen Tam Giang collaborated with Hoang Xuan Thanh and a team from Ageless Consulting on a joint Oxfam and ActionAid Vietnam study funded by the United Kingdom Department of International Development (DFID) which yielded evidence on the factors influencing education choice. Dung Doan and Bhagyashree Katare provided analytical support for Chapter 1. Nguyen Minh Nguyet provided administrative support to the team throughout. The report benefited from comments from peer reviewers Ariel Fiszbein, Mamta Murthi (at concept stage) and Omar Arias (at completion stage) as well as from Victoria Kwakwa, Xiaoqing Yu, Luis Benveniste, Michael Crawford, Lars Sondergaard, Deepak Mishra, Gabriel Demombynes, James Anderson, Vo Kieu Dung and many others. The team acknowledges extensive comments and advice received throughout preparation from Caine Rolleston from the Young Lives Research team at Oxford University. Lastly, the team thanks participants in numerous consultation meetings with Vietnamese citizens, employers, policymakers, education practitioners and development partners, both online in coordination with the VietnamNet online news paper and face to face, for their advice and views which have shaped the hypotheses and the messages in this report. This report would not have been possible without data from the World Bank’s Skills Toward Employment and Productivity (STEP) skills measurement project which collects information on workforce skills in multiple countries across the world, including in a first round in Vietnam, Yunnan Province of China, Lao PDR, Sri Lanka and Bolivia in 2011/2012. The Vietnam surveys were managed by Maria Laura Sanchez Puerta and Alexandria Valerio from the World Bank’s Human Development Network under the oversight of Ariel Fiszbein, the Network’s Chief Economist.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 5

6 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Executive Summary
Education has played an important role in making Vietnam a development success story over the last twenty tears. Vietnam’s rapid economic growth in the 1990s was driven predominantly by productivity increases that came in the wake of a rapid shift of employment out of low productivity agriculture into higher productivity non-farm jobs. Vietnam’s economy began to industrialize and modernize. Poverty fell dramatically. And education played an enabling role. Vietnam’s committed effort to promote access to primary education for all and to ensure its quality through centrally setting minimum quality standards has contributed to its reputation for having a well-educated, young work force. New evidence presented in this report shows that literacy and numeracy among Vietnam’s adult workforce is widespread and more so than in other countries, including wealthier ones. But Vietnam is facing new challenges. The pace of economic growth and the reallocation of jobs away from agriculture have slowed in the wake of structural problems in the enterprise and banking sectors and macroeconomic turmoil in recent years. Capital investments, and not productivity, have become the main source of economic growth. This is not a sustainable model for ensuring continued rapid economic growth. While the size of its workforce is still expanding, its youth population is shrinking. This means that Vietnam cannot continue to rely on the size of its workforce for continued success; it needs to focus on making its workforce more productive and alleviating skills barriers to labor mobility. A skilled workforce is central to Vietnam’s economic modernization Equipping its workforce with the right skills will, therefore, be an important part of Vietnam’s effort to accelerate economic growth and further its economic modernization in the coming decade and more. Judging by the experience of its more advanced neighbors, economic modernization will involve a shift in labor demand from today’s predominantly manual and elementary jobs towards more skill-intensive non-manual jobs, from jobs that largely involve routine tasks to those with non-routine tasks, from old jobs to “new” jobs. And “new” jobs will require new skills. These new jobs can already be found in today’s labor market, but Vietnam’s employers struggle to find the right workers for them. Despite impressive literacy and numeracy achievements among Vietnamese workers, many Vietnamese firms report a shortage of workers with adequate skills as a significant obstacle to their activity. A majority of employers surveyed for this report said that hiring new workers is difficult either because of the inadequate skills of job applicants (a “skills gap”), or because of a scarcity of workers in some occupations (a “skills shortage”). Unlike many countries around the world today, Vietnam does not suffer from low labor demand; its employers are seeking workers, but they cannot find the workers that match their skill needs. Wanted: Cognitive, behavioral and technical skills What skills are in demand in Vietnam’s non-agricultural labor market today? Employers identify jobspecific technical skills as the most important skill they are looking for when hiring both white and blue collar workers. Such technical skills include, for example, the practical ability of an electrician to do the job. But employers are equally looking for cognitive skills and behavioral skills. For example, next to jobspecific technical skills, working well in teams and being able to solve problems are considered important behavioral and cognitive skills for blue collar workers. When employers hire white collar workers, they are expecting that they can think critically, solve problems, and present their work in a convincing manner to clients and colleagues.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 7

In short, Vietnam’s new jobs require that workers have good foundational skills, such as good reading ability. But in order to be successful in the future, workers also need more advanced skills that help them to be responsive to changes in workplace demands. Vietnam’s education system has a strong track record in producing good foundational skills, but faces greater challenges in producing the advanced skills that will be increasingly demanded in coming years. Three steps for a holistic skills strategy for Vietnam This report summarizes emerging evidence on the formation of cognitive, behavioral and technical skills. Cognitive skills formation is the most intensive in the very early years in life and continues through adolescence. Behavioral skills are also first formed in childhood, and continue to evolve throughout adult life. Moreover, stronger cognitive and behavioral skills will help workers to continuously update their technical skills during their working lives. This will rise in importance as Vietnam’s population ages, as production in Vietnam becomes more technically sophisticated and as workers need to catch up with technological changes occurring during their longer working lives. What does this mean for Vietnam’s education and training system? This report proposes a holistic skills strategy for Vietnam which looks at today’s workforce as much as the future workforce. It entails three steps: Step 1: Promoting school readiness through early childhood development Vietnam can do more to promote school readiness through early childhood development interventions. Efforts at expanding access to preschool education for 3-5 year-olds are showing success but more attention is needed for children aged 0-3, in particular on tackling malnutrition. Almost a quarter of the children below the age of 5 are stunted. In Vietnam and around the world, stunting has been found to strongly negatively affect cognitive skills development. Some stunted children remain behind for the rest of their lives. Vietnam cannot afford that. Step 2: Building the cognitive and behavioral foundation in general education Vietnam can further strengthen the cognitive and behavioral foundation skills by promoting more schooling and better schooling in primary and secondary education. This entails expanding enrolments in full-day schooling and preventing early school leaving after primary and lower secondary education as well as renovating the curriculum and teaching methods to help Vietnamese students to become more effective problem-solvers, critical thinkers, better communicators and team workers. Work on a new curriculum is already under way, and Vietnam has adapted a promising model from Colombia called Escuela Nueva which features more group learning and problem-solving than the memorization and copying often seen in Vietnamese primary school classrooms today. A pilot under way in 1,500 schools across Vietnam is already showing successes and holds lessons for broader reforms. Step 3: Building job-relevant technical skills through a more connected system Vietnam can build better and more relevant technical skills among its graduates and labor market entrants. Technical skill shortages and gaps are not the concern – they are indicators of a dynamic economy which creates new, more skill-intensive jobs. The concern is whether the education and training system is equally dynamic in adjusting quickly to ensure the supply of technical skills keeps up with the constant and accelerating evolution of the demand for technical skills. Ensuring that Vietnamese graduates come with the right job-relevant technical skills requires that firms, universities and vocational schools, and current and prospective students become better connected.

8 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Better coordination and partnerships can help improve the information about what skills employers need and are likely to need in the future. Better information on graduates’ job placements can help future students to choose the best schools, universities and programs. Occupational competency standards and certification systems can improve the information about the skills that workers possess. More autonomy in decision-making coupled with accountability for the employability of their graduates (the right incentives) and better skilled staff and equipment (enhanced capacity) will help universities and vocational schools to effectively respond to the information on employer needs. Scholarship programs can provide more, including disadvantaged, students with opportunities. The government plays an important role in a more dynamic and better connected skills development system. Rather than planning and managing the education and training system centrally and top-down, the government should help to overcome the disconnects through empowering students, universities and schools and firms to make good decisions – by facilitating the flow of information, by providing the right incentives to schools and universities to be responsive to information and through carefully investing in raising their capacity. The time to act is now Vietnam’s continued transformation towards a successful industrial, middle-income economy is not automatic or guaranteed. Structural reforms in the enterprise and banking sectors and sound macroeconomic policies will matter in ensuring continued fast change, but so will the quality of Vietnam’s workforce. Changes in education and training can take a generation to result in a workforce equipped with the right skills. The time to modernize skills development is now to ensure that worker skills do not become a bottleneck. Preparing the workforce for an industrial economy is not just the government’s job. It requires a change in behavior by all actors in skills development – employers, schools and universities and students and their parents alike. Firms and universities need to build close partnerships. Parents need to become more involved in their children’s schooling. Students need to expose themselves to the world of work even prior to their graduation. In rural areas, all parties need to ensure that children from disadvantaged backgrounds have the opportunity to meet their full potential. The role of government is to facilitate this change in behavior by helping to ensure a better information flow between all the actors, to address capacity constraints including financing capacity, and to set the right incentives by freeing up universities to partner more effectively with businesses.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 9

10 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Overview – Skilling up Vietnam: Preparing the workforce for a modern market economy
Vietnam is a country undergoing multiple transitions. The transition from central planning to a market economy, started in 1986 with the đổi mới (renovation) reforms, is much advanced but not yet complete. The same is true for the transition from an agricultural to a modern, industrialized economy. In advancing along these parallel transitions, Vietnam has been counting on one of its biggest assets – its abundant young workforce. But Vietnam is also going through a demographic transition towards an aging society. While the size of its workforce is still expanding, Vietnam’s youth population is shrinking. This means that Vietnam cannot continue to rely on the size of its workforce to advance these transitions; it also needs to focus on making its workforce more productive. A skilled workforce is central to the success of Vietnam’s economic and social transitions. There is a long-standing consensus across Vietnamese society on the importance of education. The focus on education is evident in considerable public and private investments and growing levels of educational attainment. There is also, however, an equal consensus that Vietnam still needs to do more to develop the “skills”, or “quality” of its workforce – one of the three breakthrough goals of the country’s ten-year socio economic development strategy for 2011 to 2020. Today, a growing public debate among students, parents, employers, educators and policymakers is under way on what skills are required in the modern market economy, how to ensure that these skills are developed in future graduates and how each of the stakeholders can play a role in improving the skills of the workforce. The 2014 Vietnam Development Report seeks to contribute to the public debate on the topic of “skills” and to inform Vietnam’s strategic skills development. Using new survey instruments developed by the World Bank, the report analyzes the demand for skills by Vietnamese employers in the greater Hanoi and Ho Chi Minh City region, Vietnam’s economic growth poles, and assesses the skills profile of the working age population in urban Vietnam. Based on this analysis, it examines how and when different types of skills are formed and what this means for reforming the education and training systems. It will propose a set of policy recommendations along three steps of a holistic skills strategy: first, promoting school readiness through early childhood development; second, building the cognitive and behavioral (also called ‘non-cognitive’) foundation in general education; and, third, building jobrelevant technical skills through a more connected system.

Skills and development in Vietnam
Looking
back: Vietnam’s shift away from agriculture and the role of education
Vietnam’s economy has undergone fundamental structural changes over the last 25 years with a shift of employment from the agricultural sector to wage employment in manufacturing, construction and services. Since the launch of the đổi mới reforms in the late 1980s Vietnam has experienced rapid economic growth, which has catapulted it to middle income status in 2010 and has contributed to a fast decline in poverty (World Bank, 2012b). This economic miracle was initially associated with substantial labor productivity increases – GDP per employed person more than doubled between 1990 and 2010 – that came in the wake of improved agricultural efficiency and a rapid shift of employment out of low productivity agriculture into higher productivity non-farm jobs (Figure 1).

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 11

Figure 1: Vietnam has seen a large shift of employment from agriculture to the non-agricultural sector
70% 60% 50% 40% 30% 20% 10% 0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

non-agriculture wage employment

agricultural employment

Source: World Bank staff estimates using Vietnam Household Living Standards Survey (VHLSS). Note: The 2010 VHLSS used a new sample frame based on the 2009 census. This captures migration between 1999 and 2009 from rural to peri-urban areas, where fewer workers work in agriculture.

Education has played an important role in supporting and promoting structural change. Vietnam’s population has become increasingly well educated. The fraction of the population with less than primary school has plummeted over time, and those born in the period following the đổi mới reforms have attained higher levels of education than any other generation in the history of Vietnam. Vietnam’s committed efforts to promoting access to primary education for all has allowed increasing shares of the population to take advantage of greater economic opportunities. The rise in educational attainment has however been uneven across Vietnam. While more and more young people complete primary education, important inequities in access and attainment remain at secondary levels, affecting in particular children from ethnic minority families or residing in remote parts of Vietnam. A needed expansion in secondary education will come through greater enrolment of the less well-off. Education has provided most Vietnamese workers with the key basic skills needed to succeed in the workforce: the ability to read and write at an adequate level. In addition to expanding access, Government efforts to centrally set minimum quality standards have contributed to achieving good basic education outcomes. New evidence from STEP shows that literacy and numeracy among Vietnam’s students and adult workforce is widespread and more so than in other countries, including wealthier ones. In the STEP reading assessment Vietnamese workers outperformed their peers not just in poorer Laos but also in richer Bolivia and Sri Lanka (Figure 2). This new evidence compounds findings from comparable student assessments as part of the Young Lives research project which show that Vietnamese students at various age levels do better in mathematics than students of the same age in India, Ethiopia and Peru (Rolleston, James and Aurino, forthcoming). The message is thus: while inequities remain, Vietnam’s basic education system appears to be doing a fine job at imparting key basic skills for the majority of its students.

12 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Figure 2: Percentage of individuals by literacy test score, STEP household survey.
Percentage of Individuals by Literacy Test Score Pass Core Test 100% 80% 60% 40% 20% 0% Lao PDR Fail Core Test -20% 14% -40% 33% 16% 8 7 6 5 4 3 2 1 Sri Lanka Bolivia Vietnam 5% Yunnan, China 1% 0 95% 86% 67% 84% 99%

Source: World Bank staff estimates using the STEP household survey, n=3328. All country samples are restricted to urban only for comparison reasons. The scores reflect performance of individuals on a reading literacy test; individuals who score 3 or more on the test are considered sufficiently skilled to be able to continue on to the next level of the test while those who score below 3 are considered to have failed the test of basic literacy skills.

Looking ahead: Modern jobs and changing skill needs
The pace of economic growth and the reallocation of jobs away from agriculture have slowed in recent years. This slowdown has come in the wake of macroeconomic instability, structural problems in the enterprise sector and weaknesses in the banking sector. This has had an effect on the labor market, with evidence of a bifurcation that is associated with educational attainment. While well educated workers are taking advantage of expanding opportunities in the private sector, especially in urban areas, less educated workers, and particularly those in rural areas, are having more difficulty. Less educated workers and youth from rural areas have more difficulty transitioning into the expanding private sector, and are often left in the agricultural sector or in informal employment. Economic growth has not just decelerated; its composition has also changed compared to the early years of đổi mới. While productivity growth was the main driver of GDP growth in the early years of Vietnam’s transition, capital investments have become the main source of economic growth in recent years (World Bank, 2012a). This is not a sustainable model for ensuring continued strong economic growth. Vietnam has every potential to continue its success story and achieve fast growth and convergence in living standards with richer nations in the coming decade and more. But in order to do so, it will need to promote labor productivity growth across the board and a continued shift of employment into the non-agricultural sector. Equipping its workers with the right skills will be an important part of Vietnam’s effort to accelerate economic growth and further advance its economic transition. Judging by the experience of its more advanced neighbors such as Korea, Vietnam can expect a shift in labor demand from today’s predominantly manual and elementary jobs towards more skill-intensive non-manual jobs, from jobs that largely involve routine tasks to those with non-routine tasks, from traditional jobs to modern jobs. And these modern jobs will require new skills.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 13

Figure 3: Workers in more advanced occupations need to solve problems more frequently
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Managers Professionals Technicians Clerical Service & Sales Craftsman Operators Manual Workers Fraction of wage workers in different occupations who report having to problem-solve in their work, by frequency Less than once a month At least once a month At least once a week Every day

Source: World Bank staff estimates using the STEP Employer Survey. The figure shows responses to the following question: “Some tasks are pretty easy and can be done right away or after getting a little help from others. Other tasks require more thinking to figure out how they should be done. As part of this work as [occupation], how often do you have to undertake tasks that require at least 30 minutes of thinking (examples: mechanic figuring out a car problem, budgeting for a business, teacher making a lesson plan, restaurant owner creating a new menu/dish for restaurant, dress maker designing a new dress)”. Respondents were asked to indicate how often they conducted a task of this form. The sample includes only wage employees (n=1313).

Modern skill-intensive jobs are becoming more prominent in Vietnam’s labor market and carry high returns. Most non-farm jobs in Vietnam today are in blue collar occupations (craftsmen, machine operators and manual workers) and in the service and sales sector. Better educated professionals and technicians make up less than a quarter of the non-agricultural workforce. However, young graduates are increasingly entering professional and technical occupations. Workers in these occupations report that they need a number of attributes for their jobs: they have to solve problems, learn new things frequently, present ideas or persuade clients at work or interact with non-colleagues (Figure 3). Evidence presented in this report suggests that the nature of tasks performed by Vietnamese workers has been changing from predominantly manual and routine tasks, where workers are asked to perform the same function on a regular basis, towards more analytical, interactive and non-manual tasks where the type of tasks changes regularly. Workers performing these tasks are also better remunerated than their peers in traditional jobs. However, Vietnam’s employers struggle to find the right workers for these modern jobs. Despite impressive literacy and numeracy achievements among Vietnamese workers, many Vietnamese firms report difficulties in finding workers with adequate skills as a significant obstacle to their activity. STEP evidence suggests that worker skills and availability are more binding concerns for employers than labor market regulations and taxes. A majority of employers said that hiring new workers is a challenge either because of inadequate skills of job applicants (a “skills gap”), or because of a scarcity of workers in some occupations (an occupational “skills shortage”). The skills gap is particularly acute among applicants for jobs in technical, professional and managerial occupations – jobs that more likely ask workers to conduct analytical, non-manual and non-routine tasks. In contrast, a skills shortage, or a shortage in applicants in particular types of jobs, is common among more elementary occupations.

14 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

What skills are in demand today (and will be in 2020)?
Defining
“skills”
A worker’s skill set comprises different domains of skills: cognitive skills, social and behavioral skills, and technical skills. These domains cover job-specific skills that are relevant to specific occupations as well as cognitive abilities and the various personality traits that are crucial for success in the labor market. Cognitive skills include the use of logical, intuitive and critical thinking as well as problem solving using acquired knowledge. They include literacy and numerical ability, and extend to the ability to understand complex ideas, learn from experience, and analyze problems using logical processes. Social and behavioral skills capture personality traits that are linked to labor market success: openness to new experiences, conscientiousness, extraversion, agreeability, and emotional stability. Technical skills range from manual dexterity for using complex tools and instruments to occupation-specific knowledge and skills in areas such as in engineering or medicine (Figure 4).
Figure 4: The three dimensions of skills measured in the STEP survey

Cognitive
Involving the use of logical, intuitive and creative thinking

Social and Behavioral
Soft skills, social skills, life-skills, personality traits Openness to experience, conscientiousness, extraversion, agreeability, emotional stability Self-regulation, perseverance, decision making, interpersonal skills

Technical
Involving manual dexterity and the use of methods, materials, tools and instruments Technical skills developed through vocational schooling or acquired on the job Skills related to a specific occupation (e.g. engineer, economist, IT specialist, etc)

Raw problem solving ability vs. knowledge to solve problems Verbal ability, numeracy, problem solving, memory (working and long-term) and mental speed

Source: Pierre, Sanchez Puerta, and Valerio (forthcoming), STEP Skills Measurement Surveys. Innovative Tools for Assessing Skills

Vietnamese employers are looking for a mix of high quality cognitive, behavioral and technical skills. Employers in greater Hanoi and Ho Chi Minh City surveyed for this report identified job-specific technical skills as the most important skill they are looking for when hiring both white and blue collar workers (Figure 5). Such technical skills include, for example, the practical ability of an electrician to do his or her job. However, like employers in more advanced middle and high income economies, employers report that they are equally looking for employees with strong cognitive skills and behavioral skills. For example, next to job-specific technical skills, team work and problem-solving skills are considered important behavioral and cognitive skills for blue collar workers. When they hire white collar workers, employers are expecting that they are critical thinkers, can solve problems, and communicate well. Basic cognitive skills such as literacy and numeracy feature less prominently. That does not mean that they are not important – but it may mean they are simply taken for granted. In short, Vietnam’s employers require that workers are good readers, but also good problem-solvers.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 15

Figure 5: Job-related skills are viewed as the most important among blue- and white-collar workers

Job-specific technical skills Leadership Problem solving Creative & critical thinking Communication Ability to work independently Team work Numeracy Foreign language Literacy Time management 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Blue-Collar White-Collar

Source: World Bank staff estimates using the STEP Employer Survey. White-collar workers include the following worker types: managers; professionals, technicians and associated professionals. Blue-collar workers are classified as the following workers: clerical support; service; sales; skilled agriculture, craft and related trades, plant and machine operators; elementary occupations. This figure is based on the 328 and 329 firms who reported having at least one worker in the white- and bluecollar category and were willing to respond about the skills used and needed by that worker in his or her work. The differences between blue and white collar occupations are all statistically significant with the exception of job-specific technical skills and communication skills.

How are cognitive, behavioral and technical skills formed?
The skill profile of the Vietnamese workforce reflects investments made throughout their lifetimes. The foundations of cognitive and behavioral skills are formed early and are the platform upon which later skills are built. A skills strategy must take into account all of the points at which skills are formed, and be built up from the early investments made during early childhood to on-the-job training in the labor market. Figure 6 provides a simplified summary of emerging evidence on the different points in childhood and early adulthood during which cognitive, behavioral and technical skills may be formed. Four features of skill formation are worth noting for the development of a skills strategy. 1. The most sensitive periods for building a skill vary across technical, cognitive and behavioral skills. These periods are indicated in bright green in Figure 7; periods during which the skills are less sensitive to investment are indicated in light green and periods where sensitivity is most limited are indicated in blue. Research shows the critical importance of good early stimulation and early childhood development to be able to make the most of one’s abilities. Children who fall behind early have a very hard time catching up to their peers. Behavioral skills are beginning to be formed in the early years and continue to evolve throughout adult life. 2. Skill formation benefits from previous investments and is cumulative. For example, a child who has learned to read fluently by second grade will be able to absorb more in third grade than a child who cannot yet read fluently. This implies that earlier investments are likely to have a

16 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

greater longer term impact on skills, since it is easier and less costly to build these skills at the moments when children are most receptive to learning. 3. Social and behavioral skills are valuable early in a child's life since they support, and benefit from, cognitive skills development. For example a child who displays more openness to new experiences is more likely to be imaginative, creative and apply themselves at school. 4. Technical and job specific skills – often acquired last, through technical and vocational education and training (TVET), higher education and on-the-job learning – will benefit from the stronger cognitive and behavioral skills acquired earlier in the education system. The skills learnt in formal education will help workers to continuously updating their technical skills during their working lives. This will rise in importance as Vietnam’s population ages and production in Vietnam becomes more technically sophisticated and workers need to catch up with technological progress during their longer working lives.
Figure 6: The process of skill formation – a simplified model

Source: Authors’ illustration based on international evidence from a range of disciplines studying the development of abilities, including psychology, economics, and neuroscience. An excellent overview of this literature can be found in Shonkoff and Philipps (2000), Almlund et al (2011), Cunha, Heckman, Schennach (2010) and Cunha and Heckman (2007).

Skills development starts with birth and continues through early childhood education and general primary and secondary education all the way to vocational and tertiary education and on-the-job training. Vietnam’s skills development strategy should, therefore, take a holistic approach and look at how to better equip individuals with relevant skills and knowledge along an individual’s life cycle. This report examines cognitive and behavioral skills acquisition in early childhood and general education and technical skill acquisition in vocational and tertiary education and on the job training.

Preparing the workforce for a modern market economy
Vietnam’s general education system has undergone a remarkable transformation since đổi mới and is now entering a new phase. Enrolments have expanded dramatically at every level and Vietnam’s population has become increasingly well-educated over the last decades. An initial, successful focus on expanding primary education access and completion, as called for under the Millennium Development Goals, has made way to an increased emphasis on expanding pre-primary, secondary education and

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 17

tertiary enrolments and raising the quality of provision. This is expected to help address three key challenges: First, pre-primary education to promote school readiness provides the best chance to overcome remaining inequalities in education. Second, enhanced enrolments at the secondary level and improvements in teaching methods and quality should help enhance the cognitive and behavioral foundation skills of graduates. Third, overcoming disconnects between employers, universities and vocational training providers and (prospective) students can help ensure that graduates come equipped with better technical skills. A holistic skills development strategy for Vietnam, therefore, should entail three steps (Figure 7).
Figure 7: Three steps in skills development

Source: Authors’ illustration

Step 1: Promoting school readiness through early childhood development
Early childhood development and education for children below the age of 6 is the most important entry point for building their cognitive and behavioral skills and making them “ready for school”. The right nutrition and stimulation before the age of 3 through effective parenting and quality preschool between 3 and 6 contribute to children’s school readiness. The concept of “school readiness” or “readiness to learn at school” represents whether a child entering primary school is able to succeed at school. School readiness is generally considered to be the product of a young child’s cognitive, physical and socio-emotional development from an early age onward (Nadeau et al., 2011). Vietnamese children from poor background are at a disadvantage in their readiness for school. In 2012, the Ministry of Education and Training (MOET) assessed school readiness among 5 year-old children in public preschools, using a survey that adapted the Early Development Instrument (EDI) to measure the development of children across five domains: physical health and well-being; social knowledge and competence; emotional health/maturity; language and cognitive development; and general knowledge and communication skills. The survey showed that children from poor households were significantly behind non-poor children across these domains of school readiness (MOET, 2013).

18 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Malnutrition is a key driver of school “un-readiness”. Almost a quarter of Vietnamese children below the age of 5 are stunted (GSO and Unicef, 2011, see Figure 8). Apart from poverty, child malnutrition can be explained by inadequate infant and young child feeding practices, including low rates of breastfeeding. In Vietnam and around the world, stunting has been found to strongly negatively affect cognitive skills development (Le Thuc Duc, 2009). Some stunted children remain behind their peers for the rest of their lives.
Figure 8: Young children from poor household are more likely to suffer from stunting and receive less parental stimulation
Share of children under 5 with low height for age 45 40 35 30 Percent 25 15 10 5 0 National Q1 (poorest) Q2 Q3 Wealth index Q4 Q5 (richest) Percent 20 Percent of children aged 35-59 months with whom adult household members engaged in four or more activities 100 90 80 70 60 50 40 30 20 10 0 All Poorest quintile Wealthiest quintile

Source: GSO/UNICEF 2011

Deficits in school readiness will persist throughout life. Much of the inequality in learning outcomes between different types of young Vietnamese observed in primary education and beyond is already established before the age of formal schooling. The Government of Vietnam has placed increased focus on enhancing school readiness for 3 to 6 year olds, a policy that is well-motivated and addresses a key area of deficit. Vietnam’s efforts at expanding access to preschool education for 3-5 year-olds are showing success but more attention is needed for children aged 0-3, in particular on tackling malnutrition. Children from poorer households often lack stimulation, which limits their development potential from an early age. The brain development of young children is highly sensitive to stimulation and interaction. The more parents and care-givers interact with a young child, for example through talking, singing or reading, the better are the conditions for brain development. However, evidence shows that in Vietnam young children from the poorest households receive less stimulation from their parents than children from the wealthiest ones. This implies that during these early years in which children’s brains are the most sensitive to interactions and learning, children from poor households are not receiving the investments that they need and are already falling behind children from wealthier households. The support for the development of children aged 0-3 remains weak in Vietnam. Considerable international and Vietnamese evidence presented in this report shows that targeted interventions can reduce stunting and mitigate its effect on a child’s cognitive development. Despite high rates of stunting among children under the age of 5 and strong evidence of low and declining use of breastfeeding, the key policy interventions needed to curb the effects of malnutrition are not yet adequately prioritized in government policy. These interventions include a focus on child nutrition, infant and young child

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 19

feeding. There is significant scope for more systematic promotion of breastfeeding and child stimulation through a variation of parallel family-based interventions in hospitals after birth, in local health stations, in communities, and through communication campaigns and complemented by social assistance that provides financial assistance to enable poor parents to make better choices for their children. In contrast, the promotion of preschool for children aged 3-6 is currently the main policy lever of the Government to enhance school readiness. As a result of recent reforms, Vietnam’s early childhood education system has many strengths–including a sound policy framework, child-focused curriculum and rapidly expanding provision in the wake of the program to universalize full-day preschool for 5 year-old children (Program 239). However, policies to promote access and quality at the national level have not yet been fully translated into actual provision in the provinces. This is still resulting in wide variations in quality and access, in particular affecting disadvantaged children. While promoting access remains a priority, particularly in underserved regions, the Government’s focus is now increasingly shifting towards translating its modern and child-centered curriculum into quality provision across all classrooms through upgrading the competence of the current teaching workforce.

Step 2: Building the cognitive and behavioral foundation in general education
The next step for Vietnam’s general education system: balancing good basic literacy and numeracy skills with higher order cognitive skills such as problem-solving and critical thinking. Recent Young Lives research from a school survey in Vietnam that included a grade 5 student assessment in 2012 shows that large majorities of students tested at grade 5 had good formal mathematics skills. However, fewer children were able to answer questions that involved less familiar approaches even when the required mathematical knowledge for a question was less than they could demonstrate compared to a more formal and familiar question. Though certainly not conclusive, this provides some suggestive evidence that the primary school curriculum and pedagogy may not yet adequately help children transfer formal knowledge into unfamiliar settings, a cognitive skill demanded by employers and rewarded in the workplace. Vietnam’s general education system is successful in providing graduates with good basic cognitive skills. Reforms should carefully build on the system’s strengths. Shifting the emphasis in general education towards making sure that more children learn and acquire also the higher order cognitive and behavioral skills demanded in Vietnam’s labor market does not mean that the system needs wholesale reform. Instead it needs careful adjustments, building on its strong features. Building stronger cognitive and behavioral skills will require (i) more schooling for all, with full-day instruction and expansion of access to secondary education, (ii) better schooling for all, with a curriculum and teaching and assessment methods which foster the development of cognitive and behavioral skills in students and (iii) greater involvement of parents and communities in schooling.

More schooling for all
Enhancing cognitive skills among Vietnam’s next generation will require that they spend more time in school. First, enrolments in secondary education in Vietnam remain below potential. Enrolments are particular low among children from less wealthy background. Education careers need to be extended through increasing progression rates from primary to lower secondary, from lower secondary to upper secondary and then to post-secondary education. This will inevitably mean easing the financial barriers to education affecting less well-off students through fee waivers and direct cash support. Second, tuition time in primary education with between 23 and 25 instruction periods over a school year of 36

20 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

weeks remains low compared to other countries. Better-off parents tend to make up for this by paying for their children to attend “extra classes” – regular, core academic lessons typically by their own teachers after school hours. Extra classes are not only a Vietnamese phenomenon; they are encountered across several countries in East Asia. But they are prominent in Vietnam: In 2010 parents of 33 percent of primary students and 49 percent of lower secondary students reported some expenditure on coaching sessions for academic subjects. Extra classes are problematic in multiple ways. First, if they focus on the same academic knowledge on a narrow part of the formal half-day curriculum (coaching sessions for compulsory subjects) as opposed to a wider curriculum and activities that help build behavioral skills, such as arts or sports, they risk consuming precious time that could be allocated for alternative activities. Second, extra classes are often informal and not regulated. They place teachers in an undue position of power vis-à-vis parents. Parents are under pressure to pay for their children’s participation in the extra classes if they want to avoid the risk that the teacher might otherwise not let the child pass the exam. There is evidence that many parents are asked to make unofficial payments to schools and teachers (World Bank, 2012e; CECODES, VFF-CRT & UNDP, 2013). It may also undermine teachers’ motivation to perform well during the formal hours of instruction. Third, richer households are able to spend much larger amounts on extra classes and extra classes are mainly an urban phenomenon. There is, therefore, a risk that extra classes may deepen inequalities in learning. Expanding formal full-day schooling can provide the space for a more varied curriculum and mix of instruction and may well be the best strategy to limit extra classes. MOET has attempted to regulate the provision of informal extra classes, but not with much apparent effect. An alternative to regulating extra classes is to expand formal full-day schooling to reduce the time available for teachers to offer private tuition and help make up for their revenue loss related to foregone extra classes. More schooling carries additional costs which need to be covered by the government or parents or both. Vietnam has adopted the policy of “socialization” which involves levying user charges from those who can pay, while using budget resources to subsidize access for those who cannot (usually the registered poor). This is an appropriate choice so long as it is not creating new access barriers due to user charges, getting the balance right between those who can pay and those who cannot is tricky. Well-off parents who currently finance extra classes for their children could be asked to provide formal co-financing to schools for full-day schooling as opposed to informal payments to teachers who provide extra classes. But there is also considerable potential to get more out of existing public expenditure – due to Vietnam’s demographic transition: According to Vietnamese census data, the size of the population cohort below the age of 15 declined by 17 percent between 1999 and 2009. A decline in student numbers in general education may open fiscal space to accommodate expanding full-day schooling and enrolments at secondary level. Falling student numbers due to declining age cohorts means that budget resources (fewer schools, fewer teachers) could be freed up to cover additional costs associated with expanding enrolments in secondary education and full-day schooling, including progressively abolishing tuition fees at secondary level.

Better schooling for all
What matters is not just more schooling but more quality schooling with a curriculum, teaching and assessment methods that foster the formation of higher order cognitive and behavioral skills. More schooling should mean better schooling through a general education curriculum which balances

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 21

competency-based and content-based learning, coupled with the right teaching methods to stimulate creative and critical thinking in primary and secondary school students and the right approach to student assessment. Vietnam can benefit from the experience of Singapore and Korea – two countries with leading education systems. These countries adopted curricula and student assessment systems that promote both knowledge acquisition and active learning and creative and critical thinking in schools. In Vietnam, steps towards modernizing the curriculum are getting under way: In response to a call from the XI Congress of the Communist Party in 2011, the Ministry of Education and Training has launched an ambitious process of developing a new general education curriculum and new textbooks by 2015 with a definition of students’ essential competencies, which will then form the basis of educational objectives, standards, learning content, teaching methods and assessment. While curriculum change and textbook reform is an important step, what matters is the resulting change in the teaching methods and instruction in the classroom with well skilled teachers and school principals and parental involvement. Translating a new general education curriculum into concrete change in the classroom will require modernization of teacher professional development, both inservice and pre-service, and sustained investment in its roll-out to all teachers. In order to inform its curriculum modernization, Vietnam has adapted a promising model from Colombia called Escuela Nueva which features more group learning and problem-solving than the predominant focus on memorization and copying often seen in Vietnamese primary school classrooms today. A Vietnam Escuela Nueva (VNEN) pilot under way in 1,500 schools across Vietnam is already showing successes and holds lessons for broader reforms, and MOET intends to advance the pilot into lower secondary education. Teacher quality matters most for better schooling and Vietnam already has a strong teaching workforce. The primary education teacher workforce has become significantly better qualified in recent years. Nearly 60 percent of all primary school teachers now hold a college or university degree – almost double compared to 2006. Increased teacher qualification matters: Evidence from the 2012 Young Lives school survey suggests that high performing schools have higher shares of teachers with a college or university degree. High teacher capacity is also evident in their ability to correctly assess their students’ ability, which is critical to help them provide the support that their students need (Rolleston, James, Pasquier-Doumer and Tran, 2013). Better in-service teacher professional development can help better equip teachers with the skills to teach a modernized curriculum. Teacher training needs to not only focus on how to teach curriculum content but also on how to impart behavioral skills. There is a lot to improve: In-service professional development among primary teachers is limited and the content and methods require modernization – away from the traditional cascading model where the Ministry of Education and Training trains trainers who train other trainers to deliver training in the summer months toward one where capacities in provincial teacher training colleges are enhanced to provide more tailored programs all year round and with new teaching methods. Beyond curriculum and teaching methods, student assessment needs to be aligned with the objective of fostering higher order cognitive and behavioral skills. Vietnam makes much use of educational assessment: Classroom assessments with written and oral tests and marked assignments and homework are used to provide real-time feedback on students’ performance to inform teaching, while national examinations are used after grade 12 for making high-stakes decisions about students’ progression to the next level in the education system. Once the curriculum and standards in general education are adjusted to better reflect higher order cognitive and behavioral skills, the student assessment system

22 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

needs to be equipped with the tools to help assess these skills (as opposed to just content knowledge than can be memorized) in students, to see how schools perform in imparting these skills and to hold schools and local education authorities accountable for results. For example, the introduction of more open-ended questions would allow for greater emphasis on higher-order thinking and problem solving.

Schooling that involves parents and communities more
A prominent role for parents in school is important for several reasons. Parents have a strong interest in ensuring their children get a quality education. Providing them with information and a forum to voice views and advise the school can make the school more explicitly accountable to them for the learning progress of their children. Much learning takes place at home, and the home environment is an important contributor to learning success. Parents need to be aware of the learning process and content in the school and how they can complement this by providing effective support to their children’s learning at home – after school and during the long summer vacations. A greater involvement of parents and communities can also help make instruction more reflective of local needs, traditions and contexts and can help build bridges where there are cultural and other gaps between school and home, for example in the case of ethnic minority children which are taught by Kinh teachers. The opportunities for formal parental involvement in schools beyond making financial contributions are limited in Vietnam. Schools can establish a parents’ council for a class or the school as a whole but, where they exist, they have little formal powers. Such councils can channels parents’ feedbacks to teachers on educational issues and bring their voice to the principal regarding educational activities and management of the school. However, legally the parents’ council has very limited weight on influencing the operation and monitoring the performance of a public school, and in practice the role of the parents’ council is often reduced to collecting parents’ voluntary contributions to the school. A greater role of parents in the school is possible even within the current system of central standards and predominant decision-making at the province level. Provinces and districts could cede certain decisions to schools and with the involvement of parents. For example, schools could be entrusted with deciding on the arrangements for full-day schooling and parents could contribute to this decisionmaking. Parents could advise on how to incorporate extra classes into the formal program and how to arrange afternoon activities under formal full-day schooling. There are already examples of greater parental involvement in Vietnam: Schools participating in the Vietnam Escuela Nueva Pilot have the freedom to involve parents in the learning process and to contribute to learning content.

Step 3: Building job-relevant technical skills through a more connected system
Higher education, vocational training and on-the-job training are the key avenues for acquiring technical skills that workers need to work in their chosen profession. Higher education is booming in Vietnam and is viewed as the key avenue towards raising the quality of human resources by the population, firms and the government alike. Returns to higher education in Vietnam are large, suggesting strong demand for university graduates. Employment prospects of graduates from a prestigious university in urban areas are good, but less so for those in rural and remote areas (World Bank, 2013b). In response to high returns to education, enrolments have expanded dramatically over the recent decade (Figure 9), though they remain low in comparison to comparable countries in East Asia (World Bank, 2012c). Moreover, there are concerns about quality, particularly given the fast pace of expansion, and the relevance of what students and trainees learn. Vocational training is less popular than higher education and the share of 19-21 year-olds in vocational training has remained stagnant.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 23

Many firms provide on-the-job training to their workers. As they encounter skill gaps and shortages in the context of expanding enrolments in universities and in vocational schools, some employers choose to provide on-the-job training to their workers. The role of on-the-job training is to deepen the technical skills acquired in formal education and training and to adapt employees to the individual work place. Many Vietnamese firms report that they provide on-the-job training; however, most of this appears to be internal training, while external training is limited to few firms and workers, often those that are already relatively well educated and trained.
Figure 9: Enrolments in university and colleges exploded over the last decade, but less so in in post-secondary vocational training institutions
70% 60% 50% 40% 30% 20% 10% 0% 1998 2004 National University 2010 1998 2004 2010 1998 2004 2010 Urban Basic Vocational Rural College/Professional Vocational Share of 19-21 year-olds in post-secondary education

College (Non-Vocational)

Source: World Bank staff estimates using the 1998, 2004 and 2010 VHLSS surveys. The figure shows the fraction of 19-21 year olds enrolled in vocational training, college or university. In 1998, it is not possible to separate out university and college therefore all college and university admissions are included in the university figure.

Vietnam should not be concerned about the existence of skills gaps and occupational skill shortages, but about the ability of the skills development system to overcome them. Skills shortages and gaps are indicators of a dynamic economy which creates new, more skill-intensive jobs. The real concern is whether the education and training system is equally dynamic in adjusting quickly to supply graduates with the technical skills to keep up with a constant and accelerating evolution in the demand for technical skills. One indicator of responsiveness to expanding demand is the strong expansion in enrolments and in the supply of universities, colleges and vocational training institutes. But gross enrolments in tertiary education remain lower than those in neighboring countries, suggesting that supply can and will need to expand further. Moreover, another indicator is whether the rising numbers of graduates and job applicants bring the skills that employers demand. And the evidence provided in this report suggests that they often do not. Vietnam’s skill development system today is not as responsive as it needs to be and is suffering from “disconnects” between employers, students and universities and vocational schools. An unresponsive, under-performing skills development system is a disconnected system in which actors make choices and act in isolation and do not sufficiently interact with each other (Figure 10). Schools and universities may offer programs and produce graduates with skills that do not fully reflect the needs of the labor market. Students and parents may not be demanding the types of programs or teaching methods and content which would give them the skills they or their children need to succeed in the labor market. Like many countries around the world, Vietnam suffers from such system disconnects.

24 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Disconnects result from imperfect and asymmetric information among actors and their inadequate capacity and weak incentives to make good use of information. Information, incentive and capacity deficits make the system less dynamic in responding to the evolving technical skill needs in the economy. They reflect what economists call “market failures”.i The government plays an important role in helping to overcome these market failures. But rather than planning and managing the education and training system centrally and top-down as in the past, the government should help overcome the disconnects through empowering students, universities and schools and firms to make good decisions – by facilitating the flow of information, providing the right incentives to schools and universities to be responsive to information and through carefully investing in raising their capacity. Interventions on these three drivers of system responsiveness are mutually reinforcing and should be conducted in parallel.
Figure 10: Skills development is not working as a system of connected actors
Disconnects in skills development Causes of the disconnects

Employers

Poor information

Weak incentives

Education and training providers

Students and parents

Low capacity

Source: Authors’ illustration, adapted from World Bank (2012c)

Better information
Information is the oxygen of responsive skills development systems. First, without good information about employers’ skill needs, conditions in the labor market and returns to certain fields of study, education and training providers cannot make good choices on the programs to develop and offer. Second, without such information, students and parents cannot make good decisions on which school or university and which study program to choose. Third, without information on the quality of education programs and employment success of graduates, prospective students may not be able to make good choices. Strengthened coordination and partnerships between firms and universities and vocational schools can help to bridge many information gaps. Government at central and local levels can improve the flow and availability of information through using its convening power and using incentives to help initiate the establishment of formal and informal coordination mechanisms and partnerships between employers and training providers. While institutional models and set-ups vary across countries, all successful skills development systems around the world have created such coordination mechanisms. They range from the highly formal and institutionalized “dual system” in Germany which was built more than one hundred years ago to less formal and localized systems elsewhere. In Vietnam, partnerships

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 25

already exist between leading firms and universities, and the challenge is to learn from this experience and help spread them further. However, today central or local government rarely plays the role as facilitator of such initiatives. International experience suggests it could and should. Prospective students in urban Vietnam tend to have much better access to information to make education and career choices than their peers in rural areas. In urban areas, the market appears to provide adequate information to influence good decision-making: There is evidence that prospective students in urban areas choose those fields of study whose graduates earn the highest wages, business, IT and sciences. Qualitative evidence collected for this report suggests that prospective students in rural areas, by contrast, have fewer and less reliable information sources available than their urban peers. This suggests the need for increased and more career advice in schools in rural areas as well as enhancing the connectedness to the internet in schools in these areas. Better information on graduates’ job placements through tracer studies can help future students choose the best schools, universities and programs and provide an incentive to universities to focus on quality. They can also provide useful information to hiring firms on the quality and relevance of education programs and providers. Such studies collect information on employment patterns of graduates after a certain period, usually six months. While some universities in Vietnam conduct such studies to demonstrate their graduates’ labor market success, the use of tracer studies is not systematic. Improving the frequency and accessibility of labor market information can also help. Vietnam is collecting quarterly labor force data but its record in publishing and disseminating this information is poor. It is usually limited to headline unemployment statistics. More disaggregated analysis and publication of returns to education, returns to occupations and employment trends, for example by levels of education and by occupations, can provide useful information to prospective students as well as to training providers. Removing the scope for rent seeking and corruption in education also helps with improving information. Anticorruption surveys show that making unofficial payments in education is widespread (World Bank, 2012e, CECODES, VFF-CRT & UNDP, 2013). Corruption and unofficial payments deepen the disconnects by undermining the quality of information. Paying for grades, for example, compromises the information value of grades. With such payments, grades do not fully reflect a student’s real performance and thus make diplomas less useful for students in their job search and for firms in recruitment.

Right incentives
Even in a world of perfect and symmetrical information, students and parents as well as education and training providers may still not be able to make the right choices if they face weak incentives. For example, universities that are not sufficiently autonomous in their decision-making and who have to seek permission from central Government on whether to develop a new program or change any curriculum content will find it hard to respond to good information. A rigid curriculum that does not give space for vocational schools and universities to adjust their teaching methods and content to the changing and local needs expressed by employers may undermine their responsiveness. Greater autonomy of decision-making in education and training institutions, coupled with clear accountability for quality, is a critical precondition for enhanced linkages and partnership with industry. This is why the international trend in higher education and vocational training has been towards ensuring greater autonomy and accountability of institutions at the expense of central 26 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

government control. In line with this, Vietnam launched a comprehensive reform of the tertiary education sector which includes steps towards greater autonomy of higher education institutions. The recently adopted Higher Education Law creates legal conditions for greater institutional autonomy for higher education institutions on many important aspects like planning, opening and closing units, new programs, financial management and staffing. Vocational education and training institutions can choose up to 35 percent of curriculum content locally and can also introduce new study program at their own initiative, though subject to approval by the Ministry of Labor, Invalids and Social Affairs (MOLISA). Vocational schools also have autonomy to decide on matters such as staffing and financing. Vietnam’s principal challenge in higher education and vocational training now is to translate a legal framework for greater institutional autonomy into de facto autonomy. Despite expanded de jure autonomy of decision-making on curriculum content and study programs in vocational training, many vocational institutions decide to follow directions from the government and their main source of revenue remains government transfers, more so than proceeds from tuition fees and partnerships with enterprises (CIEM and World Bank, 2013). Likewise, de facto autonomy of many higher education institutions for decision-making in response to labor market needs is still limited, and university councils not fully empowered to hold universities accountable. While the two national universities in Hanoi and HCMC as well as regional universities are largely autonomous in decision-making, both public and private universities and colleges have to follow operational and academic policies set by MOET. The steps towards greater autonomy of national and regional institutions have demonstrated the benefits of a system in which MOET cedes greater decision-making to institutions, for example resulting in the establishment of partnerships with universities abroad and with local firms. Greater institutional autonomy for universities also means that the role of government needs to change from direct management towards stewardship of the system. Despite the recent moves towards promoting greater institutional autonomy, the Vietnamese Government still retains a strong say in managing the vocational and higher education systems, for example by centrally setting enrolment quotas in higher education and regulating and approving curriculum content. In contrast, a more connected, responsive skills development system suggests a different role for Government, with a shifting focus from controlling inputs (enrolment quotas, curriculum, teaching methods) to ensuring minimum quality levels (through accreditation) and incentivizing better outputs (qualifications and competencies of graduates). Government can use regulative and financing tools to steer the system and promote accountability for results. For example, rather than approving the content of a training program to become an electrician, the Government could invite employers and training providers to agree on occupational competency standards which an electrician should possess. Government could then focus on certifying electricians based on their competencies – whether they acquired them on the job, with a private or public training provider or elsewhere. There are increasingly examples of partnership between the Government, employers and providers in Vietnam in determining occupational competencies, for example in the tourism sector. The Government can use financing tools to incentivize excellence in universities (e.g. by allocating part of its financing based on results) or stimulate firms to partner with training providers and expand on-the-job training (e.g. through tax breaks).

Enhanced capacity
Even in a world of perfect and symmetrical information and appropriate incentives, students and parents as well as providers may still not be able to make the right choices if they face capacity

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 27

constraints. Students from less wealthy background often drop out because they are unable to finance the tuition and non-tuition as well as opportunity costs associated with education and training. Scholarship and tuition fee waivers are important tools to help students to overcome this barrier. Among schools and universities, capacity constraints may come in form of insufficiently trained teaching staff or managers, inadequate curricula or a simple lack of knowledge and experience on how to act on information. Financing capacity constraints can also prevent firms from investing in their workers’ training.
Figure 11: Few staff in higher education institutions have advanced academic degrees
Staff Qualifications in Higher Education Institutions 100% 80% Master 60% 40% 20% 0% 1999/2000 2010/2011 Other university & college qualifications Professional qualifications Other Doctorate

Source MOET

Investments in the qualifications of staff and equipment will help universities and vocational schools to more effectively respond to the information on employer needs. At present, few staff in higher education have advanced academic degrees. Strengthening the graduate education and advanced training system as well as scholarships and programs to retain students in universities and incentivize them to choose academic careers can help raise the overall qualification profile. Creating attractive conditions for research can help attract Vietnamese overseas PhDs back to Vietnam. Likewise, a strategic strengthening of the science, technology and innovation system can create a better environment for attracting and retaining researchers and for promoting a growing, capable critical mass of international-level professors at higher education institutions. But capacity is not limited to teaching and research, investments in managerial capacity will enable university and vocational school leaders to take advantage of greater autonomy. Better information, incentives and capacity are mutually reinforcing. Government can use regulatory or financing incentives to promote partnerships between providers and industry and the generation and dissemination of better information on graduates’ employment successes. In turn, better information makes providers more accountable. Ambitious and successful universities and vocational schools want to demonstrate that they have strong linkages with industry and that their graduates find good jobs and do so quickly. Investments in their managerial and teaching capacity can enable them to do so.

Summary
Vietnam’s continued transition towards a modern, industrial market economy is not automatic. Structural reforms in the enterprise and banking sectors and sound macroeconomic policies will matter in ensuring continued fast change, but so will the quality of Vietnam’s workforce. Vietnam’s return to strong economic growth will come through increased labor productivity. Changes in education and training can take a generation to result in a workforce that is equipped with the right skills. The time to

28 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

modernize skills development is now to ensure that worker skills do not become a bottleneck over the coming decade and more. The nature of work in a modern market economy will change and become more sophisticated. Vietnamese employers already are looking for a mix of higher quality cognitive, behavioral and technical skills. These skills are accumulated at various points along the life cycle from birth into adulthood. This suggests that a smart skill development strategy for Vietnam should encompass reforms and investments from early childhood development to on-the-job training. Views by Vietnamese employers are very similar to those of employers in much more advanced middle and high income economies where, as in Vietnam, employers report that critical thinking and communication skills among workers are also in high demand but lacking. This means that by reorienting its education system to focus more on teaching these types of skills, Vietnam can prepare itself to deliver skills that will never go out of fashion and are important in almost any industry. Vietnam’s challenge is thus: Turn graduates from good readers into critical thinkers and problem-solvers who are well equipped to acquire technical skills in university, vocational training and throughout their working lives. Building a highly skilled workforce is a shared responsibility between the Government, education and training providers, employers and students and parents. Preparing the workforce for an industrial economy is not just the government’s job. It requires a change in behavior by all actors in skills development - employers, schools and universities and students and their parents alike. Firms and universities need to build close partnerships. Parents need to become involved in their children’s schooling. Students need to expose themselves to the world of work even prior to their graduation. But the Government plays an important role as a steward, not the manager, of the system. The role of government is to facilitate the change in behavior by helping to ensure a better information flow between all the actors, to address capacity constraints including financing capacity, and to set the right incentives by freeing up universities to partner more effectively with businesses. There are pockets of excellence in the system of cognitive, behavioral and technical skills development already; as the system’s steward the challenge is for the Government is to translate these pockets into system-wide change.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 29

Annex Table 1: A framework for skills development in Vietnam

Objective Policies Promoting school readiness through early childhood development Early childhood development for More systematic promotion of breastfeeding and child children aged 0-3 stimulation through parallel family-based interventions in hospitals after birth, in local health stations, in communities, and through communication campaigns; Social assistance to enable poor parents financially to make better choices for their children Preschool for children aged 3-5 Universalize access to full-day preschool; Translate modern and child-centered curriculum into quality provision across all classrooms through upgrading of the competence of the current teaching workforce Building the cognitive and behavioral foundation in general education More schooling for all Increase transition rates into secondary education through fee waivers and direct cash support for less well-off students; Expand formal full-day schooling to reduce extra classes and ensure more varied formal curriculum Better schooling for all Modernize curriculum, teaching methods and student assessment with stronger focus on critical thinking, problemsolving and behavioral skills; Equip teachers with tools to teach modernize curriculum through reformed in-service teacher professional development Schooling that involves parents and Empower parents’ councils in schools and involve them in communities more decision-making; Strengthen school-community linkages in disadvantaged contexts, e.g. through ethnic minority teaching assistants and greater involvement of parents Building and updating technical skills in post-secondary education and training Better information Initiate and incentivize formal or informal skills coordination and partnership forums at national, provincial and local levels between firms and education and training providers; More use of graduate tracer surveys; Address information barriers in rural and remote areas; Better dissemination of available labor market information; Tackling corruption in education Right incentives Increase de facto autonomy of providers; State to shift from management to Stewardship of the system; Focus on outcomes, not inputs: Stop setting enrolment quotas, define quality and occupational skills standards and assess and certify graduates; Adequate capacity Invest in faculty/teacher training; Leadership and Management capacity to exercise autonomy at institutional level retaining graduates in academia; Scholarships

30 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Chapter 1: Vietnam’s economic transformation and the role of education
Vietnam is a global economic development success story. Since the launch of the đổi mới reforms in the late 1980s, Vietnam has seen rapid economic growth, which catapulted it to middle income status in 2010, and contributed to one of the fastest declines in poverty ever recorded. This economic miracle was associated with substantial productivity increases and a rapid movement of labor out of agriculture and into wage employment. In large part, this transformation was driven by rising levels of education, and an influx of foreign and domestic capital investment. Vietnam’s focused investments over the last decades into universalizing primary education completion and expanding access at all levels has paid off and has allowed increasing shares of the population to take advantage of expanding economic opportunities. Vietnam’s development story is entering a new chapter that will shift the focus from factor accumulation to productivity growth. Despite the success, labor productivity remains low relative to competitors in the region. Unlike in the early period of Vietnam’s transition, growth in recent years has been entirely driven by factor accumulation rather than by productivity growth. Economic growth has slowed in recent years in the wake of domestic macroeconomic and structural challenges. This has had an effect on the labor market, with evidence of a bifurcation that is associated with educational attainment. While well educated workers are taking advantage of expanding opportunities in the private sector, especially in urban areas, less educated workers, and particularly those in rural areas, are having more difficulty. Less educated workers and youth from rural areas have more difficulty transitioning into the expanding private sector, and are often left in the agricultural sector or in small informal enterprises, for example as street vendors. With relatively flexible formal labor markets and still widespread informality, even in wage employment (World Bank, 2013a), the main barriers to labor mobility in Vietnam today are skills gaps and shortages and lacking information about vacancies and job opportunities. Strengthening the skills development system is an important element of Vietnam’s restructuring needs to ensure that the structural transformation proceeds apace and Vietnam succeeds as a middle income country (MIC). The experience from Vietnam’s more advanced neighbors shows that a continued structural transformation over the coming decade and beyond will trigger a skills-biased occupational transition with growing importance of the types of jobs that require strong cognitive and behavioral skills. The pace of this change will depend on many things, most prominently on the scope of economic restructuring and on the soundness of macroeconomic policy. Taking decisive steps to modernize skills development now can help to accelerate the structural transformation, to improve productivity and growth and to boost living standards - and to ensure that skills will not become a bottleneck.

Trends in Vietnam’s labor market since đổi mới
The đổi mới reforms and the transition from central planning to a market economy with a socialist orientation triggered a period of remarkable growth in the 1990s and throughout much of the 2000s. As shown in Figure 12, real GDP growth averaged 7.5 percent from 1995 to 2007, slightly below China’s average of 10 percent. Compared to other countries in the region, Vietnam’s economic growth has been remarkably robust to both the 1998 Asian financial crisis and the 2008-2009 global economic crisis. Growth dipped to about 5 percent in 1998, but then quickly rebounded to 7 percent in 2000, before starting to slow to 5 to 6 percent in the late 2000s. Vietnam experienced a growth slowdown since 2008

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 31

which, in most recent years, has been driven by domestic macroeconomic and structural challenges. Real GDP growth fell to 5 percent in 2008, temporarily rebounded to 7 percent in 2010, and fell again to 6 percent in 2011 and an estimated 5 percent in 2012.
Figure 12: Vietnam has seen consistently high rates of economic growth since đổi mới and until recently
Real GDP growth in Vietnam and its neighbors, 1995-2010 15 10 5 Percent 0 -5 -10 -15 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 China Indonesia Korea Philippines Thailand Vietnam

Source: IMF World Economic Outlook, October 2012

Fast economic growth has helped millions of Vietnamese to escape poverty. Rising incomes have helped boost living standards in urban and rural Vietnam alike. Poverty has fallen from 58 percent (1993) to 14.5 percent (2008) to under 10 percent (2010), using comparable series of VHLSS surveys, consumption aggregates, and poverty line (World Bank, 2012b). Changes in employment, including improvements in human capital and increases in the employment share of the export sector, have been found to have accounted for over 60 percent of the probability of households escaping poverty in rural Vietnam in the 1990s (Inchauste, 2012). Fast increases in labor productivity have been key to Vietnam’s impressive growth performance. Figure 13 indicates that Vietnam has seen the second fastest growth in labor productivity in the region since 1990 after China, albeit from a very low base. The reallocation of labor across sectors, most notably from low productivity agriculture into non-agricultural wage employment (see below), has been a particularly important component, accounting for 2.6 of 4.2 percent of labor productivity growth. Despite this fast growth, labor productivity remains low relative to its peers, with GDP per person (at constant 1990 GDP) at 10 percent of the United States.

32 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Figure 13: Labor productivity in Vietnam has grown fast since đổi mới but remains low compared to its peers
GDP per person employed (index, 1990=100) 550 500 450 400 350 300 250 200 150 100 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 10 0 Indonesia Malaysia Vietnam Philippines Cambodia Singapore China 2010 Thailand 70 60 50 40 30 20 GDP per person employed (constant US$ 1990 PPP) as a percentage of the US level

Cambodia Indonesia Philippines Thailand

China Malaysia Singapore Vietnam

1990

Source: World Bank staff estimates using ILO Key Indicators of the Labor Market

Although productivity growth was the main driver of GDP growth in the early years of Vietnam’s transition, capital deepening has become more important in recent years. In the early period after the đổi mới reforms, much of the fast GDP growth was driven by increases in total factor productivity (TFP), largely in the wake of liberalization in the agricultural sector and improvements in education which triggered the reallocation of labor across sectors. Over the years, productivity gradually gave way to factor accumulation, in particular to increases in the capital stock, as the main driver of economic growth (Figure 14). The contribution of TFP to GDP growth since 2007 appears to have declined to zero. This is concerning, since relying on factor accumulation as the sole source of economic growth is not a sustainable strategy for Vietnam as it wants to succeed as a middle income country. Rather, a return to sustained strong economic growth will require productivity improvements through structural reforms and investments in human capital (World Bank, 2012a). This is why it is appropriate that Vietnam’s Socio-Economic Development Strategy 2011-2020 places the strengthening of human resources as one of the key breakthrough objectives.
Figure 14: Decomposition of GDP growth in contributions due to capital, labor, and TFP, 1986-2010
12 10 8 6 4 2 0 1 1 1 3 4 4 3 3 4 4 8.7 5.1 5.8 6 4 8.8 9.5 9.3 8.2 5 4 3 7.3 6.8 6.9 7.1 1 5.8 0 1 2 4.8 0 0 4 5 5 Real GDP Growth 7.8 1 8.4 8.2 8.5 0 2 2 6.2 0 8 3 4 4 5 6 6 5 4 5 Capital 5.3 0 Contribution of 6.8 0 TFP Labor

8.1

4

1990 1994 Source: World Bank (2012a)

1998

2002

2006

2010

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 33

Productivity growth was intrinsically linked with a transformation in the structure of the labor market. Reforms under đổi mới have had far-reaching effects on the labor market, pulling large numbers of workers out of less productive agriculture and into more productive wage jobs. In developing countries, jobs in the agricultural sector tend to be the least productive and worst-paid. As countries develop, workers first shift into non-farm self-employment, and then into wage work. In Vietnam, the strong growth during the 1990s was associated with a substantial reduction in agricultural employment, driven by the dramatic decline in collective farming, and a jump in the share of workers in salaried jobs (Figure 15). Over half of Vietnam’s workforce is now working outside of agriculture, and is increasingly focused on wage employment: Vietnam’s economy is modernizing.
Figure 15: Vietnam’s structural transformation from employment in agriculture to the non-agricultural sector
Share of the workforce in agricultural and non-agricultural wage employment 70% 60% 50% Percent 40% 30% 20% 10% 0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 non-agriculture wage employment agricultural employment

Source: World Bank Staff estimates using VHLSS. The 2010 VHLSS used a new sample frame based on the 2009 census. This captures migration between 1999 and 2009 from rural to peri-urban areas, where fewer workers work in agriculture.

The reallocation of labor out of agriculture and into wage employment appears to have slowed down in recent years as economic growth has decelerated. The initial rapid fall in agriculture from 1998 to 2006 was followed by a slowdown between 2006 and 2008. This has been followed by what, at first glance, appears to be a remarkable shift out of agriculture between 2008 and 2010. Likewise, the share of workers in wage employment appears to have significantly declined between 2008 and 2010. However, because of differences in the sample frame, the 2008 and 2010 results of the Vietnam Household Living Standard Surveys (VHLSS) are not comparable (Figure 15). As will be shown below, many less well educated workers, especially in rural areas, appear to have retained a foot in the agricultural sector during the recent economically difficult years. While the share of employment in agriculture appears to have stagnated in rural areas and slightly expanded in urban areas, wage employment in the urban private sector has been expanding fast even during the recent period of economic slowdown. Wage employment in the private sector rose from 6 percent to over 8 percent between 2007 and 2010. This growth in the private sector has been more than enough to absorb a slight decline in public sector employment, which fell from 12 to just under 11 percent of the population. In urban areas, the share of private sector wage jobs outside of agriculture rose five percentage points in four years, reflecting a remarkable shift from public to private employment in a relatively brief period (see Figure 16). In rural areas, the growth in private sector employment was much smaller. Meanwhile, consistent with a slowdown in the overall economy, more workers pursued agriculture. Growth in agriculture was particularly noticeable in urban areas, as workers moved out of non-agricultural self-employment.

34 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Figure 16: Most rural workers are still in agriculture, but the share of private sector wage workers has increased in urban areas
Share of workers by type 100% 90% 80% 70% Percent 60% 50% 40% 30% 20% 10% 0% 2007 2008 Urban 2009 2010 2007 2008 Rural 2009 2010 Agriculture Own account and unpaid Non-ag Public wage workers Non-ag Private wage workers Employers

Source: World Bank staff estimation using labor force surveys

Most non-agricultural jobs in Vietnam today are in blue collar occupations and service and sales. Jobs as craftsmen, machine operators or in elementary occupations jointly make up 40 percent of nonagricultural employment – much more than technicians. Another 30 percent of non-farm workers work in service and sales jobs. Professionals make up 16 percent of the non-agricultural workforce (Figure 17). Jobs across all these occupations are divided almost equally between rural and urban areas, suggesting that rural areas remain an important part of the non-agricultural economy.
Figure 17: Blue collar occupations dominate Vietnam’s non-agricultural labor market

Source: World Bank staff estimations using VHLSS 2010

Despite the rapid structural change since the mid-1990s, Vietnam’s labor market development still trails that of many of its neighbors. Vietnam’s share of workers in agriculture remains higher than that in China, Indonesia, and the Philippines, (see Figure 18). Similarly, despite the rapid progress in creating wage jobs that has seen it catch up to Indonesia, Vietnam still lags behind Thailand, the Philippines, and especially Korea in terms of the share of the workforce in a salaried job. What will Vietnam need to do to catch up? What will be drivers of Vietnam’s continued structural transformation in the labor market?

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 35

Figure 18: Recent employment trends in Vietnam and its neighbors
Employment shares, 2008 80% 70% 60% Percent 50% 40% 30% 20% 10% 0% Korea Philippines China Indonesia Thailand Vietnam wage employment agricultural employment

Source: World Development Indicators

The pace of Vietnam’s continued economic modernization will depend on the success of its economic restructuring efforts. The skills of the workforce are a critical part of that. Continued economic growth, expansion of the non-agricultural sector and its move up along the value chain will be contingent on sound macroeconomic policy, well planned and executed public investment and reforms in the enterprise and banking sectors (World Bank, 2012a). But worker skills matter, too. This report will show that equipping Vietnamese workers with the right skills will enable them to continue to take advantage of expanding opportunities in a growing, non-agricultural private sector. The remainder of this chapter first examines the role of education in the urban and rural labor market over the last years, which were dominated by the economic slowdown, and then looks ahead to its likely evolution of labor demand over the coming decade.

The role of education in Vietnam’s labor market Expanding educational attainment of Vietnam’s workforce has contributed to the shifts in the labor market. Over the last decades, the share of Vietnamese without primary education has declined significantly and many workers, especially in professional and technical occupations, now have secondary and higher degrees. Figure 19 presents educational attainment by birth year for those born between 1920 and 1988. Educational attainment increased rapidly for those born before the 1960s: the share of the population with primary education or higher rose from 10 percent to over 70 percent for those born after 1960. This rapid rise in educational attainment stalled, and even reversed in the case of lower-secondary attainment, for the generation born during the turbulent war periods. But the rapid rise in educational attainment continued for those born after 1980 with a particularly sharp increase for those with upper secondary education or higher.

36 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Figure 19: A large expansion in educational attainment
Percent of the population by educational qualification 100% 90% 80% 70% Percent 60% 50% 40% 30% 20% 10% 0% 1920 1923 1926 1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 Less than primary Primary and above LSE and above USE and above

Year of birth

Source: World Bank staff estimations using the VLSS 1998, VHLSS 2004, 2006, 2008 and 2010. Year of birth was estimated based on age and year of survey, only individuals older than 22 were included in order to capture those who have completed their education. The sample consists of 103320 individuals from repeated VHLSS rounds.

The education profile of today’s workforce varies considerably across occupations. Basic general education at a primary level and below or at a lower secondary level continues to dominate the education profile of the bulk of Vietnam’s workforce today – workers in agriculture, in elementary occupations, sales and services and among craftsmen (Figure 20). In fact, few craftsmen come with even basic vocational training, while 30 percent of machine operators have completed any level of vocational training. Vocational education and training is predominant among technicians: almost half of technicians hold a professional vocational education and training degree and another 30 percent a higher education degree. Apart from technicians, the best educated are professionals, with almost 80 percent holding a university degree and another ten percent a college degree. There is an important demographic aspect to this: Younger workers are not only better educated than older workers, they are also significantly more likely to work in professional and technical occupations.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 37

Figure 20: Significant shares of workers in blue collar occupations have primary education and below

Source: World Bank staff estimations using VHLSS 2010

Despite the large increase in educational attainment in recent years, demand for well-educated workers remains high and the economy continues to reward them. The rapid increase in educational attainment shown in Figure 19 is partly a response to expanding demand for workers with higher degrees, which has been growing even faster than the supply. This is particularly noticeable at the top end of the education distribution, where the number of college graduates has not kept up with demand. Among wage workers, the returns to college and university education surged to 80 percent in 2008 (Figure 21). The large increase in the number of lower and upper secondary graduates has helped moderate the increase in returns at these lower levels, but upper secondary graduates in wage work could still expect to earn more than 30 percent than primary school graduates.
Figure 21: Estimated education earnings premium among wage workers
80% 70% 60% Percent 50% 40% 30% 20% 10% 0% 1993 1998 2002 2008 Lower Secondary Upper Secondary College or above

Source: Coxhead and Pham (2012) using VHLSS

38 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Strong demand for secondary and higher education graduates has remained robust during the recent years of economic slowdown, but the demand for poorly educated workers has been declining. As shown in Figure 22, poorly educated workers in wage jobs were earning much less in 2010 than they were in 2007, suggesting a decline in the demand for workers with primary education or less. Meanwhile, returns appear to have hardly changed for graduates from secondary education and above during this period. Graduates with vocational education and training degrees are particularly attractive: earnings premia for workers with elementary and secondary vocational education were higher than for workers with general lower and upper secondary degrees respectively. The high rate of return for tertiary education can help to explain the substantial rise in the share of youth acquiring a tertiary education but also signals the need to continue to expand the fraction of workers with these sought after qualifications.
Figure 22: Estimated returns to education among wage workers (relative to lower secondary)
60% 50% 40% 30% Percent 20% 10% 0% -10% -20% -30% No degree Under primary Primary Secondary Elementary High school Secondary Trade school vocational vocational 2007 2010 College University

Source: World Bank Staff calculations using the Vietnam labor force survey. The returns are estimated using a Mincerian wage regression in which log hourly wages are regressed against education, sex, and experience. Various robustness checks were performed to examine whether the relative returns profile is robust to controlling for sector and occupation.

Vietnam’s good jobs are increasingly being generated by the urban private sector, and a secondary or tertiary education degree is increasingly a predictor of employment chances. Vietnam’s labor market appears to have become increasingly bifurcated as public sector employment is declining and the structural transformation has slowed. Many well-educated workers in urban areas, in particular the young, are able to obtain wage work in the growing private sector. But many urban workers with primary or secondary education are not attractive to private sector employers and are forced to take less productive jobs in agriculture (Figure 23). The situation is starker still in the rural areas, where even tertiary-educated workers struggle to land employment in the private sector and have to rely on agricultural employment. In short, the demand for well educated workers in Vietnam is high and has remained robust during the recent economic slowdown. Education and skills are a predictor of labor market success more than ever before. How can the demand be expected to evolve over the coming decade and more?

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 39

Figure 23: Change in share of employment by education group and urban/rural, 2007-2010
A: Change in share of urban workers 2007-2010 15 10 Percentage Points 5 0 -5 -10 -15

Youth Change in agriculture

Young adults Change in Non-ag private wage sector

Older adults Change in public sector

B: Change in share of rural workers 2007-2010 10 Percentage Points 5 0 -5 -10 -15

Youth Change in agriculture

Younger adults Change in Non-ag private wage sector

Older adults Change in public sector

Source: World Bank staff calculations using labor force survey data

Box 1.1: What barriers to labor mobility in Vietnam? Labor market regulations set the legal parameters for employment, for example through a minimum wage or hiring and firing restrictions. These regulations are often considered protective in nature, and are designed in order to address labor market imperfections, such as unequal power between job seekers and providers. However, they may come at an efficiency cost through affecting employment, unemployment and earnings. In an international comparison, employment protection legislation does not appear to be particularly severe in Vietnam (see Figure 24). The EPL index displayed below compares some of the most critical EPL costs faced by employers across OECD and East Asia and Pacific countries. In de jure terms, Vietnam’s EPL is not particularly stringent for dismissals or regulation on temporary employment. Moreover, in de facto terms the impacts of regulations is likely to be relatively small since informal employment remains widespread, even among the wage employed.

40 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Figure 24: Employment protection legislation in Vietnam is not particularly restrictive in an international comparison
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 United States ***Singapore Canada United Kingdom ***Malaysia New Zealand Ireland Australia Brunei Darussalam Japan Switzerland ***Mongolia Korea Denmark Slovak Republic Czech Republic Hungary Sweden Netherlands Finland ***Thailand ***Lao PDR ***Cambodia Poland Austria ***Philippines ***Vietnam Germany Iceland Italy Belgium Luxembourg Norway ***China France Portugal Greece ***Indonesia Spain Mexico Turkey Specific requirements for collective dismissal Regulation on temporary forms of employment 3.5 3 2.5 2 1.5 1 0.5 0 Previous experience High job turnover Overall wage level Labor availability Payroll taxes and contributions Minimum wage Employment protection legislation General education of workers Formal training of workers Issues affecting firms’ business operation and growth ASEAN+ OECD-30 ECA Employment Protection Legislation (EPL) Index (2008-2010)

Source: World Bank (2013a). Notes: Score range from 0 (least stringent) to 6 (most restrictive). OECD and ASEAN unweighted average. OECD average includes a sample of 30 countries. OECD figures are for 2010. ECA figures are for 2007 and only reflect a total (with no breakdown by category). ***ASEAN+ countries

This report argues that skills gaps, skills shortages and information barriers represent the main barriers to labor mobility in Vietnam today, and that labor market regulations play a subsidiary role compared with these other issues. Employers surveyed for the purposes of this report stated that they consider workforce skills and experience bigger obstacles to their business operation and growth than employment protection legislation, (minimum) wage levels or payroll taxes (Figure 25). Meanwhile, workers report that their main avenue for finding a job is their social network consisting of friends and family and not other, more formal, sources of vacancy and labor market information. This limits the chances of those with limited networks, for example those living in rural areas far away from centers of economic agglomeration, of making good labor market (and education) choices. See Chapter 5 for a more in-depth discussion of information barriers. Figure 25: Labor market-related issues are less of a concern to employers than worker skills and experience

Source: World Bank staff estimations using 2011 STEP Employer Survey. Note: Index score range from 0 (least problematic) to 4 (most problematic). N=330

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 41

Looking ahead: Skill needs for an industrializing Vietnam
The structural transformation since đổi mới has changed the type of work conducted in Vietnam. The labor market that a young Vietnamese labor market entrant faces in 2013 is quite different from the labor market that they would have entered in the early 1990s. This is not just evident in the employment patterns as described above, but also in the sources of household income: In 1998, the majority of household income came from agricultural production; by 2010, the majority of household income comes from household enterprises and wage employment.ii Through the eyes of a recent labor market entrant, the expansion of the non-agricultural sector has changed the type of jobs that they pursue, the careers that they can aspire to and the education and skills they need for these careers. What will Vietnam’s future labor market look like and what are the implications for skill needs? A look at Vietnam’s neighbors is suggestive of the direction that Vietnam might take in the coming decades and what will be likely transformations in the type of work conducted in the next stage of Vietnam’s development. The share of the workforce employed in agriculture in Korea, Thailand, Malaysia and Vietnam has seen a long-term decline (Figure 26, left panel). While approximately 50 percent of Korea’s workforce was employed in the agricultural sector in 1970, this figure had dropped in half to 25 percent by the mid-1980s. Likewise, in Thailand the share of agricultural employment dropped from nearly 80 percent in 1970 to approximately 40 percent in 2010. The decline in agricultural employment was accompanied by an increase in employment in the manufacturing sector, from 13 percent of employment in Korea in 1971 to approximately 25 percent by the mid-1980s. The sectoral transformation that occurred in more industrialized countries has been accompanied by a shift to more skill-intensive jobs. In Korea, Malaysia and Thailand, the share of white-collar workers expanded over time. Figure 26 (right panel) shows the fraction of professional and technical workers in the labor force between 1971 and 2008. Professional and technical occupations include mechanical, civil and other engineers, chemists, doctors, lawyers, technicians in IT and science, teachers, and accountants. Similar, but less pronounced, increases were seen in the fraction of clerical (“pink-collar”) workers, such as receptionists and librarians. Skilled white and blue-collar occupations dominate the manufacturing sector employment in these more developed East Asian economies today. In Thailand in 2010, approximately 10 percent of workers in manufacturing conducted elementary unskilled work, while 27 percent were machinery operators and 45 percent were craftsmen.iii
Figure 26: Long-term structural change in East Asia – predictors for Vietnam?
25% 100% 90% 80% 70% Percent 60% 50% 40% 30% 20% 10% 0% 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 0% 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 5% Percentage in Agriculture Thailand Korea Malaysia Vietnam Percent Percentage in Professional and Technical Occupations

20% Thailand Korea Malaysia Vietnam

15%

10%

Source: World Development Indicators.

42 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Placing Vietnam’s economic transformation in the context of its neighbors’ development paths suggests that its economy is at a transitional juncture. In Vietnam, the labor force employed in agriculture has declined from more than 60 percent in 1993 to 45 percent in 2010, while the share of the workforce in manufacturing has risen by 50 percent from 10 to 15 percent of the labor force. This places Vietnam in a comparable moment to Korea’s economic transformation in 1975, a point at which the economy was transitioning away from low-value added manufacturing activities towards heavy manufacturing (Kim, 1997). The skill-biased occupational transition that has taken place in more advanced economies in East and South-East Asia is already underway in Vietnam. The demand for analytical and interpersonal skills has been growing in urban Vietnam since the early 1990s, while the demand for manual skills has been declining. Jobs that are non-repetitive or non-routine in nature, in other words jobs that involve conducting different tasks on a regular basis, expanded between 1998 and 2010. At the same time those jobs that require the worker to do the same tasks or movements all the time have been contracting (Figure 27; Box 1.2 explains in greater detail how the measure of the skill content of the urban workforce has been constructed).
Figure 27: Trends in the nature of tasks in Vietnam’s urban labor market
60 58 56 54 52 50 48 46 44 42 40 1998 2004 2006 2008 2010 Routine Analytical Routine Interactive Routine Manual Non-Routine Analytical Non-Routine Interactive Non-Routine Manual

Source: World Bank Staff estimates using STEP and VHLSS, see Box 1.1

Analytical and interpersonal skills are in high demand and highly valued, as signaled by a high wage returns to these skills relative to manual skills. It is not just that the use of analytical and interactive tasks has expanded over the last decade. These tasks also carry high wage returns. Figure 28 shows the return to conducting analytical, interactive and manual skills, broken down by whether these skills are used in repetitive or non-repetitive tasks.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 43

Figure 28: A high return to conducting analytical (problem solving) and interactive tasks in urban Vietnam
25% Percentage return to different task combinations, controlling for education and demographics

20%

15%

10%

5%

0% Analytical (***) -5% Interactive (*) Non-Routine Manual Analytical Interactive (***) Routine Manual

Source: World Bank staff estimates using STEP Household Data. Jobs are divided into categories based on the type of tasks that people found in those jobs are reported to do. In particular, a job is first divided into one that required the individual to perform routine or non-routine tasks, and is further classified into those that are analytical (require continuous thinking and problem-solving), interactive (that require interacting with others) and manual in nature. Jobs can be classified into more than one category, for example jobs can be non-routine analytical and interactive. The return displayed is the return of being in a job in which a task is performed relative to being in a job that is non-analytical, non-interactive and non-manual (for example, office clerks). The returns are estimated using a Mincerian wage regression that controls for education, sex, experience and 1digit sector as well as the task content of jobs. ***, ** and * represent statistical significance at a 1, 5 and 10% level respectively. See Box 1.1 for more information on the evidence that was used to generate this figure.

Box 1.2: Vietnam’s occupational changes through the lens of skills The occupational changes that have occurred in Vietnam since the đổi mới reforms have changed the type of work that people do and the skills they use in the workplace. The analysis presented here uses the framework of Autor, Levy and Murnane (2003) to examine the changes in the skills content of job s. Jobs can be thought of as a series of tasks or activities, such as moving an object, presenting information, or conducting a calculation. A worker conducting a job needs to make overarching decisions on what tasks and activities to do next, through prioritizing tasks and making trade-offs in the face of unknown or partial information. For example, an engineer may be required to conduct and choose between multiple tasks including complex analysis, to solve problems, to supervise members of a team and to make presentations about her work. Classifying jobs into the skills that they require allows considering the types of skills that are needed to conduct different types of work, and examining how the skills used in the workforce in Vietnam have evolved over time. The “Skills toward Employment and Productivity” (STEP) household survey conducted in 2012 and covering Vietnam’s urban working age population asks individuals about the tasks that they conduct in their jobs. For example, workers are asked how often they have to think for at least 30 minutes about a p roblem, or how often they learn new things in their workplace. Activities or tasks conducted in different occupations are separated into four main categories: routine or non-routine activities, analytical work, interactive work and manual work. Routine and non-routine is used as a primary classification, since it allows a separation of jobs into those that are predictable and repetitive (routine tasks, such as those conducted by assembly line workers in factories) and those which require workers to be adapt ive to changes in their environment and not repeat the same processes on a regular basis (non-routine tasks, such as those conducted by architects, doctors, truck drivers). The table below details the tasks and types of occupations conducted in different s kill brackets.

44 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Table 2: Tasks and types of occupations conducted in different skill brackets Analytical Routine Conducting short repetitive tasks all the time Non-Routine Conducting short repetitive tasks less than half the time Think for at least 30 minutes at least once a week Learning new things every day Interpersonal Contact with people other than co-workers Making formal presentations to clients/colleagues to persuade them on a topic Direct or supervise other workers Routine: Armed forces officers, shop sales persons, machinery mechanics Non-Routine: Architects, Marketing, Finance Professionals, Teachers Routine: Shop tellers, hairdressers Non-Routine: Engineers, Sales and marketing assistants and professionals Manual Drive a car; Operate heavy machines or equipment; Work is considered to be relatively physically demanding; Lift or pull anything weighing at least 50 pounds Routine: Truck operators, food preparation, craftsmen Non-Routine: Shop sales persons, transport clerks, repairmen

Examples of jobs

Using the information in the STEP household survey on the task content of jobs and data from the VHLSS, it is possible to estimate the fraction of the urban workforce that are in jobs using analytical, interpersonal and manual skills between 1998 and 2010. The average skill used in occupations (at a one digit level) can be calculated using the STEP survey, and then the average skill usage can be applied to the fraction of the urban population in that one digit occupation, as captured in the VHLSS. An increase in the fraction of the population with, for example, non-routine analytical skills implies that occupations that are relatively intensive in the use of these skills are expanding over time. Figure 27 above shows the evolution of these skills in the workforce over time, using the fraction of the workforce using those skills in 1998 as the benchmark. In absolute terms, the fraction of the population doing routine tasks and using manual skills continues to be high. However, the fraction of the population in jobs that use analytical and interpersonal skill sets has increased over time in urban Vietnam, while the fraction of the population in jobs that use manual skills has declined over time. Therefore although work using manual skills continues to be in demand, there has been a gradual shift in the fraction of jobs that use analytical and interpersonal skill sets.

The transition into jobs requiring more advanced cognitive and behavioral skills has already begun with the youngest generation of labor market entrants. Figure 29 shows the fraction of workers employed in professional and technical occupations, by location and age cohort. Among labor market participants aged 25 to 34, there appears to have been a sharp increase in the fraction employed in professional and technical occupations in urban areas. These occupations have also been on the rise among other age cohorts in urban areas, albeit less rapidly, and have also expanded to account for 7 percent of jobs among younger rural workers. In rural areas, the expansion of the manufacturing sector has increased the demand for craftsmen and machine operators. The fraction of 25 to 34 year olds working in skilled blue-collar occupations in manufacturing has more than doubled from 7 percent of the rural workforce in 1998 to 18 percent in 2010.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 45

Figure 29: Employment in technical and professional occupations has been growing for the youngest cohort
35 30 25 Employment in professional and technical occupations

Percent

20 15 10 5 0 1998 Urban, 25-34 2004 Rural, 25-34 2006 Urban, 35-44 Rural, 35-44 2008 Urban, 45-64 2010 Rural, 45-64

Source: World Bank staff calculations using VHLSS

Summary
The expanding educational attainment of its workforce has been one of the key drivers of the rapid modernization of the Vietnamese economy since the launch of the đổi mới reforms. Universal primary education and expanding secondary education has helped workers make the transition out of agriculture into non-agricultural wage employment and from the rural to urban sector. In recent years, education has become an ever more important predictor of success in finding a good job in the expanding occupations and in the urban private sector. While the majority of jobs are in skilled blue collar occupations, employment in professional and technical occupations has grown rapidly in urban areas and with it the demand for workers with a secondary general and vocational or higher education degree. Experience of Vietnam’s neighbors suggests that the sectoral and occupational transformations witnessed over the last 20 years are likely to continue. However, this transformation is not automatic and the question is how fast its pace will be. Structural reforms in the enterprise and banking sectors and sound macroeconomic policies will matter in ensuring continued fast change, but so will the quality

46 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

of Vietnam’s workforce. With changes in education and training taking a generation to result in a workforce equipped with the right skills, the right time to modernize skills development to ensure worker skills do not become a bottleneck is now. Jobs that are likely to grow in Vietnam – in professional and technical occupations – require workers to have more advanced skills than those working in jobs that are likely to decline in demand over the next 20 years. Traditional jobs in agricultural and elementary occupations require routine and manual work. The jobs of the future involve performing increasingly complex tasks that require workers to be able to solve problems, learn on the job, and to be responsive to shifting needs. They also require workers to have strong social and behavioral skills, since they will require workers to conduct tasks such as working in teams and supervising others. These more complex tasks command higher wages, commensurate to the more advanced skill sets they demand. The next chapter will review the demand for skills by Vietnamese employers today and assess to what extent the education system is providing graduates with these skills.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 47

48 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Chapter 2: Skills for current and future jobs
The shift away from agriculture seen since the đổi mới reforms has changed the type of work that Vietnamese people do and the skills that they need to do their jobs. Jobs can be thought of as a series of activities, such as harvesting rice, sowing clothes, checking the temperature of a patient, calculating profits and presenting analysis. A worker conducting a job needs to make overarching decisions on what tasks and activities to do next, through prioritization and recognizing trade-offs. Making these choices and conducting these activities requires a set of skills for the person to perform them well, from physical strength and manual dexterity to numerical skills and the self-confidence to put forward new ideas. Vietnam is gradually moving away from the type of jobs that consist mainly of manual and repetitive activities, and is moving towards jobs that require workers to solve problems and to use more modern technology. Although the shift in the demand for skills in Vietnam has been gradual, it has been transformative. The change in the type of jobs that Vietnamese people do over time has implications for the skills that the education system needs to build. A young urban labor market entrant in Vietnam faces a more diversified choice of career paths than ever before, but also faces a more demanding set of employers. Rural households that were previously focused on agricultural activities have moved in large numbers into non-farm enterprise activities that require choosing products and suppliers, interacting with customers, setting prices, and calculating profits. Although this report focuses on data from urban areas, the rise in non-agricultural activity in rural areas implies that similar, if not as fast paced, transitions are underway there. These changes to what people across rural and urban Vietnam do on a daily basis imply that the way that they use their education has changed over time. Both employers and employees in urban areas report that the education system does not provide all the skills needed in the current Vietnamese labor market. The skill shortages are reported to be greatest for firms with international links, and among employees expected to do complex tasks. Although education has rapidly risen over the last thirty years, both employers and employees recognize that the education system today does not provide graduates with all the needed skills for their enterprises, workplaces, and career aspirations. Reports from employers suggest that the economy suffers from a skills shortage, and that the shortage is a substantial obstacle to the operation and growth of Vietnamese firms. “International” firms (FDI firms, firms that are engaged in international trade and firms that have international links) are affected by the skills shortage more than “local” firms. This means that the skills shortage, if not addressed, may become a binding constraint to the modernization and growth of the Vietnamese economy. Workers of all education levels report that their literacy and IT skills are a constraint to their career growth.iv Although occupation specific technical skills are in high demand, employers value a broader skill set. There is a strong return to education in urban Vietnam, and the return to education has increased over time (Coxhead and Pham, 2012). One reason why people with upper-secondary or university education earn more than those with primary education is that they have better technical, cognitive, social and behavioral skills. Employers value and pay for cognitive and technical skills, such as being able to solve problems and think critically. Employers also value social and behavioral skills, such as being able to communicate well, work in teams and have positive job attitudes. This chapter presents the type of skills that are demanded by employers in urban Vietnam and examines the importance of skills in Vietnam’s economy. It shows that in order to serve the emerging needs of the labor market, it is necessary to look beyond educational attainment to focus on the underlying skills that are produced by the education system.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 49

Shifting the dialogue: from education to skills
Vietnam has made impressive strides in raising education levels and in reducing inequalities in education access over the past two decades (World Bank 2008). Among young adults aged between 20 and 24, 90 percent had completed primary education in 2010 compared to 85 percent in 1998 (Figure 30). The rise in primary school completion among this age cohort has been dominated by poorer households, and primary completion rates among the rural and urban population are nearly identical among individuals transitioning into the labor market in 2010. More importantly, these gains in education and narrowing disparities across income groups are also seen at lower and upper secondary levels. The share of 20 to 24 year-olds who have completed at least lower-secondary education has increased across all income quintiles, and most notably among the poorest households. In urban Vietnam, six in ten workers have attained a higher level of education than their parents, and the youngest cohort of labor market participants is more likely to have graduated from tertiary education than older workers. Enrolment rates reported by UNESCO’s Institute of Statistics reveal a rapid increase in tertiary enrolment from 10 percent in 2000 to 24 percent in 2011 (UNESCO, 2013).
Figure 30: Vietnam’s workforce has become better educated over time
Percent of the population aged 20-24 who have completed primary, lower- or upper-secondary or above Percent of the population aged 20-24 who have completed lower-secondary or above, by expenditure quintile

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

100% 90% 80% 70% 60% 50% 40%

Primary and Above Lower Secondary and Above Upper Secondary and Above

30% 20% 10% 0% 2004 2006

Q1 Q3 Q5 2008

Q2 Q4 Average 2010

2004

2006

2008

2010

Source: World Bank staff estimates using the Vietnam Household Living Standards Survey 2004 to 2010.

Box 2.1. Skills towards Education and Productivity (STEP) Household and Employer Survey The STEP Skills Measurement Project (STEP) collected information on the supply and demand side for skills in multiple countries across the world, including Vietnam (urban), Yunnan Province, China (urban), Lao PDR (urban and rural), Sri Lanka (urban and rural) and Bolivia (urban). The Vietnam STEP data were collected in 2011 and 2012 as part of this multi-country international initiative to shed light on skills in the workforce. The STEP data consist of two surveys, a household and employer survey, aimed at collecting information on the supply and demand for skills in the population of Ho Chi Minh City and Hanoi. The STEP household survey collected detailed information on education, skills, work history, family background and labor market outcomes for 3,405 individuals of working age (between 15and 64). The survey includes three modules to capture different types of skills, notably: (i) a test of reading literacy to assess the level of competence of the individual to access, identify, integrate, interpret and evaluate information; (b) a battery of self-reported information on personality and behavior; (c) a series of questions on task specific skills that the respondent possesses or uses in his or her work. The same questions were asked in all countries participating in the survey, therefore allowing for international comparisons of skills and skill development. The skill profile of older workers reflects a life-time of accumulation at work and school, while the skill profile of younger individuals reflects accumulation during earlier stages. Skills depend on innate abilities, learning at home

50 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

and school during early childhood and early childhood, and also on acquisition on the job. More discussion on the measurement of skills can be found in the in-depth section at the end of the chapter. The STEP Employer Survey was conducted in Ho Chi Minh City and Hanoi and immediately surrounding provinces; it can therefore be considered to be representative of these two major urban conglomerations. The Employer Survey gathers information on hiring, compensation, termination and training practices as well as enterprise productivity. The survey includes questions to identify: (a) employers’ skills needs and utilization; (b) the types of skills that are considered of most value; and (c) the tools used to screen prospective job applicants. Throughout the text, “international firms” are defined as firms that have international business contacts with entities in other countries. International firms are considered as “modern” firms, while firms that do not have international business contacts as “traditional” firms. International firms represent 35 percent of all firms, but account for 93 percent of total employment in the survey. International firms are thus much larger than local ones: on average they employ 490 workers compared with 29 workers employed by local firms. International firms are more likely to report good economic performance than local firms and more frequently introduce innovations. However, the share of blue collar occupations is significantly higher in international firms, while the share of white collar occupations (including professionals and technicians) is lower. There are no significant locational differences between international and local firms. The Employer and Household survey uses the same skills concepts and definitions, which enables the analysis of skills constraints from demand and supply side perspectives. On the person or worker side, the household survey measures the human capital stock of skills – the skill supply. On the employer side, the Employer survey captures the types of skills demanded and potential shortages – the demand for skills. The simultaneous measurement of skills stocks and demands allows an in-depth analysis of skills needs and the skill profile of the population of Ho Chi Minh City and Hanoi.

Despite the impressive rise in education acquisition, many Vietnamese firms report a shortage of workers with adequate skills as a significant obstacle to their activity. A majority of employers surveyed under the STEP Employer Survey (see Box 2.1) report that hiring new workers is difficult either because of inadequate skills of job applicants (a “skills gap”), or because of a scarcity of workers in some occupations (“skills shortage”) (see Box 2.2 for a definition of these terms).v STEP evidence suggests that worker skills and availability are more binding concerns for employers than labor market regulations and taxes. Over 60 percent of international firms view the availability of labor with the right skills as an obstacle to their activity, and nearly half of these firms view it as a major obstacle (Figure 31). Nearly 40 percent of international firms see the general education of workers as an obstacle, and 46 percent see vocational education as an obstacle. Employers from international firms estimate that 13 to 14 percent of their employees are not fully qualified to do their jobs. This suggests that, despite expanding attainment, the educational system does not respond to labor market needs, and that improving the quality of education will remove an important barrier to productivity and growth of Vietnamese firms.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 51

Figure 31: A shortage of workers with adequate skills is a key obstacle to firm activity
Reported obstacles to firm activity 70 60 50 Percent 40 30 20 10 0 Labor availability General education All firms Vocational training Labor availability General education Vocational training Labor availability General education Local firms Vocational training

International firms Some obstacle Major obstacle

Source: World Bank Staff Calculating using STEP Employer Data. N=305. Employers were asked to report whether labor availability, the general education and formal training of workers was an obstacle to the operation and growth of their businesses.

Employers hold the education system accountable for not providing graduates with the skills needed in their workplace. Vietnamese employers are highly critical of the quality of the education system. Almost half of the employers in the STEP survey complain that graduates do not have the level of skills needed in their workplace. International firms complain about the quality of education more often than local firms. Two thirds of all international firms claim that both the general and vocational education systems do not meet the skill needs of their workplace. In the eyes of the employers, school leavers are equipped neither with the appropriate skills acquired through the school and university system, nor with the appropriate vocational skills.
Box 2.2: Defining skill gaps and occupational skill shortages Firms report that hiring workers is difficult. Although the explanation for this varies by occupation, two explanations stand out. First, applicants lack required skills – a skills gap. Second, there are no or few applicants – an occupational skills shortage. Other reasons, such as excessive wage expectations, unsatisfactory working conditions (meaning that the applicants turn down the job offer), usually play a secondary role. An occupational shortage occurs when, given the prevailing wage level, the demand for workers with certain occupation specific technical skills exceeds their supply. When firms are not able to fill vacancies in a certain occupation because there are too few applicants, this is an indication of an occupational shortage. For example, when the job vacancy rate for electricians is high this points to a shortage of electricians. An occupational shortage tends to be associated with a growth in relative wages for the workers in the occupation that is in a short supply. In a competitive labor market the growing relative wages induces an increase in the supply of workers in the given occupation; this eventually leads to an equilibrium whereby demand and supply match. A skills gap occurs when workers lack the skills required by employers. They may lack either technical skills, or cognitive skills, or social and behavioral skills (or some combination of them). An indication of a skills gap is when employers find it difficult to hire workers with the required skills despite the fact that there are numerous job applicants. For example, there are many applicants for a position of an office clerk, but employers are not satisfied with the applicants’ skills. A skills gap points to weaknesses in the educational system in the sense that it does not equip workers with the skills demanded by employers. Accordingly, a skills gap should be addressed by reforms to the education and training systems. Figure 32 illustrates the difference between these two concepts. If there is an occupational shortage, job vacancies are difficult to fill because there are few applicants. Craftsmen are the case in point. Many employers

52 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

found it hard to hire craftsmen because there were no or few applicants. This means that the supply of craftsmen falls short of the demand, which may point to an underdeveloped vocational education and training system. This is in a sharp contrast to the case of technicians (as well as professionals) where it is the lack of adequate skills among the job applicants, rather than the lack of applicants, that is the main problem. This is a clear case of a skills gap. Workers have the diplomas (formal qualifications) required for the jobs that they apply, but they lack the actual skills they need to do their jobs. This may indicate that the quality of tertiary education does not keep up with employers’ expectations. Figure 32: Skills gap vs. occupational shortage: a tale of two occupations
Problems encountered when trying to hire Percent Reporting Experiencing Problem when Hiring 100 90 80 70 60 50 40 30 20 10 0 Applicants did not Applicant Applicants lacked like working expected wages required skills conditions higher than offered No or few applicants Technicians Craftsmen

Source: World Bank Staff estimations using STEP Employer Data. Employers were asked if they had tried to hire workers in various positions during the last 12 months. Firms were asked about the problems that they encountered when hiring for these positions. The figure covers reports from 132 firms who reported hiring craftsman and 34 firms who reported hiring technicians. Since the number of firms who report hiring technicians is small, care should be taken in interpreting this figure. The displayed differences between technicians and craftsmen are statistically significant at a 5% level for two responses: applicants lacking required skills and for few applicants.

Concern about missing skills is particularly pronounced among white-collar workers, such as professionals and technicians. A lack of required skills among job applicants is cited by approximately 80 percent of employers who were trying to hire professionals and technicians. By comparison, a lack of required skills is cited by only 40 percent of employers who were hiring craftsmen.vi However, the severity of the skills gap among blue-collar workers should not be underestimated. The percentage of employers who complain that blue-collar workers lack required skills is substantial: 25 percent of firms claim that workers applying for a position of machine operator lack the required skills (Figure 33). There is substantial room to improve the skills of blue-collar workers in order to match the job requirements.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 53

Figure 33: Many job applicants lack the required skills, particularly those applying for white-collar occupations

Source: World Bank Staff Calculating using STEP Employer Data. Employers were asked if they had tried to hire workers in various positions during the last 12 months. Firms were asked about whether the applicants for the positions lacked the required skills when hiring for these positions. 350 firms were asked about hiring; the figure covers the following number of employers hiring a given position: Managers, 36 firms; Professionals, 18; Technicians, 34; Clerks, 98; Service & sales workers, 114; Craftsman, 132; Machine operators, 87; and Laborers, 78.

Employers’ concerns on skill constraints are mirrored by worker’s views that their skills limit their ability to advance in the workplace. Although workers value their education, they report that their skills constrain their workplace development. Approximately half of workers report that their education was either moderately or very useful for their current work. More highly educated workers and those working in skilled occupations are more likely to report this to be the case. However, the majority of workers report that their writing and reading skills – core analytical skills – are a constraint to their career advancement (Figure 34). Highly educated workers and those who are required to read and write lengthy documents as part of their work are the most likely to report that they do not have all the literacy skills needed to progress in their workplace. Although these workers have strong basic literacy skills – they perform highly on the literacy test, and also have the highest self-reported literacy and writing skills – they may not have the full set of written analytical skills and argument foundation skills they need for their workplace development.vii Similarly, these individuals report that their information technology (IT) skills are not as advanced as they would need for their careers.

54 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Figure 34: More educated workers are more likely to report that a lack of reading and writing or computer skills has prevented obtaining a job, promotion or restricted advancing business activities
70% 60% 50% Percent 40% 30% 20% 10% 0% No Formal Schooling Primary (ICSED 1) Lower Secondary Upper Secondary Higher Education Higher Education V+G (ICSED2) V+G (ICSED3) (V+G) (ICSED 4) (V+G) (ICSED 5) Average Percent of individuals reporting that lack of reading and writing or computer skills has prevented obtaining a job, promotion or restricted advancing business activities

Literacy skills are a constraint

Source: World Bank Staff Calculating using STEP Household Data, n=3316. The data displayed reflect responses to the question "Has a lack of reading or writing skills in Vietnamese ever kept you from getting a job, a promotion, a pay rise, or held you back from advancing your career?" A similar question was repeated for business/own activity.

What do we mean by skills?
This report focuses on three domains of skills: cognitive skills, social and behavioral skills, and technical skills. These domains cover the job specific skills that are directly applicable to specific occupations, the various personality traits that are crucial to labor market outcomes and also the cognitive ability generally believed to underpin human capital.viii Figure 35 puts forward the definition of skills used in this report. The ‘In Depth” section at the end of this chapter explains in greater depth what these skill domains capture and how they are measured in the STEP surveys.
Figure 35: Skills Measured in the STEP survey

Cognitive
Involving the use of logical, intuitive and creative thinking

Social and Behavioral
Soft skills, social skills, life-skills, personality traits Openness to experience, conscientiousness, extraversion, agreeability, emotional stability Self-regulation, perseverance, decision making, interpersonal skills

Technical skills
Involving manual dexterity and the use of methods, materials, tools and instruments Technical skills developed through vocational schooling or acquired on the job Skills related to a specific occupation (e.g. engineer, economist, IT specialist, etc)

Raw problem solving ability vs. knowledge to solve problems Verbal ability, numeracy, problem solving, memory (working and long-term) and mental speed

Source: Pierre, Sanchez Puerta, and Valerio (Forthcoming).

Basic cognitive skills are separated from more advanced cognitive skills. Cognitive skills include the use of logical, intuitive and critical thinking as well as problem solving using acquired knowledge. They include literacy and numerical ability as basic or foundational cognitive skills, and extend to the ability to understand complex ideas, learn from experience, and analyze problems using logical processes. VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 55

The fast expansion of education in Vietnam has meant that basic cognitive skills are widespread in urban areas. The STEP household survey conducted in Hanoi and Ho Chi Minh City in 2012 tested the literacy skills of working age individuals (see Box 2.1). This survey revealed solid achievement by urban Vietnamese in important basic literacy ability. Figure 36 presents the percentage of individuals who passed a “core” literacy test in the five countries in which the STEP household survey was administered – Lao PDR, Sri Lanka, Bolivia, Yunnan province of China and Vietnam. The core literacy test assesses basic literacy skills and sorts the most literate from those with lower levels of literacy skills.ix,x Vietnam came second to Yunnan/China in the share of respondents who passed the literacy test. Nearly two thirds of the sample obtained full marks on the test, suggesting strong average basic literacy skills among the Vietnamese urban population.
Figure 36: Vietnamese in urban areas perform well on basic literacy skills
Percentage of Individuals by Literacy Test Score
Pass Core Test 100% 80% 60% 40% 20% 0% Lao PDR Fail Core Test -20% 14% -40% 33% 16% 8 7 6 5 4 3 2 1 Sri Lanka Bolivia Vietnam 5% Yunnan, China 1% 0 86% 67% 84% 95% 99%

Source: World Bank Staff Calculations from the STEP household survey, n=3328. All country samples are restricted to urban only for comparison reasons. The scores reflect performance of individuals on a reading literacy test; individuals who score 3 or more on the test are considered sufficiently skilled to be able to continue on to the next level of the test while those who score below 3 are considered to have failed the test of basic literacy skills. Greater information on the measurement of literacy skills is given in box 4 below.

Younger individuals appear to have stronger basic literacy skills which may reflect improvements in the education system over time. Figure 37 presents the achievement scores by the highest education level completed and age group in Vietnam. Younger respondents score better on the literacy tests overall, although this could be attributable to their higher levels of education. However, even after taking into account their higher education levels, younger respondents perform better than older respondents.xi Among those who have completed lower secondary education, 83 percent of 15 to 29 year-olds attain scores of 6 or higher compared to 78 percent of 30-44 year-olds and 74 percent of 45 to 64 year-olds. Among tertiary educated graduates, 90 percent of younger respondents obtain full marks compared to 80 percent of 30-44 year olds. These patterns can be seen even after excluding the 44 percent of the younger population who are still in education. All this evidence suggests that improvements in the education system over time may be translating into stronger basic literacy skills.

56 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Figure 37: Younger and more educated individuals attained higher scores on the basic literacy test
Literacy test scores by education and age 100 90 80 70 Percent 60 50 40 30 20 10 0 15-29 30-44 Lower-Secondary 45-64 15-29 30-44 Upper-Secondary 45-64 15-29 30-44 Tertiary 45-64 8 7 6 3 to 5 1 to 2 0

Source: World Bank Staff Calculations from the STEP household survey, n=3328. The scores reflect performance of individuals on a reading literacy test; individuals who score 3 or more on the test are considered sufficiently skilled to be able to continue on to the next level of the test while those who score below 3 are considered to have failed the test of basic literacy skills. Greater information on the measurement of literacy skills is given in box 4 below.

Although basic and mid-level cognitive skills are widely used in urban Vietnam, more advanced skills are less likely to be used. Individuals were asked to report whether they read or write at least a few lines, and the length of document that they read or write.xii Over 80 percent of the urban working age population reports reading or writing either at home or at work (Figure 38). However, the majority of workers only make basic use of their literacy skills– three quarters of those who report that they are able to write have not written a document longer than 5 pages in the last twelve months, and half of those reading have not read anything longer than 10 pages over the same period. Similarly, basic numerical skills – likely to be used in everyday transactions – are widespread in urban Vietnam while more advanced numeracy skills are more limited. Figure 38 also shows the use of numeracy skills in urban Vietnam, where numerical tasks are split by the complexity of operations conducted. Approximately 90 percent of individuals conduct at least basic numerical operations, such as estimating weights and distances, or calculating prices or costs. Measured basic numerical skills are likely to be used in everyday transactions and are more widespread than basic literacy skills. Moving to the next level of complexity, three quarters of the population do more complicated operations such as using decimals, percentages, multiplication or division.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 57

Figure 38: The use of literacy and numeracy skills is limited
Literacy Percent reportng reading and writing, by intensity 100 90 80 70 60 50 40 30 20 10 0 Post-Secondary Secondary (Lower and Upper) Secondary (Lower and Upper) Post-Secondary < Primary < Primary Average Average More than 25 pages 11 to 25 6 to 10 pages 2 to 5 pages < 1 page

Reading Numeracy

Writing

90% Percent reporting use of mathematical techniques, by intensity 80% 70% 60% 50% 40% 30% 20% 10% 0% No Formal Schooling Primary (ICSED 1)

Lower Secondary V+G (ICSED2)

Upper Secondary V+G (ICSED3)

Higher Education (V+G) (ICSED 4)

Higher Education (V+G) (ICSED 5)

Calculating Prices and Costs

Using Fractions, Decimals, Percentages

Using more complex Algebra, Geometry

Source: World Bank staff estimations using STEP household survey

Social and behavioral skills capture social ability and personality traits that have been found to be strongly linked to success in life, including doing well in school and at work. These skills are captured in the STEP household surveys using the Big-Five taxonomy of personality traits, which are viewed as highorder proxies of behaviors or actions that are a manifestation of personality and that are associated with a myriad of socio-emotional skills. The measures include whether individuals are open to new experiences, whether they can be considered to be conscientious, to have perseverance and to be motivated (conscientiousness), whether they are socially energetic (extraversion), whether they are agreeable towards others (agreeableness), and whether they are self-regulating, or broadly secure and comfortable in themselves (emotional stability or neuroticism).xiii These traits, and the behaviors and actions that they are associated with are described in greater detail in Table 3.

58 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Table 3: The Big Five personality and motivational traits Personality Trait Openness to Experience Characterization of Individual Openness to Experience is a personality dimension that characterizes someone who is intellectually curious and who tends to seek new experiences and explore novel ideas. Someone high on Openness can be described as creative, innovative, imaginative, reflective, and untraditional. Someone low on Openness could be conventional, narrow in interests, and unanalytical. Conscientiousness indicates an individual’s degree of organization, persistence, hard work, and motivation in the pursuit of goal accomplishment. This personality dimension may be an indicator of the desire or ability to work hard (Barrick & Mount, 1991). An individual who scores low on an emotional stability scale can be thought to be selfconfident, calm, even tempered and relaxed. Individuals who score high on the emotional stability scale tend to experience a number of negative emotions including anxiety, hostility, depression, self-consciousness, impulsiveness, and vulnerability (Costa & McCrae, 1992). Extraversion describes the extent to which people are assertive, dominant, energetic, active, talkative, and enthusiastic (Costa & McCrae, 1992). People who score high on Extraversion tend to be cheerful, like people and large groups, and seek excitement and stimulation. People who score low on Extraversion prefer to spend more time alone and are characterized as reserved, quiet, and independent. Individuals who score high on the agreeableness scale can be thought of as having cooperative values and a preference for positive interpersonal relationships. At the low end of the dimension can be characterized as manipulative, selfcentered, suspicious, and ruthless (Costa & McCrae, 1992; Digman, 1990). xiv What is it associated with? Openness is positively associated with intelligence, especially aspects of intelligence related to creativity, such as divergent thinking (McCrae, 1987).

Conscientiousness

Conscientiousness has been the most consistent personality predictor of job performance across all types of work and occupations (Barrick, Mount, & Judge, 2001).

Emotional Stability

Extraversion

Agreeableness

Emotional stability has been linked to education and labor market outcomes, although the trait is not as robust or consistent as conscientiousness. Traits related to emotional stability (for example, the locus of control and selfesteem) predict a variety of labor market outcomes, including job search effort (Almund et al. 2011). Traits related to extraversion have been found to be linked to wages, but that the relationship differs by occupation (Cattan, 2010, cited in Almund et al, 2011). For example, adolescent sociability has been found to increase the wages of managers, sales workers, and clerical workers but to decrease the wages of professionals and technicians. Agreeableness has been found to be negatively related to salary levels and career performance (McClelland and Boyatzis, 1982; Seibert and Kraimer, 2001).

Technical skills reflect knowledge and technical know-how that is often built through in-depth training or experience. Technical skills range from manual dexterity for using complex tools and instruments to occupation specific skills (engineering, economics, medicine, etc.). Since technical skills are often discipline or domain specific, they are harder to capture using a survey instrument aimed at the general population. The technical skills that are measured in the STEP skill survey therefore reflect specialized abilities that are relevant to perform tasks that can be found in multiple jobs.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 59

What skills are in demand and used in the urban labor market?
Employers place the most emphasis on job-related skills, including technical skills and the ability to solve problems and think critically. Employers were asked what types of skills or characteristics they considered to be most important when deciding to keep retain an employee after a probation period. Figure 39 shows the relative importance placed on job-related skills, personality traits and personal characteristics among employers at international and local firms. Job-related skills were valued most highly, but personality traits are also highly valued. In contrast, personal characteristics (such as age, sex, and appearance) have little impact on hiring decisions. The relative importance of these three broad skill groups is the same for both white and blue-collar workers, and across international and local firms.
Figure 39: Employers value job-related skills more in hiring decisions than personality traits and personal characteristics
Importance of skill groups for white-collar workers: international versus local firms

Job-related skills

Personality traits

International firms Local firms

Personal characteristics

0.0

0.2

0.4

0.6

0.8

1.0 index (0-2)

1.2

1.4

1.6

1.8

2.0

Source: World Bank staff estimations using STEP Employer Survey. Employers were asked to indicate which attributes – jobrelated skills, personality traits and personal characteristics – were the first and second most important when deciding which workers should be retained after a probation period. N=330, of which 149 firms have international links and 181 firms do not. Job related skills were defined to include: job-specific technical skills, being able to communicate well, displaying leadership abilities, working well in teams, being able to engage in creative and critical thinking, being able to solve problems, being able to work independently, and manage your time. Personal characteristics include age, appearance, gender, family relations and personal ties. Personality traits include whether an individual is conscientious, emotionally stable, agreeable, extravert and open to new experiences. The differences between international and local firms that are displayed are not statistically significant at a 10% level.

Among job related skills, employers consider strong technical competencies as the most important attribute a worker can have. Employers were asked to define which job related skills were most important in determining whether an employee on probation should be retained. Technical skills were ranked most highly by employers among both blue and white collar workers (Figure 40). International firms value job-specific technical skills more than local firms. They also attach a somewhat higher value to the ability to work independently, to whether workers are open to new experiences and to teamwork sills. Local firms value leadership and communication skills more than international firms. This may be due to a different production profile of both types of firms, or to the fact that local firms find it more difficult to attract workers with these skills, potentially because they offer lower remuneration.xv Employers also value employees who are able to think critically and creatively and who are able to solve problems. These employee attributes are typically associated with having advanced cognitive skills. Being able to solve problems and think creatively and critically were highly valued attributes for 60 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

both blue- and white-collar workers – they were considered the 3rd and 4th most valuable job related skills for white-collar workers, while problem solving was ranked 3rd most important for blue-collar workers. Creative and critical thinking was however not viewed by employers as an important skill for blue-collar workers.
Figure 40: Importance of job-related skills among white and blue-collar workers

Job-specific technical skills Leadership Problem solving Creative & critical thinking Communication Ability to work independently Team work Numeracy Foreign language Literacy Time management 0.0 0.5 1.0 1.5 2.0 Index (0-4) 2.5 3.0 3.5 4.0 Blue-Collar White-Collar

Source: World Bank staff estimates using the STEP Employer Survey. White-collar workers include the following worker types: managers; professionals, technicians and associated professionals. Blue-collar workers are classified as the following workers: clerical support; service; sales; skilled agriculture, craft and related trades, plant and machine operators; elementary occupations. This figure is based on the 328 and 329 firms who reported having at least one worker in the white- and bluecollar category and were willing to respond about the skills used and needed by that worker in his or her work. The differences between blue and white collar occupations are all statistically significant with the exception of job-specific technical skills and communication skills.

Employers also value workers who display strong leadership abilities, who are able to work in teams as well as work independently, who are able to manage their time and who communicate well. Employers valued employees who displayed leadership competencies as the second most valuable trait among white-collar workers, while being able to communicate well and work in a team were among the most valued attributes for blue-collar workers. These workplace skills draw upon workers social and behavioral abilities. For example, conscientious workers are more likely to push forward on work independently and manage their time. Employee reports of what they are asked to do in their jobs often mirror employer demands for certain skills. Managers, professionals and technicians are more likely to be asked to solve problems and to think in a creative and critical way than other workers. The STEP household survey complemented the STEP employer survey by asking workers what they do in their jobs – this allows a comparison of the skills that employers demand with the skills that are actually used by employees. Workers were asked to report how often they need to find a solution to a challenging situation at work through thinking for at least half an hour. Approximately three quarters of managers, professionals,

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 61

technicians and clerical workers reported having to solve problems as part of their work. The intensity with which these skills are used is also high – nearly one in two of these workers report having to problem solve at least once a week.
Figure 41: Wage workers are required to be think on their feet by having to solve problems

Source: World Bank STEP Employee Survey. The figure shows responses to the following question: “Some tasks are pretty easy and can be done right away or after getting a little help from others. Other tasks require more thinking to figure out how they should be done. As part of this work as [occupation], how often do you have to undertake tasks that require at least 30 minutes of thinking (examples: mechanic figuring out a car problem, budgeting for a business, teacher making a lesson plan, restaurant owner creating a new menu/dish for restaurant, dress maker designing a new dress)”. Respondents were asked to indicate how often they conducted a task of this form. The sample includes only wage employees (n=1313).

Although employers indicate that they value problem solving skills in all workers, craftsmen, machine operators and manual workers are much less likely to report having to solve problems as part of their jobs. Craftsman and machine operators are much less likely to report having to think about problems during their work than professional and technical workers, and also report a lower intensity of problem solving. Approximately 40 percent of craftsman and machine operators report having to solve problems in their work, although half of these workers report using these skills less than once a month. Worker reports of problem solving contrast with the importance and value placed on these skills by employers – as shown in Figure 40 above, employers place almost as much value on these skills for white-collar workers as they do for blue-collar workers. The discrepancies between these reports may reflect a shortage of problem solving skills among certain types of workers. Nearly all wage workers report that their job requires them to be adaptive to changes in their work environment since they are continuously learning on the job. Learning new skills requires workers to have strong core cognitive skills to build off. Workers were asked how often their work involved learning new things (Figure 42). Nine in ten managers, professionals and technicians report continuously having to learn as part of their work, and of these over half report learning every day. The incidence of learning among craftsmen and machine operators is also high and relatively intensive – 70 percent of craftsmen report learning on the job, and 20 percent of them report having to learn new things every day. Workers who conduct manual tasks are the only category of workers for whom learning does not appear to be an important component.

62 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Figure 42: Wage workers are required to be adaptive to change by having to learn new things

Source: World Bank STEP Employer Survey. The figure shows responses to the following question: “How often does (did) this work involve learning new things?”. Respondents were asked to indicate how often they conducted a task of this form. The sample includes only wage employees (n=1313).

Among social and behavioral skills, employers value conscientiousness most highly for all types of workers, while openness to experience is highly valued among white collar workers. Conscientiousness emerges as a key employability skill in virtually all countries where the demand for skills has been studied (e.g. Macedonia, Poland, Russia, United Kingdom). It includes elements such as responsibility, self-discipline, carefulness, thoroughness, self-organization, and need for achievement (motivation). Workers who do a thorough job, are hard-working, and do things efficiently are more likely to be hired and employed than workers who lack these traits. In addition, employers deem openness to new experiences to be important traits for managers, professionals and technicians, while being emotionally stable is considered to be important for blue-collar workers (Figure 43).
Figure 43: Conscientiousness is the most highly valued trait for all workers
Importance of personality traits White-Collar and Blue-Collar Workers Conscientious ness Openness Emotional stability Extraversion Agreeablenes s 0.0 1.0 2.0 Index (0-4) 3.0 4.0

White-Collar Workers Blue-Collar Workers

Source: World Bank STEP Employer Survey. Employers were asked to indicate which was the most to fourth most important personality trait when deciding which new employees should be retained. N=330. White-collar workers refers to Managers, Professionals and Technicians, while blue-collar workers refers to workers in all other occupations, notably clerks, sales and service workers, craftsmen, machine operators and manual laborers. Differences in emotional stability, agreeableness and openness to new experiences are statistically significant at a 5% level. Among white-collar workers, conscientiousness, and openness to new experiences are statistically different from zero at a 5% level, among blue-collar workers emotional stability is statistically different from zero at a 5% level, while conscientiousness and agreeableness are statistically different from zero at a 10% level.

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 63

The high value placed on workers who are more open to experience and conscientious is mirrored in earnings: workers with these types of skills earn more in the labor market. However, there are substantial differences across jobs in the types of social and behavioral skills that are most valued, likely reflecting differences in the type of tasks conducted in different jobs (Figure 44). Among managers, professionals and technicians, people who display higher levels of openness and conscientiousness earn more. Meanwhile, those who are more agreeable actually earn less – this is a finding that reflects patterns in the international literature. More disagreeable people have been found in multiple contexts to have higher incomes and wages (Arias et al, 2011; Seibert and Kraimer 2001). Among pink- and bluecollar workers, social and behavioral skills appear to play a greater role in wage setting. Workers who are more open and conscientious again earn more. (Figure 44, green bars). Among these workers, we additionally find that more emotionally stable workers earn more.
Figure 44: Openness and conscientiousness have the highest returns of all behavioral skills
Returns to social and behavioral skills by occupation type Agreeableness *** Blue-Collar, Wage Workers White-Collar, Wage Workers

Emotional Stability

**

Openness

** ***

Conscientiousness

** *

Extraversion

-8%

-6%

-4% -2% 0% 2% 4% 6% 8% Return to a one standard deviation increase in measured personality trait

10%

12%

Source: World Bank Staff Estimates of Returns to Monthly Incomes among white-collar (managers, professionals, technicians) and blue-collar (clerical workers, service and sales, craftsman, machine operators and elementary wage workers) wage workers (n=1244). The reported results are from a Mincerian earnings regression that controls for demographics, cognitive skills and education. Reported standard errors are jackknifed bootstrapped, and outliers are eliminated using a robust regression technique based on Cook's distance measure. ***, ** and * denote statistical significance at a 1, 5 and 10 percent level respectively.

Wage workers need strong social and behavioral skills since they are often required to persuade others of their ideas, work with and supervise others. Workers in multiple occupations report needing to be persuasive through providing information to clients or having to convince colleagues of their point of view (Figure 45). These attributes are most needed in occupations which require direct contact with workers outside of their enterprises – 70 percent of sales and service sector workers report that they are regularly have to sell ideas, inform others or persuade others of their opinion. Tasks that require interaction with others and persuasion require workers with strong social and behavioral skills such as self-esteem and agreeableness – these workers will be required to pick up on social cues, to change their strategies according to the personality of the person that they are interacting with.

64 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Figure 45: Percentage of wage worker who report having to interact with others, present ideas or interact with others as a normal part of their work

Source: World Bank STEP Employer Survey. The figure shows responses to the following questions: (i) “As part of this work, do you (did you) have to make formal presentations to clients or colleagues to provide information or persuade them of your point of view?”; (ii) “As a normal part of this work do you direct and check the work of other workers (supervise)?” (iii) “As part of this work, do you (did you) have any contact with people other than co-workers, for example with customers, clients, students, or the public?” The sample includes only wage employees (n=1313).

Skills are not a formal sector phenomenon: strong social skills are most highly valued in the informal sector. The earnings premium to being more open to new experiences and conscientious is higher for self-employed people than for wage workers.xvi This may reflect the observation that more educated workers cluster into wage employment, and that openness to experience and conscientiousness are both highly associated with education. In studies in other countries, entrepreneurs have been found to be more conscientious and open to experience than managers (Zhao and Seibert, 2006). There is however no clear evidence in Vietnam that the average self-employed person is more open or conscientious than the average wage worker or manager.
Figure 46: Openness and conscientiousness are rewarded in self-employment
Agreeableness Emotional Stability Openness Conscientiousness Extraversion -2% 0% * *** Returns to social and behavioral skills by wage employment Self-Employed *** * Employed

*** 2% 4% 6% 8% Return to a one standard deviation increase in measured personality trait 10% 12%

Source: World Bank Staff Estimates of monthly income returns among wage and self-employed workers (n=2058). The reported results are from a Mincerian earnings regression that controls for demographics, cognitive skills and education. Reported standard errors are jackknifed bootstrapped, and outliers are eliminated using a robust regression technique based on Cook's distance measure. ***, ** and * denote statistical significance at a 1, 5 and 10 percent level respectively.

One reason why openness and conscientiousness are more highly rewarded in self-employment is because the tasks conducted by entrepreneurs – working with clients, needing to be self-motivated – are more intensive in the use of these skills. Entrepreneurs are more likely to report having to do interactive tasks, such as talk to and assist individuals outside of their business. In addition, they are

VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 65

more likely to have to supervise others or make formal presentations. Their work is less likely to involve technology such as computers, involves a higher level of freedom and more likely to be non-routine and manual in nature, implying that their work involves readjustment. Although self-employed work is less analytical than the work reported by wage workers, many self-employed workers report needing to think for at least 30 minutes on a regular basis.

Summary
The education system is producing strong basic cognitive skills, an important asset that enhances Vietnam’s competitiveness in the global economy. There are however signals that the education system is not building all the skills needed by employers and the workforce. The STEP household survey data suggests that the education system is producing workers with strong basic cognitive skills. Higher-level cognitive skills are highly valued by employers but are less likely to be used in the workforce. Employers are concerned that the education system is not provided all the skills that they need of their workers, and these concerns are mirrored among workers. The good news for Vietnam is that it will be investing in the missing skills from a strong base – the urban workforce has strong basic literacy and numeracy skills, a necessary requirement for building more advanced cognitive and jobrelevant technical skills. The evidence from the STEP surveys suggests that multiple skills are valued in the current urban labor market. The diversity of skills used in the labor market has implications for the education system, which is expected by employers to develop the whole range of employability skills in addition to jobspecific technical skills. The need to have strong cognitive, technical and social and behavioral skills is not a “formal” sector phenomenon or limited to certain professional or technical occupations. Cognitive, behavioral and technical skills are required in all types of wage employment, and are strongly predictive of labor market outcomes and enterprise success. The informal and enterprise sector appears to use a different but overlapping skill set to the skills used in wage employment. In rural areas, over 30 percent of households engage in self-employment activities in the non-farm sector. Therefore recognizing that skills go beyond the formal sector workforce is likely to raise enterprise success. As its economy continues to grow and transition into higher value-added sectors, Vietnam needs to focus its attention on building the advanced cognitive, technical and social and behavioral skills that are already being used in today’s urban labor market and will be increasingly used in the future. In the current urban labor market, workers are already being asked to think on their feet, to solve problems, to learn on the job and to interact with others on a regular basis. Demand for workers who are able to perform these tasks is likely to rise and workers will be asked to be responsive to shifting needs and labor markets. Consequently, the skills shortage that is reported today is likely to grow as firms ask more of their workers and the transition towards modern jobs continues. In order to meet the current and future demands of employers, the focus needs to shift to laying a foundation for strong skills. The next chapter will examine when skills are formed, and put forward a framework to understand how disconnects in the current education and training system may result in an under-investment in the skills needed for a modern industrialized Vietnam.

66 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

In depth: What are cognitive, behavioral and technical skills and how are they measured?
The STEP Household data focuses on three domains of skills: cognitive, social and behavioral, and technical skills. Cognitive skills can be defined as “the ability to understand complex ideas, to adapt effectively to the environment, to learn from experience, to engage in various forms of reasoning, to overcome obstacles by taking thought” (Neisser, Boodoo, Bouchard). The literature on intelligence has separated cognitive skills into a general intelligence factor g and multiple second-order factors, which display different paths over an individual’s life-cycle (Carroll 1993). Two seminal and widely discussed factors are fluid intelligence and crystallized intelligence. Fluid intelligence reflects the capacity to perceive and act upon complex problems under novel conditions, independent of acquired knowledge (Cattell, 1971). In contrast, crystallized intelligence reflects learned skills and knowledge, and is therefore dependent on education and the formation and learning of knowledge (Horn and Cattell, 1967). Cognitive skills are typically measured using achievement or assessment tests that capture to different degrees fluid and crystallized intelligence. Broadly speaking, aptitude tests are designed to measure differences in the rates at which individuals learn (fluid intelligence) whereas achievement tests are designed to measure acquired knowledge (crystallized intelligence). The relative weight of fluid versus crystallized intelligence captured by a test depends on the amount of prior knowledge or experience that is required to perform well on the test. In the StEP household survey, cognitive skills are measured in two ways. First, respondents are asked to report whether and how often they read, write and do numerical tasks both at work and at home. The questions were designed to capture both overall use of reading, writing and numeracy skills as well as the intensity of their use. These measures are likely to capture a combination of the person’s actual ability to conduct tasks involving these skills, and their motivation/opportunity to do so. In this case, they may represent a lower-bound estimate of these skills in the population. For example, an individual may be able to write long documents but have no recourse to do so in his or her work or home life. On the other hand, individuals may claim to read on a regular basis but may actually not be able to do so; therefore this miscategorization would result in over-estimates of the skill stock. Self-reported reading “Do you read anything [in daily life/at this work], including very short notes or instructions that are only a few sentences long?” “Among the things that you normally read [in daily life/at this work], what is the size of the longest document that you read?” Self-reported writing “Do you ever have to write anything (else) [in daily life/at work], including very short notes, lists, or instructions that are only a few sentences long?” “Thinking about all the things you normally write (wrote) [in daily life/at work], what is the longest document that you write (wrote)?” Self-reported numeracy “[As a normal part of this work /in daily life], do you do any of the following...?” VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT | 67

A second measure of cognitive ability captures an individual’s literacy by testing their reading competency. The STEP literacy test is lined to and draws from other large-scale international surveys, which has included the International Adult Literacy Survey (IALS), Adult Literacy and Life Skills Survey (ALL), and the Program for the International Assessment of Adult Competencies (PIAAC). STEP is based on the same conception of literacy used in other large-scale assessments, notably “understanding, evaluating, using and engaging with written texts to participate in society, to achieve one’s goals, and to develop one’s knowledge and potential” (PIAAC Literacy Framework). The literacy items cover a range of areas, notably: Material types, focusing on non-school-based materials in adult contexts (Example 1); Task types, including tasks that require respondents to access and identify information (in both text-based and non-prose materials such as tables, graphs and forms), to integrate and interpret information, and to evaluate information by assessing the relevance, credibility, or appropriateness of the material for a particular task (Example 2); and Difficulty, with tasks ranging from locating a single piece of information in a very short advertisement to summarizing reasons for using generic drugs as presented in a newspaper article. Tasks are reported along a scale divided into 5 levels, with Level 1 characterized by the least demanding tasks and Level 5 the most demanding.

Example 1

Example 2

Does the following sentence make sense? THE MAN WAS TOO TIRED TO BRUSH HIS PLANT SO HE WENT STRAIGHT TO SLEEP. Circle the correct word: IT STARTED RAINING, SO I PUT UP MY UMBRELLA/MUSHROOM

STAR

SAND

GLASS

Circle the correct word

The self-reported reading, writing and numeracy questions capture a different concept of cognitive skills than the literacy test. The literacy test captures an objective assessment of an individual’s literacy that can be compared to the literacy of others in the survey. In comparison, the self-reported questions capture the use of reading and writing skills; since these measures are self-reported, they may well differ from an individual’s actual ability to read or write. Figure 47 below displays the fraction of correct responses in the literacy assessment by self-reported reading category. The average number of correct responses increases as self-reported reading intensity rises – among those who read more than 25 pages, 75 percent got over 95 percent of the questions on sections A and B of the reading assessment correct compared to approximately 40 percent of those who read less than a page. However, nearly 33 percent of those who do not read anything on a regular basis also scored in the highest category. It is therefore clear that, although self-reported skills are related to reading ability as captured in the literacy test, they do not fully capture a person’s actual skills.

68 | VIETNAM DEVELOPMENT REPORT 2014 - MAIN REPORT

Figure 47: Self-reported literacy is highly correlated with, but does not fully capture, a person’s actual literacy abilities.
Self-Reported Reading Length and Fraction of Correct Responses 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Don't Read

Similar Documents

Premium Essay

Management

...What is Management? Definitions According to Harold Koontz, "Management is the art of getting things done through and with people in formally organised groups." Harold Koontz gave this definition of management in his book "The Management Theory Jungle". According to Henri Fayol, "To manage is to forecast and to plan, to organise, to command, to co-ordinate and to control." Henri Fayol gave this definition of management in his book "Industrial and General Administration". Image Credits © Michael Heiss. According to Peter Drucker, "Management is a multi-purpose organ that manages business and manages managers and manages workers and work." This definition of management was given by Peter Drucker in his book "The Principles of Management". According to Mary Parker Follet, "Management is the art of getting things done through people." Meaning of Management According to Theo Heimann, management has three different meanings, viz., 1. Management as a Noun : refers to a Group of Managers. 2. Management as a Process : refers to the Functions of Management i.e. Planning, Organising, Directing, Controlling, etc. 3. Management as a Discipline : refers to the Subject of Management. Management is an individual or a group of individuals that accept responsibilities to run an organisation. They Plan, Organise, Direct and Control all the essential activities of the organisation. Management does not do the work themselves. They motivate others to do the work and...

Words: 1096 - Pages: 5

Premium Essay

Management

...Past Influence of Management Today Abstract The past influence of management was done with bureaucracy and Administrative ways that gives management today to achieve their goals for the organization. Bureaucratic management may be described as "a formal system of organization based on clearly defined hierarchical levels and roles in order to maintain efficiency and effectiveness." Administrative has to foresee and make preparation s to meet the financial commercial and technical condition s under which the concerns must be started. How Bureaucratic and Administrative Management Affects Overall Management Bureaucracy Bureaucratic management focuses on the ideal form of organization. Max Weber was the major contributor to bureaucratic management. Based on observation, Weber concluded that many early organizations were inefficiently managed, with decisions based on personal relationships and loyalty. Also, bureaucracy formed the need for organizations to operate rationally rather than relying on owners’ and managers. (Williams’s pg. 31) this brings Jobs are divided into simple, routine and fixed category based on competence and functional specialization. Officers are organized in a n hierarchy in which higher officer controls lower position holders i.e. superior controls subordinates and their performance of subordinates and lower staff could be controlled. All organizational...

Words: 864 - Pages: 4

Premium Essay

Management

...conceptual skills, interpersonal skills, and technical skills. These three managerial skills are used by different managers in different degrees. Successful managers usually display more conceptual than technical skills. They have to continuously think about the company's goals and objectives and how they can be effectively communicated to employees. Middle Level Management Middle management is the intermediate management level accountable to top management and responsible for leading lower level managers. Image of Middle managers fig. 1 Middle managers Middle management is the intermediate management of a hierarchical organization, being subordinate to the senior management but above the lowest levels of operational staff. Key Points Middle management is the intermediate management of a hierarchical organization, subordinate to the senior management but above the lowest levels of operational staff. They are accountable to the top management for their department's function. They provide guidance to lower level managers and inspire them towards better performance. Middle management may be reduced in organizations as a result of reorganization. Such changes include downsizing,...

Words: 635 - Pages: 3

Premium Essay

Management

...Assignment On- “The Evolution of Management Thought and The Patterns of Management Analysis” Submitted To: Professor Dr. Abu Hossain Siddique Department of International Business University of Dhak 9th Batch, EMBA Date of Submission: 4th July,2012 INTRODUCTION Although modern management theory dates primarily from the early twentieth century, there was serious thinking and theorizing about managing many years before. Two events are especially significant to management history. First, in 1776, Adams Smith published The Wealth of Nations, in which he argued the economic advantages that organizations and society would gain from the division of labor (or job specialization). The second important event is the industrial revolution. Starting in the late eighteenth century when machine power was substituted for human power, it became more economical to manufacture goods in factories than at home. These large, efficient factories needed someone to forecast demand, ensure that enough material was on hand to make products, assign task to people, direct daily activities, and so fort. That “someone” was managers, and these managers would need formal theories to guide them in running these large organizations. It wasn’t until the early 1900s, however, that the first steps were taken toward developing such theories. The evolution of modern management thinking begins in the nineteenth century...

Words: 6134 - Pages: 25

Premium Essay

Management

...Classical Management Theory (1900 – 1930) It was the rise of the Industrial Revolution and factories were becoming more common. Inside these factories, managers were constantly look for ways to improve productivity and efficiency. As time moved on, it became apparent that searching for the single best way to do things was the most important thing for managers to do. Thus, classical management theory was born. The Evolution of Classical Management Theory The Industrial Revolution was a time where innovation really began to change the way that products were produced and sold. The invention of machines to produce goods in the 19th century drastically improved productivity, which in turn lowered the cost to the consumer. The lower price resulted in a greater demand for products and thus a greater need for more factories and workers. As factories increased in number, managers continued to search for ways to improve productivity, lower cost, increase quality of their products, improve employee/manager relationships and increase efficiency. The focus shifted from using machines to increase productivity to how they could increase employee productivity and efficiency. When they did this, they began to notice some new problems inside their factory systems. Employees were dissatisfied with their current working conditions, and many lacked the necessary training for how to do their work efficiently. Managers then began to formulate and test possible solutions, one of which was to find...

Words: 952 - Pages: 4

Premium Essay

Management

...The formation of organization implies that a leader should take the role to control the activities of the group; the work done by the leader is what we call management. Organization is formed by a group of people who work together. No matter the organization is a profit making ones or non-profit making ones, its formations are to achieve a common purpose or variety of goals, which are the desired future outcomes. The outcomes might be producing a series of product or serving a group of target customers or satisfying others¡¦ needs. In these organizations, managers mainly are responsible to supervising the work performance of the group members and deciding the use of resources to achieve the organization’s goal. Management can be simply defined as getting things accomplished through other people. Management is then the term describe the work done by the manager, which are planning, organizing, leading and controlling the use of human and other resources, in order to help the organization to achieve a higher organization performance. Planning is to define to goals or targets of the organization and devising action plans to meet organization goals. Organizing is to determine what tasks should be done, arrange jobs to subordinates, controlling the budgeting and divided tasks to individuals or teams. Leading is to motivate staffs to work, maintaining the progress of activities and good relationship and to ensure to work done effective and efficient. Controlling is to measure...

Words: 3855 - Pages: 16

Premium Essay

Management

...MGT115 – Management and Organization Tutorial 1 – Answers 1.1. Who are Managers? a) Explain how managers differ from non-managerial employees? A – Managers differ from non-managerial employees in the sense that they are responsible for coordinating and overseeing the work of their subordinates (who maybe non-managerial or managerial) so as to ensure the organizational goals are met. Non-managerial employees however are only responsible for the task(s) assigned to them. b) Describe how to classify managers in organizations. A – Managers can be classified in to * First-line managers: - Individuals who manage the work of non-managerial employees * Middle managers: - Individuals who manage the work of first-line managers * Top Managers: - Individuals who are responsible for making organization-wide decisions and establishing plans and goals that affect the entire organization. 1.2. What is Management? a) Define management. A – Coordinating and overseeing the work activities of others so that their activities are completed efficiently and effectively. b) Explain why efficiency and effectiveness are important to management. A – Because both efficiency (getting the most output for the least inputs) and effectiveness (attaining organizational goals) are important to ensure that there is low resource waste and high goal attainment. 1.3. What do managers do? a) Describe the four functions of management. A – The four functions...

Words: 2602 - Pages: 11

Premium Essay

Management

...Modelling for Change: An Information Systems Perspective on Change Management Models Robert D. Macredie, Carl Sandom and Ray J. Paul Department of Information Systems and Computing, Brunel University, Uxbridge, Middlesex, UB8 3PH Tel: +44 1895 203374; Fax: +44 1895 203391 E-mail: Ray.Paul@brunel.ac.uk; Robert.Macredie@brunel.ac.uk Abstract This paper will focus on the topic of organisational change and its management from an information systems perspective. The paper will examine the issues raised during a review of the change management literature – looking at the major approaches to change management, namely, the planned, emergent and contingency approaches – as background to the issues raised in other papers in this theme of the book. As in the Management In The 90s (MIT90s) study, a very broad definition of the term IT is used to include: computers of all types, hardware, software, communications networks and the integration of computing and communications technologies. The paper will then examine change management within the context of Information Systems (IS) theory and practice. This will lead to a discussion of an emerging model by Orlikowski and Hofman which will be briefly reviewed to provide insight into the types of models which are likely to provide a focus for research in the area in the near future. The model also provides a strong and interesting framework against which to view some of the papers that follow in this theme of the book. 1. Introduction As...

Words: 6387 - Pages: 26

Premium Essay

Management

...Introduction to Management Technology BMRT 11009 - Section 300 Kent State University MANAGEMENT AMY HISSOM 10/26/2009 TABLE OF CONTENTS Introduction............................................................................................................................................ 3 Managers and Managing ........................................................................................................................ 4 What is Management?..................................................................................................................... 4 Essential Managerial Tasks............................................................................................................... 4 Levels and Skills of Managers ........................................................................................................... 4 Recent Changes in Management Practices ....................................................................................... 5 Challenges for Management in a Global Environment ...................................................................... 5 The Evolution of Management Thought ................................................................................................. 6 F. W. Taylor (1890-1940): Scientific Management ............................................................................ 6 The Gilbreths: Time-and-Motion Study ....................................................................................

Words: 3462 - Pages: 14

Premium Essay

Management

...The Four Functions of Management Management is the art of effectively organizing people and things using the resources available to achieve an overall goal. Management is necessary because it enables the overall organization, group or business to operate efficiently by properly allocating the resources utilized. Great management within a system that works leads to great success no matter what the venture may be. Management has evolved in that business has become a global enterprise. In today’s global economy, management demands a much more structured, generic and appealing approach because it must communicate to a variety of people (Batemen & Snell, 2008). It is because of this vast increase in the sheer amount of people, that management has gone from a much more “do as I say or your fired” role and transitioned into a “this is the way we do it here at Burger King” kind of way. This generic and appealing yet simpler model of management consists of four basic key concepts. The four key concepts of management include leading, controlling, organizing and planning. I placed them in this particular order because I believe that what they have in common is their ability to be placed in that order. Once a person has shown their ability to lead effectively, it enables that manager to have control over the employee because the manager has shown through their leading that they are fully able to essentially “practice what they preach”. Once a manager has control he can then begin...

Words: 846 - Pages: 4

Premium Essay

Management

...The Management Planning Process An effective management planning process includes evaluating long-term corporate objectives. Management planning is the process of accessing an organization’s goals and creating a realistic, detailed plan of action for meeting those goals. It is kind of like writing a business plan, a management plan takes into consideration short and long term corporate strategies. Some basic steps in the management planning process involves creating a road map that outlines each task the company must accomplish to meet its overall objectives. There are seven very important management planning process steps I am going to talk a little bit in depth about. The first step in the management planning process is establishing goals. In planning you have to identify specific company goals. The part of the planning process should include a detail overview of each goal, including the reason for its selection and the anticipated outcomes of goal related projects. Anywhere there are possible objectives should be described in quantitative or qualitative terms. For example, a goal is to raise profits by ten percent over a four month period. Establishing goals is a good way to help any organization see their hard pay off. The second step is to identify organizational resources that will be beneficial to them for help and advice. Each goal should have financial and human resources projection associated with its completion. For example, a management plan may identify how many...

Words: 673 - Pages: 3

Premium Essay

Management

...Management by objective (MBO) Management by Objective is a tool that allows managers and employees to come together for the purpose of agreeing upon a set of objectives to achieve the company’s short, medium, or long term future (www.word.com/defination/mangement). The theory intrigued me because management by objective theories can help promote a great team. The overall well-being of the company works better with healthy communication between management and employee’s. I currently manage people clarifying their goals and stimulating theory can be a challenge. Management by objective is an essential part of the mangers daily activities. The Theory for management by objective is to improve planning, better understanding between management and employee, participation in the goal setting process, better informed employees, improved appraisal system and better organization of functional task grouping (Ford, McLaughlin, Nixdorf o 1980). The concept of job planning is a key theory of management by objective because it sets a range of performance systems to assist the employees to stay on track (www.1000ventures.com). When you plan you give your employees an expected result from beginning to end. Better understanding between you and your employees is important because if your employee does not understand what is needed from them they cannot possible meet the company’s needs. If the communication is unclear there is room for error Communication is an essential part...

Words: 635 - Pages: 3

Premium Essay

Management

...One of the first schools of management, the classical management theory, developed during the Industrial Revolution when new problems related to the factory system began to appear. Managers were unsure of how to train employees. A large amount of the non-English speaking immigrants or dealing with increased labor dissatisfaction caused managers to test solutions. According to Plunkett, Attner & Allen (2008) “The classical management focused on finding the “one best way” to perform and manage tasks” (p.38). This school of thought is made up of two branches: classical scientific and classical administrative. The scientific branch arose because of the need to increase efficiency and productivity. The emphasis was on trying to find the best way to get the most work done by examining how the work process was actually accomplished and by paying close attention to the skills of the workforce. The classical scientific school got its roots to several contributors, including Frederick Taylor, Henry Gantt, and Frank and Lillian Gilbreth. Whereas scientific management focused on the productivity of the certain individuals, the classical administrative approach emphasizes on the total organization. The emphasis is on the development of managerial principles rather than work methods. Contributors to this school of thought include: Henri Fayol, Max Weber, Mary Parker Follett, and Chester I. Barnard. During World War II, mathematicians, physicists, and others joined together to solve...

Words: 744 - Pages: 3

Free Essay

Management

...2.4 The Environmental Management System (EMS) application in the related industries. How it can improve the environmental performance of business? Example. 2.4.1 THE ENVIRONMENTAL MANAGEMENT SYSTEM (EMS) Definition: the environmental management system (EMS) refer to one part of the comprehensive management system that relate to organizational structure, planning activities and documented manner, it includes planning, implementation, checking, management review and environmental policy. An environmental management system (EMS) 1. It is environmental performance improving tool. 2. It is effective way to manage organizational companies. 3. Manage organizations to solve environmental problems, like allocation of resources, assignment of responsibility and ongoing evaluation of practices, procedures and processes. 4. Manage the long-term or short-term environmental impact of products service and processes for organizations. 5. Continual improvement is emphasis. EMS Model Plan Act Do Check Step 1: plan (planning) Definition: planning is a way of establish objectives and processes requirement. In order to implement ISO 14001, the first step is suggestion, to help to classify all the current or future operation elements. It includes environmental aspects, compliance, objectives and targets, environmental management programs (EMP). Business firms should plan for environmental protection. They need to plan their current operation or even future operation. The...

Words: 3017 - Pages: 13

Premium Essay

Management

...Management is universal in the modern industrial world. Every industrial organization requires the making of decisions, the coordinating of activities, the handling of people, and the evaluation of performance directed toward group objectives. In addition, our society simply could not exist as we know it today or improve its present status without a steady stream of managers to guide its organization. Peter Drucker makes this same point in stating that effective management is quickly becoming the main resource of developed counties and the most needed resource of developing ones (Certo, 1986). In short, management is very important to our world. Then, what is management? This essay will discuss this topic as following. It has to be recognized that the definitions of management are extremely broad. Harbison and Myers (1959) offered a concept for emphasizing a broader scope for the viewpoint of management. They observe management as an economic resource, a system of authority, and a class or elite from the view of the economist, a specialist in administration and organization, and sociologist respectively. Henri Fayol, “the father of modern management theory,” formulated fourteen principles of management. Hugo Munsterberg applied psychology to industry and management. Max Weber is known for his theory of bureaucracy. Vilfredo Pareto is considered “the father of the social systems approach.” Elton Mayo and F.J. Roethlisberger became famous through their studies of the impact...

Words: 296 - Pages: 2