Connecting Vietnam’s youth to high-skilled jobs: What does it take?

As we celebrated International Youth Day on August 12, we reflect on the progress made in ensuring that the youth of Vietnam are on a pathway to greater upwards economic mobility. Achieving this requires the full utilization of their human capital potential by providing high-quality education, training, and better employment opportunities to meet the rising aspirations and talents of today’s young generation. 

In Vietnam, only 9% occupations were high-skilled in 2021, according to ILOSTAT. By contrast, data from ILOSTAT also shows that high-skilled jobs accounted for over half of all occupations in the United Kingdom. Closer to home in neighboring Singapore, nearly 65% of workers are in high-skilled roles (data excludes employment not classified).

Why do these figures matter? In fact, they matter a lot because reaching high-income status requires the critical transition of employment towards more productive, knowledge-intensive, and high value-added activities. These types of activities require a high level of skills, such as complex problem solving, decision-making, creativity, and strong interpersonal communication. Employment in high-skilled professions is what drives economic development at higher income levels.

As Vietnam aspires to reach greater levels of prosperity, the majority of its labor force should no longer remain engaged in manual and routine jobs.  The same strategies that enabled Vietnam to transition from low to middle income are no longer sufficient to propel the country forward in the next stage of its economic development.

Employment in Vietnam is still predominantly in low and medium skilled jobs. Vietnam is becoming more educated, but the share of roles, that has marginally increased over time has been outpaced by jobs in medium-skilled occupations.

^{(Data source: Vietnam 2022 Poverty and Equity Assessment)}

 

According to the World Bank’s Utilization-adjusted Human Capital Index (U-HCI), Vietnam’s human capital potential is underutilized. Vietnam saw a notable decline in its Human Capital Index score from 0.69 to 0.37, reflecting limited employment of workers in higher quality jobs  – or a potential underutilization of the country’s high human capital potential.

Why are Vietnam’s more educated youth not going into high-skilled jobs?

Employment outcomes of Vietnamese youth are affected by both supply and demand factors.  On the supply side, there may be a mismatch in the skills and knowledge gained in education and those needed in the modern workplace. A fifth of firms surveyed in 2019 reported that the biggest obstacle they faced was an inadequately educated workforce. Rapid technological progress also increases demand for radically different skills than those that are traditionally taught in schools.

On the demand side, the current job market may have limited availability of high-skilled roles. Domestic private firms are largely small and yet to be competitive as they lack the scale in accessing technology and investment. Compared to countries in the East Asia and Pacific region, firms in Vietnam need to be more innovative and faster to adopt more complex production process. The high-skill growth transition will require the development of a more competitive and innovative private sector.

What steps can Vietnam take to facilitate a high-skilled transition?

Vietnam needs to continue improving the access and quality of higher education. Reducing the gaps in access to education for different socioeconomic groups can help expand higher-education coverage. This can be done through addressing academic readiness, increasing financial aid, and outreach programs in disadvantaged communities.

Improving the quality of education will require an update to curriculums to help students develop in-demand skills such as managerial, socio-emotion, or job-specific technical skills. In addition, policies supporting further funding for research, improved staff retention programs, coordinated investments in international accreditation and exchanges can strengthen Vietnam’s tertiary education system.

There is also a need to improve collaboration between employers, educational and training institutions so that skills development can be aligned to labor demand. Well-designed policies should encourage greater provision of on-the-job training by employers.

To tackle the demand side constraints, policies should aim at promoting firm development and creation of better jobs. By sharing know-how and information on adopting new technologies, governments can support the improvement of capabilities among small and medium enterprises. Governments can also encourage greater innovation through investment in technology generation, research, commercialization, and knowledge transfer between firms. A more in-depth analysis of these policy implications are available in the Vietnam 2022 Poverty and Equity Assessment and the Taking Stock Report - “Education to Grow”.

Reaching high-income aspirations by 2045 requires policy action today. Ensuring that workers have the right skills, and that the private sector can provide the right jobs is key to Vietnam’s transition to a high-skilled, high-income economy.