Education-occupation mismatch in Vietnam: determinants and effects on earnings

Abstract

We examine the education-occupation mismatch in horizontal and vertical respects; and their impacts on earnings of Vietnamese workers. We start by clarifying definitions and causal reasons of mismatch between education and occupation: in major and level. Analyzing survey data from 267 workers, we find that the mismatch between schooling major and working field which is caused by unavailability of job in the schooling field (demand-related horizontal mismatch) has a negative effect on earnings. And the mismatch between schooling major and working field caused by remaining reasons (supply-related horizontal mismatch mismatch) has no statistically significant impact on earnings. Interestingly, a horizontal mismatch because of supply-related reasons for workers who learned science major has a positive effect on earnings. Furthermore, when examining the effect of vertical mismatch, a negative effect of under-education on wage is found whereas over-educated years have no significant effect on wage. From policy perspective, we recommend that people should avoid major mismatch for best earnings. However, in case individuals learn science and work in mismatched career voluntarily, their earnings will be better than ones in adequate career. Moreover, students should avoid over-education to reduce the waste of resources unless they want to study more for their own preferences.