The influence of educational level on the income of people in the central highland

List of tablesTable 4.1 Statistics describe the variables in the model Table 4.2 Statistics on educational level and average salary received Table 4.3 Regression results of the single wa

Bộ GIÁO DỤC VÀ ĐÀO TẠO ĐẠI HỌC KINH TẾ THÀNH PHỔ HÔ CHÍ MINH

BÁO CÁO TÓNG KÉT

ĐÈ TÀI NGHIÊN cứu KHOA HỌC THAM GIA XÉT GIẢI THƯỚNG ‘’NHÀ

NGHIÊN CỨU TRẺ UEH ” NĂM 2024

< The influence of educational level on the income of people in the Central

Highlands >

Thuộc nhóm chuyên ngành: Kinh tế

TABLE OF CONTENTS List of tables

2.2 Analytical methods and data from previous research

2.2.1 Number ofdata used

2.2.2 Analytical method

2.2.3 Contributions from previous research

2.2.4 Limitation from previous research

Chapter III Methodology

3.1 Research data

3.2 Below is the specific model of this research article :

Chapter IV Result

4.3.3 Public money allocation according to number ofyears of education and other factors

V Conclusions and recommendations

5.1 Conclude

5.2 Request

REFERENCES

APPENDIX.

List of tables

Table 4.1 Statistics describe the variables in the model

Table 4.2 Statistics on educational level and average salary received

Table 4.3 Regression results of the single wage model of 3 provinces Dak Lak,

Lam Dong, Gia Lai in 2020

Table 4.4 Regression results of wage model according to educational level

Table 4.5 Regression results of wages according to years of education and other

factors

Table 4.6 Regression results of returns to education for men and women

LIST OF ACRONYMS

Standards Survey

Survey of living standards of Vietnamese households

UNESCO United Nations Educational,

Scientific and CulturalOrganization

Unitied NationsEducational, Scientific and Cultural Organization

PRR Private Rate of Return Specific rate of return

OLS Ordinary least-squares Least squares method

This research uses the 2020 data set on individuals with income in the Central Highlands taken from the data set of the 2020 Vietnam Living Standards Survey Results of analyzing the personal income function for we see that the important factor affecting each individual's income is education When each individual's innate ability is not controlled,

an additional year of schooling can increase income by 5.9 % When controlling for this factor by a model that fixes the innate abilities of individuals in the household, the increase in income is about I % Wages for people with less than a high school education

do not differ much However, when each individual's education level is higher,specifically college and university degrees or higher, their wages are 44.7% and 60.9%higher than other levels of education From the above results, it shows that the return on education in 2020 achieved much better results than the results of previous researcharticles, mainly using data from the 2002 Vietnam Living Standards Survey, 2008 and

2010 Shows that personal education level is an increasingly important factor indetermining workers' wages, even in the Central Highlands where the school dropout rate

is high, agricultural production is predominant, and people still not interested in studying

Chapter 1 Introduction

1.1 Question

Education is always a special topic that attracts the attention of not only those involved inteaching and learning but also everyone Furthermore, education and training is also a lever to actively develop the economy and improve quality of life Therefore, in order forVietnam to move towards globalization and a knowledge economy as well as for people's lives to progress and develop sustainably, we need to promote education and training not only in the provinces, big cities but also need to pay special attention to remote areas, the highlands of the Central Highlands is an example

The Central Highlands or South Central Highlands is an area with plateau terrain including 5 provinces: Kon Turn, Gia Lai, Dak Lak, Dak Nong and Lam Dong Blessed

by nature, the Central Highlands has climate, soil and many rare resources and mineralsthat cannot be found anywhere else The Central Highlands is known as a legendary land,home to nearly 6 million people, including 52 ethnic minorities The Central Highlands is also a particularly important strategic area in terms of economy, society, ecologicalenvironment, defense - security and foreign affairs ofthe country However, compared toother regions in the country, the socio-economic conditions of the Central Highlands have many difficulties, such as lack of skilled labor, underdeveloped infrastructure, and the interaction of many ethnic groups living in a small area and especially with a low level of education leading to many difficulties in living standards

The relationship between educational level and income has been of interest to manyscholars since more than half a decade ago, specifically there have been more than 800 research articles on this issue in nearly 20 years since the second half of the century 19(W Lee Hansen, 1970) Accordingly, Jacob A Mincer (1974) was the first to use the estimate of individual returns to education using the human capital income function(Pham, 2011) The return to an individual year of schooling was estimated at 5% at the time the author used 1993 VHLSS data (Moock et al., 2003) Thanh et al., (2006) used

2002 VHLSS data to evaluate the returns to education and showed that an additional year

of high school would increase income by 11.43% Research by Doan & Gibson (2010) shows that the return on education in Vietnam increased over time, increasing by nearly7% in 10 years from 2.9% in 1998 to 9.8% in 2008 This shows that education has a certain impact on people's income

However, each economic region or living area has a different formation and development process (Nguyen Duy Tho, 2013) Therefore, the Central Highlands - a highland region suffering from many socio-economic difficulties, needs to be given more special attention

in terms of education and training to improve the quality of people's lives That's why ourgroup conducted the research project "The influence of educational level on the income

of people in the Central Highlands"

1.2 Objectives of the study

- Propose measures to raise people's awareness of the importance of education as well asthe impact of education on income and solutions to help increase income

1.3 Research question

- What is the return rate of Vietnamese education in the Central Highlands region in

2020 When increasing one year of schooling, how many percent will a worker's income

increase ?

- How different is the profit rate ofVietnamese education in the Central Highlands region

in 2020 when there are differences in personal factors: gender, qualifications, economicclass, work experience

- Is education a sustainable path to income for people in the Central Highlands?

The research topic focuses on workers in the Central Highlands with income in 2020

Chapter II Theoretical Overview

2.1 Theoretical basis

2.1.1 Academic level

A person's level of education is the highest grade he or she has completed (According tothe International Classification of Education - ISCED) For operational purposes, the highest level of education a person has achieved will represent the level of education completed, often confirmed by certified certificates or degrees (UNESCO, 2011).According to the current Law on Education and Training of Vietnam, our country'seducational establishments include formal educational establishments and continuingeducational establishments, from preschool education to upper secondary education

general education, vocational training to professional education levels.

2.1.2 Return on educational attainment

According to Blundell et al., (2001) the concepts of benefits of education are private benefits, social benefits and labor productivity benefits This is calculated by evaluating the Internal Rate of Return (IRR) Hartog et al., (1999) define the return on education assubtracting the present value of future profit streams from the present value of futureinvestments The specific return on education is income minus taxes The social return on education is the costs and benefits of the entire society All of these calculations assess the impact of education on earnings Because the social rate of return also includesexternal factors and many other factors that cannot be measured, so in these studies, when talking about the rate of return on education, it can be understood as the separate rate of return (Private Rate of Return - PRR)

2.1.3 Human Capital

The types of capital we often know are financial capital, physical capital, and human capital And investing in learning, training, healthcare , etc are investments in human capital The importance of human capital’s influence on economic growth has long been holly debated among researchers According to the research of Manuclli & Scshadri (2014), the important factor contributing to economic promotion is human capital Thequality of human capital is proportional to development This study also identifies thatthe quality of human capital greatly affects the differences in output products in different countries In poor countries, low-income individuals not only have fewer years ofschooling than other countries, but human capital is still very low, which can be understood as the poor quality of leaching during the years of schooling, not high either

2.1.4 Workers

The income-earning workers mentioned in the study are manual workers (workers,janitors, employees , etc.) or knowledge workers (employees, civil servants, officials)

2.1.5 The impact of educational level on labor productivity' and income

The Cobb-Douglas function shows that the total function of productivity factors (A),capital input (K) and labor input (L) is the total quantity of products produced Soincreasing any factor (A, K or L) will help increase production productivity Factors such

as capital and labor are tangible while factor productivity (A) is often considered intangible and often ranges from technology to worker knowledge (Human Capital) Manuelli & Seshadri’s model (2014) believes that human capital is the result of the following stages: Early childhood, Schooling and On-job-training From there, it can be seen that educational level plays an extremely important role in perfecting human capital, thereby increasing worker productivity Through time studying, individuals will certainly acquire new knowledge and skills, thereby increasing their working efficiency Welch (1974) argues that if we assume fixed prices in the same market, then individual differences in income reflect individual differences in production attributes It can be said that labor productivity has an impact on each person's income

2.1.6 The impact of educational level on income through the Sheepskin Effect

The “sheepskin effect” posits that attaining higher degrees increases wages (Welch, 1974) stated that one of the easily calculated factors to predict a person's salary is the number of years ofschooling that person completed This means that because people withmore years of schooling are often perceived to have more knowledge and skills than people with less years of schooling, they can expect to receive higher incomes Oremployers think that people with more ability and skills than others tend to have highereducation, so they arc willing to pay these people a higher income Therefore, they view years of schooling as a way to identify those who are more likely to be productive Therefore, people often tend to study to achieve higher degrees, as a way to showemployers that they arc capable and worthy of receiving a high income Therefore, the number of years of schooling a person has is greatly influenced by this Although the content of the "sheepskin effect" does not mention the specific benefits of an additionalyear of schooling affecting income, it does evaluate the difference between people with a

degree and those without a degree, but with the same number of years of schooling, people with degrees will receive a higher income In our country's current situation, manypeople want to achieve a degree such as a university or master's degree to affirm their abilities to employers and consider it career and income stability Although in fact this argument is not entirely accurate and there are many objections to this argument, inVietnam the situation of assessing capacity through qualifications to determine salary is still very much present.

2.2 Analytical methods and data from previous studies

2.2.1 Data has been used

Data used in previous studies in Vietnam came from the 2002, 2008 and 2010 Population Living Standards Surveys of the Vietnam General Statistics Office

2.2.2 Analytical method

Method for measuring returns to educational attainment

Jacob A Mincer's model (1974) is a frequently used model when studying the impactbetween education level and income level:

In In [w(s,x)] = a o + f) Ss + 00 x+ Pix2 +e

Where u/v ,xJ is the wage at education level s and years of experience X, p s is the return

to education level (Assumed to be constant for all education levels) and £1S the remainder It can be said that Mincer's model regressed the log of income on a constant coefficient, linearly on the number of years of schooling, and the square of the number ofyears of experience

The hypotheses put forward by Mincer in this model are:

+ School expenses will not be considered

+ Each person is the same, just different in years of schooling and years of experience

+ Experience and education can be separated when assessing the impact on earnings

Heckman el al., (2003) argue that different levels of education will have different returns

to education The above studies explain that returns for one year of study will includegreater returns for higher levels of education For example, completing elementary schoolwill help learners access middle school, and completing high school will help learners access higher levels of education such as college and university Attending college or university is a necessary step to complete the program and receive a college (university) degree And according to the “sheepskin effect”, people with better abilities tend to gel higher degrees In particular, Mincer's model assumed that educational levels have the same return This may increase the returns on low-level, non-dcgrcc-producing levels of education, while degree-producing levels of education will have their returns reduced

Psacharopoulos (1994) states that the return on primary education is higher than that of middle and high school The returns to education for disadvantaged individuals or families are often higher because disadvantaged individuals are often more affected by educational interventions ((Lang, 1993); (Card , 1994))

According to Mincer, the assumption that different individuals have the same abilities is not correct because clearly each person has different innate abilities and this will have animpact on the number of years of schooling and work productivity of the individual.Inorder to be able to more accurately evaluate the return on education and be suitable for different research areas, previous projects in Vietnam have used the Mincer function withadditional variables as follows:

In In (TNHAP ik )= fit) + 01 HVAN ik + 02 KNGHIEM ik + Pi KNGHIEM 2 Ik + 04

GTINH ik + 05 NNGHIEP ik + $6 KTMVUOC ik + Pk + Eik

*Note:

HVAN is the worker's educational level, measured in years;

KNGHIEM and KNGHIEM 2 are variables representing the number of years of labor experience and its square;

GT1NH is a variable representing the gender of the employee , male has a value of 1, female has a value of 0;

NNGH1EP is a variable describing the worker's field of work, equal to 1 if the workerworks in the agricultural sector and equal to 0 if working in other fields;

KTNNUOC is a variable that describes if the worker operates in the state economicsector, equals 1 if the worker operates in the stale economic sector, otherwise equals 0;

ik is the i th worker in the k th household in the sample and p are the parameters to be estimated and £ the error portion of the model

2.2.3 Contributions from previous studies

Through research conducted in our country and around the world, it has been shown thatalong with the development of the market economy, education has a great impact on workers' income From there, we propose solutions to improve collection and recommendations for the government to promulgate policies suitable for each region In addition, these studies also make positive methodological contributions to facilitate futureresearch

2.2.4 Limitations from previous studies

Research on the impact of education level on people's income today in the world and inVietnam is still very limited, mainly in different regions and there are very few researcharticles and data from different countries The research was a long time ago, recently from 2008 and 2010, so there is no new insight into people's education level and currentincome The collected data samples do not cover the entire region but are only concentrated in a few localities There are also other factors at play, such as innate abilities, which are invisible and difficult to evaluate because each person's personalabilities are different

Chapter III Methodology

3.1 Research data

The Vietnam Living Standards Survey (VHLSS) is held every two years nationwide Data used in the project are taken from the 2020 Vietnam Living Standards Survey (VHLSS 2020) deployed nationwide with a sample size of 46,980 households in 3132

communes/wards, representing the whole country , regions, urban areas, rural areas and centrally run cities and provinces.

The survey data set includes many items, to serve model estimation, the project only uses information from the following items:

Section 1: List of household members

Section 2: Education, training and vocational training

Section 4: Income

To limit the scope of the research and only focus on groups of individuals suitable for the estimation goal, the authors omitted some observations in the data set Specifically, only data from individuals surveyed in Dak Lak, Gia Lai, and Lam Dong provinces of the Central Highlands were used At the same time, only individuals aged 15 years or older and capable of working will be considered according to the provisions of Article 6 of the Labor Code Therefore, observations under 15 years of age and individuals who were not salaried were filtered from the study data set

In addition, the authors also considered eliminating individuals who have no source of income or did not declare their source of income in the data set to ensure the effectiveness of the statistical significance of the model The number of individuals in the sample after being filtered again is 1789 individuals

3.2 Below is the specific model of this research:

MJNHAPik ) = po+ pl HVAN ik + 02 AGE ik + Pl AGE 2 ik + P4 GTINH ik + Ps

NNGHIEP ik + p6 KTNNƯOC ik + Ma + Zik

The variable KNGHIEM in the old research model will be replaced by the variable

TUOI which is the age of each individual in years with the assumption that as a person'sage increases, that person's experience also increases A person with a greater number of years of age also has greater experience

HVAN variable will be estimated in two ways:

(1) Use each individual's years of schooling

(2) Use dummy variables for education level to replace education variables

Thus, if done in method (1), the model used will be:

InỢNHAPik ) = po+ Pl NHOC ik + 02 TVO1 ik + p3 TUOI 2 ik + 04 GTINH ik + p5

NNGHIEP ik + P6 KTNNUOC ik + Pk + E'k

In particular, NHOC will be calculated by the number of years of schooling for each individual This model will show the impact of each year of study on an individual's income

If done in method (2), the model used will be:

InỢNHAPik) = po+ Pl THCS Ik + p2 THPT ik + p3 CDANG ik + P4 DAIHOC ik + p5

TV 01 Ik + p6 TVOI2 ik + p 7 GTỈNH 'k + Ps NNGHIEP ik + p9 NNUOC ik + Pk + Elk

The variables tieuhoc , THCS , THPT , CDANG , DAIHOC are dummy variables indicating the level of education the individual completed, taking the value 0 or 1 To simplify the equation and increase the degrees of freedom, the variable tieuhoc is chosen

as the basis and does not appear in the equation nor in the estimation results The estimated coefficient for other levels of education gives the difference between wagesand education level for this level

Variables THCS and THPT represent individuals who have completed junior high school (middle school) or high school (high school) respectively These arc the two levels

of education with a high completion rate, after the rate of people completing primaryschool and those without a degree in the total number ofobservations

The variable CDANG represents individuals who have completed the College level and the variable DAIHOC represents individuals who have completed the University and Postgraduate levels Based on the preliminary descriptive statistical results from the previous sections, we have a basis to expect that individuals who complete College or University or post-graduate level will have higher wages In other words, these variables have a great influence on workers' wages

At the same time, in order to fix the innate ability factor between individuals in the same household, these models will be estimated using the fixed effects method FEM (Fixed Effects Mode 1)

Chapter IV Result

4.1 Descriptive statistics

The authors extracted data from the 2020 Vietnam Living Standards Survey, using a survey sample of 1,789 carefully selected individuals After the data collection process ,the team checked and coded the data before importing it into Stata 17 software foranalysis The group's estimation results were shown by descriptive statistics below:

Table 4.1 Statistics describe the variables in the model

Variable

Number of

observations Medium

Standarddeviation

Smallestvalue

Observing the variables described by the statistics gives US the following results:

For the tiencong variable , the average individual wage per hour (thousand/h) is calculated according to the formula:

Tống thu nhập trong nấm Tiên công = — -77— -7— -3—

Tỏng giờ làm việc trong nam

Accordingly, the total income for the year includes income from job 1, job 2, job 3 and other jobs of the individual in the 12 months of 2020 (thousand VND/year) And the total working hours in the year are calculated by the total number of working hours in 1 day multiplied by the total number of working days in the year Thereby, giving us the average value of workers in 3 provinces of Dak Lak, Lam Dong, Gia Lai is 33,081 VND/hour Along with that, the largest wage value that individuals in the area make is 590,900 VND/hour and the smallest value is 600 VND/hour Thereby, it can be seen thatthe salary of the worker with the highest salary is about 18 times higher than the workerwith the lowest salary, showing that the difference in income is quite large, the cause may

be due to the pressure of the economy The market has an impact on income as well asthe ability to enter high-paying jobs that are usually reserved for more qualified people.Similarly, the main sonamdihoc variable is the number of years of schooling of individuals in the survey calculated by the number of classes that person studied This is

also the variable that represents the educational level factor and considers its impact on workers' income According to statistical results, the minimum number of years of schooling is 0 years, which means this person has never received any classroom training.The maximum number of years of schooling is 12 years, which means this person hasgraduated from high school Each working person in this area goes to school for anaverage ofabout 8.7 years

Next , the variables tieuhoc , THCS, THPT, caodang , daihoc are qualitative variables that are transformed quantitatively through dummy variables (1 and 0) These are also variables used to measure or, in other words, represent the educational level factor in

order to further examine the impact of the dummy variable of educational level on the income of individual workers If individuals have the above diplomas, the variable will take the value of 1 and otherwise it will take the value of0.

Along with that, the canhan variable and the nhanuoc variable , these are two variables that talk about the type ofbusiness in which the individual participates in labor Canhan variable is Employed Household/Individual, this is the type of business that many people

in the research data participate in Nhanuoc belongs to the type of Stale-owned enterprise In particular, if an individual participates in labor with a state-owned enterprise or an employee houschold/individual, the value is equal lo 1 and vice versa, the value is equal

to 0

In addition, the variable tuoi is the age of the individual participating in the survey Theoldest employee participating in the survey was 79 years old and the youngest employee participating in the survey was 15 years old For this data set, it is assumed that peoplewith more experience will have higher ages

Finally, the variable gtinh (gender) is a dummy variable used to evaluate the difference

in the influence of educational level on salary between men and women This variablehas a value of 1 if the observation is male and a value of0 if the observation is female

Table 4.2 Statistics on educational level and average salary received

Number of years ofstudy Medium Standard deviation Number of observations

^Source: Research results of the author group

In general, it is found that salaries increase gradually with the number of years of education and there is no significant difference between years However, there is a spike

in the gap between those who complete 11th grade and 12th grade (high schoolgraduation) In addition, at the University and College level, wages have decreased significantly compared to grades II and 12 Thereby, it shows that the majority of workers in the Central Highlands only need jobs High school degrees are mainly manualwork and spend more time on experience instead of going to college However, thisstatistical result partly confirms the effect of completing the final years of schooling,

helping learners achieve a degree and have the opportunity to receive a higher salary.This may be explained by employers’ implicit assumption that those who complete the final years ofschooling are more capable and descrying of higher salaries.

The chart below shows salary results by education level and gender:

Graph 4.1: Wages by educational level and gender in 2020, Dak Lak province

Unit: Thousand VND/hour

★ Source: Research results of the author group

The graph results show that, at all educational levels, the average hourly wage of maleworkers is always higher than that of female workers At university level, the salary of

male workers is higher than other levels, while for women, college level salaries arehigher than other levels ( For men it is 52 and for women it is 48).

In addition, the salaries of the levels increase in increasing order, once again confirming that the more levels of the training program a worker completes, the more likely the employee is to increase his or her salary in the future

more effective in explaining

Here the coefficient of determination R2= 7.7% shows that the number of years of education of the worker explains the variation in the logarithm of wages of 7.7% In addition, the regression coefficient of the sonamhoc variable and the P-value coefficient

of the model are both statistically significant, showing that both models are effective Forthe OLS model, without controlling a worker's innate abilities, increasing the number of years of schooling by 1 year will increase that person's salary by 5.9% Meanwhile, in the FEM model, when each person's innate ability is controlled, that is, each person has the same ability, if the number ofyears of schooling increases by 1 year, each person's salarywill increase by 1%

Table 4.3: Regression results of the single wage model of 3 provinces Dak Lak, Lam

Dong, Gia Lai in 2020