Dynamic skill formation in Vietnam: Beyond a ‘skill mismatch’ paradigm

Abstract

There are growing claims that an increasing skill mismatch, in terms of skill shortages and gaps, is impeding further economic growth and industrialisation in Vietnam. Previous studies often attributed it to the failure of supply-side initiatives to meet increasing skill demand. However, this supply-side approach, which emanates from human capital theory, provides only a partial view of Vietnam’s skill formation model and its challenges. This research investigated the perceptions of skill mismatch in the machine manufacturing sector, which is expected to lead higher value-added industrialisation, obtained through questionnaires and in-depth qualitative interviews with policymakers, educators, and employers. It found that employers are not uniformly concerned about large skill shortages and skill gaps because many of them do not require large numbers of skilled workers due to intensified supply chain competition, small domestic markets, and incremental technological progress. In contrast, policymakers and educators often perceive large skill shortages and gaps, in particular for intermediate workers such as technicians. Accordingly, they are adopting the supply-side approach by suggesting that education and training, in particular TVET programs, should be improved in accordance with the perceived skill needs of employers. However, they confront two fundamental challenges in trying to deliver improvements to their skill formation system through a supply-side approach. Firstly, many employers have weak incentives to engage in TVET reform due to stagnant skill demand. Secondly, they struggle to determine current and future skill ‘needs’ precisely. In these conditions, imposing the supply-side approach amplifies mutual distrust between the supply and demand sides. In order to overcome these two challenges and achieve further industrialisation, Vietnam needs an integrated skill formation strategy which stimulates the dynamism of skill demand, while promoting inclusive upskilling beyond employers’ immediate skills needs. This requires active local initiatives focusing on sectors with high aspirations for ascending value chains and upskilling