Asymmetric information among stakeholders and consequences in vocational training for ethnic minority youth in hoa binh province

616 Asymmetric Information among Stakeholders and Consequences in Vocational Training for Ethnic Minority Youth in Hoa Binh Province Bui Thanh Minh* Abstract: The government supports

616

Asymmetric Information among Stakeholders and

Consequences in Vocational Training for Ethnic Minority Youth in Hoa Binh Province

Bui Thanh Minh*

Abstract: The government supports vocational training in order to improve social security

for specific population groups, such as the ethnic minority youth However, there exists information asymmetry among the stakeholders in vocational training, including the ethnic minority youth, local authorities, training institutions, enterprises and state management agencies, leading to adverse selection, moral hazard and principal-agent problem These problems have negatively impacted the effectiveness of vocational training for ethnic minority youth

Keywords: Information Asymmetry; Stakeholders; Consequences; Vocational Training;

Ethnic Minority Youth

Received 19 th September 2019; Revised 20 th October 2019; Accepted 24 th October 2019

DOI: https://doi.org/10.33100/jossh5.5.BuiThanhMinh

1 Introduction

The youth is among social groups that

are vulnerable to socio-economic changes, at

national and global levels Youth

unemployment is a testament of this

vulnerability ILO (2017) has showed that

the growth of global unemployment rate is

not in the same direction as the economic

growth In 2017,the youth unemployment

rate saw a slight increase: 13.1% of youth or

approximately 70.9 million were

unemployed This number was only 10%

less than the number of unemployed youth

at the peak of the economic crisis in 2009

(76.7 million) It is alarming that the

unemployment rate of the youth is three

times higher than that of adults in general In



University of Social Sciences and Humanities, Vietnam

National University; email: buithanhminh88@gmail.com

addition, the jobs that young people undertake also have unsecured working conditions and limitations in added values

In developing and emerging countries, the quality of employment is relatively low: 16.7% of young workers‟ income is below the poverty line of 1.9$/day, as most of their work is in the informal sector Even in developed countries, youth unemployment is also a matter of concern and many countries have put in urgent policies to deal with the crisis (Nguyen Van Lich and Hoang Quoc Viet 2012)

The National report on Vietnamese youth

of UNFPA and Ministry of Home Affairs (2015) showed that in 2018, the number of young people in Viet Nam was 23.3 million, accounting for 24.6% of the population Among the problems that young people have to face with, unemployment needs to

be prioritized and addressed By the end of

the first quarter of 2018, the rate of

unemployed 15-24 was 7.07%, 0.19% lower

compared to the fourth quarter of 2017

However, the number of unemployed young

workers accounted for 46.2% of the total

unemployed Urban areas have an

unemployment rate of 41.3%, 58.7% lower

than that of rural areas Unemployed youth

workers accounted for 22.9%, equivalent to

over 180,000 people

Among young people, there are certain

groups that have less access to job

opportunities, thus are more negatively

affected by unemployment, including the

youth of ethnic minority groups Differences

in race, ethnicity, spiritual beliefs, and

culture are considered factors contributing to

inequalities for ethnic minority group in

many countries

Unemployment has many long-term

negative consequences to the development

of youth in particular, and the

socio-economic situation of a country in general

Unemployment at a young age causes

„scars‟ that affect an individual life,

particularly in later stages, such as lower

wages, higher risk of unemployment, limited

developmental opportunities, and poor

health outcome (Dike 2009; Hammarström

1994; Schuring et al 2009) This leads to

high social costs due to lower taxes and

increased cost for welfare services

(McQuaid 2015), which cause a huge waste

of national human resources and creates

long-term welfare loss (Raheem, 1993;

Aiyedogbon and Ohwofasa 2012)

Vocational training with relevant

practical training components is the key for

any country to become technologically and

internationally competitive in the global

market (Zite, Baridoolenu Ngor and

Deebom, Mtormabari Tambari 2017)

Having close connection with the labor

market and the combination of providing basic skills with specific, specialized occupational skills, education and vocational training are considered an important path to promoting participation and sustainable attachment to the labor market of the people, especially young people (World Bank 2013) In addition, retrain vocational knowledge and skills can help labours to increase their income or in looking for new possition with higher quality of social welfare, leading them more inclusive development in society This effect is further reflected in disadvantaged groups such as ethnic minority youth (Batchuluun

et al 2017; Pham Thi Ngoc Toan and Le Thi Luong 2017)

Given the positive externalities, Vietnamese government have introduced policies to develop vocational training system and to support ethnic minority youth

in vocational training processes

2 Asymmetric information theory and applications in research

Vietnamese government pay significant attention as well as financial resources to develop vocational traning system and support people, especially minority ethnic groups in vocational training However, due

to the lack of cooperation among stakeholdesr, the result of vocational does not effective as expected Information asymmetry is the leading cause of the ineffective cooperation (National Assembly

of the Socialist Republic of Vietnam 2019)

In reality, vocational training is provided

by many stakeholders such as the government, private agencies, and social organizations with different subjects These stakeholders, such as the youth, their

families, local authorities, vocational

training institutions, enterprises, state

management agencies access and use

information differently, at different levels,

thereby leading to adverse selection, moral

hazard, and principal – agent problem that

negatively affect the quality and

effectiveness of vocational training activities

for the youth ethnic minority This paper

analyzes the gap in grasped information

amongst stakeholder as well as the ways

they exploited asymmetric information to

arrogate interest

Information asymmetry is the

phenomenon in which one party has more

information than the other, thereby gaining

greater benefits in transactions It originated

from economic theory by George A Akerlof

in 1970 when studying the automotive

market The information asymmetry was

later used in various fields, both

theoretically and in application (Auronen

2003) Akerlop said that since car buyers do

not know about the quality of the car as

much as the seller, they will choose the

average price A good car cannot be sold at

that price, so gradually a low-quality

product will push a good one out of the

market At the end, only bad car will be

traded on the market Information

asymmetry is also manifested in the labor

market when employers „gamble‟ as they

are uncertain about the productivity and

contribution of their employees (Rothschild

and Stiglitz, 1976) Information asymmetry

also occurs in other fields, such as insurance

Mai Thi Dung and Le Thi Xuan Huong

(2017) on Vietnam's social insurance market

also shows that there is an information

asymmetry when the social insurance

agency lacks information on their clients,

and many employees also lack the

information about social insurance, which

eventually lead to adverse selection, moral hazard and principal – agent problem For example, some enterprises evade the purchase of social insurance for their employees or lower employee‟s salary in official document to pay lower social insurance fee In addition, some employees register social insurance record in different locations so as to recieve social welfare more than one time as required in law Moreover, many insurance agents profiteering both the participants and the social insurance agency

Duong Ngan Ha (2014), using the same approach, also pointed out the information asymmetry in Vietnam's stock market, with many enterprises violating information disclosure (112 enterprises in the first 10 months of 2014) and consolidated financial statements for the financial year of 2013 (37 enterprises in April 2014) Information asymmetry also takes place in the field of banking, real estate, and many other production and business sectors

To alleviate negative consequences, reducing information asymmetry among the parties is an important solution Akerlop (1970) recommended the use of intermediary organizations with the function

of providing information, guarantee and warranty to reduce information asymmetry Michael Spence (1973) proposed a signaling mechanism through qualifications and experience of employees so that employers can recruit suitable people In addition, it is possible to apply a screening mechanism such as commodity classification, competencebased salary to attract qualified employees according to the ideas of Joseph Stiglitz (1975), or strengthen monitoring mechanisms

3 Research methodology and method

This research rent both qualitative and

quantitative method to examine the research

questions 27 in-depth interviews, 2 focused

group discussions were conducted, including

ethnic minority youth, local authorities,

vocational training institutions, enterprises,

state managing agencies which specialize in

vocational training

In addition, 303 questionnaires were

delivered to ethnic minority youth in 5

districts in Hoa Binh provinces: Ky Son,

Cao Phong, Kim Boi, Lac Son, Lac Thuy

representing 10 districts with different

eco-socio conditions The collected data was

analyzed with SPSS 20 computer software

4 Findings

4.1 The stakeholders in vocational training

for ethic minority youth system

In terms of policies, Viet Nam closely

follows the World Bank's recommended

guidelines for vocational training

development solutions (2013):

Vocational education should be provided

in high school and it needs to be modernized

with practical application and linked with

the practicum facilities

The design of vocational training

programs should be consulted with

employers through a network of employers

and training facilities

To avoid considering vocational training

as the last option, it is necessary to design a

training system that is interconnected and

easily transited to higher levels of training,

including universities

Financial supports and tuition reductions

should be taken into account to mobilize

participation in vocational training

For developing countries, vocational training should be brought into the informal section to create more opportunities for people from different social classes to participate and improve the economic efficiency, preserve and develop jobs traditional crafts

Vocational training for ethnic minorities youth is regulated under several legal document, which are aligned with the policy orientation of the government towards ethnic minorities, youth and vocational training activities

In reality, there are two primary policy systems relating to and vocational training for ethnic minority youth

The first system is the Project for

“Vocational training for rural labor up to 2020” that was approved in Decision 1956/2009/QĐ-TTg, then later amended and supplemented by Decision 971/2015/QĐ-TTg The main beneficiary of this project is ethnic minorities with the intention to support up to 3 million VNĐ (approximately

$150/primary vocational training course, in addition to food expenses of 15,000 VND/day, travel expenses up to 200,000 VND/day for people that have to travel more than 15 kilometers each day

The second system focuses on vocational training programs at training facilities with official diplomas and certificates In this system, ethnic minorities youths are supported under Decision 53/2015/QĐ-TTg regarding the boarding policies for college students in which the support will be applied for the ethnic minorities in poverty and near poverty households; graduates of boarding ethnic minority high schools The scholarship under the policy is 100% of the basic salary (currently is 1.490 million VNĐ/month) and 80% for boarding school graduates Furthermore, there is an allowance for personal items, traveling

expenses and Tet‟s holiday up to 1 million

VND annually The mechanism for grants is

through public training facilities or directly

to the trainees if they are participating in a

non-public facility through Department of

Labor, Invalid and Social Affairs Decree

86/2015/NĐ-CP also stipulates tuition

reduction for ethnic minority students; very

few of whom might receive 100%

exemption and the remaining will receive

the scholarship and social welfare of

allowance of 140 thousand VND/month and

160 thousand VND/month respectively,

depending on each student at public facility

according to Decision 194/2001/QĐ-TTg

There are important stakeholders that are

engaged in Project 1956, including: rural

workers; vocational training institutions; the

ministry of Agriculture and Rural

Development; Ministry of Labor, Invalids

and Social Affairs; enterprises and other

social organizations Regarding the

vocational training at schools, the involved

parties consist of the ethnic minority youth,

vocational training institutions, and

vocational training management agencies,

mainly the authority agencies of the ministry

of labor, invalids and social affairs

The required outcomes of the vocational

training activities for ethnic minority youths

must be as follows Firstly, the needs of the

subject, which is the ethnic minority youths,

the demand for labor of the employers, the

local socio-economic development

strategies, and the planning on new rural

area development and sustainable poverty

reduction (Article 1, Decision

971/2015/QĐ-TTg), must be met Secondly,

the quality of training facilities must be

ensured; these facilities need to be eligible

to operate vocational education programs;

training courses should not be organized

when there are no potential employers and

expected income level for the trainees

However, the information asymmetry has created some issues that make vocational training not as effective and sustainable as anticipated

4.2 Asymmetric information between the stakeholders and its effect

There are two vocational training programs which are accessible to the young people: vocational training for all rural workers under Project 1956 to train and retrain vocational knowledge and skills at short term and primary training, and the training program at vocational training facilities at intermediate and college level There are important parties that are engaged

in Project 1956, including: rural workers; vocational training institutions; the Ministry

of Agriculture and Rural Development; the ministry of Labor, Invalids and Social Affairs; enterprises and other social organizations Regarding the vocational training at schools, the involved parties consist of the ethnic minority youth, vocational training institutions, and vocational training management agencies, mainly the authority agencies of the Ministry of Labor, Invalids and Social Affairs It can be seen that the government plays a key role in vocational training in Viet Nam, providing financial resources to not only develop vocational training system but also help people to participate different training levels There has been an asymmetry of information among the stakeholders and it negatively affects on the effectiveness of vocational training through adverse selection, moral hazard and principal – agent problem

Firstly, adverse selection can be seen in the behaviors of ethnic minority youth who are the major party in the vocational training program because it is directly relevant to

their future In order to help the ethnic

minority youth to make reasonable and

practical choices relating to their prospective

career, they need to be informed about the

importance of attending vocational courses,

particular training programs and related

policies Besides, the information should be

accessible, available, consistent and reliable

However, according to the survey in Hoa

Binh, the percentage of adolescent who knew about the information on vocational training is still relatively low There are no supportive policy which is knew by more than 70% of 303 participants in our research This has led to the favorable policies not coming into effect or being fully accessed by the targeted beneficiaries - the adolescents in the ethnic minority areas

Chart 1: The percentage of adolescent who knew the supportive policy from government in vocational training

Source: The statistics of author’s survey in Hoa Binh

In addition, participants do not

understand the information on the vocational

training programs properly and fully They

mainly learn about the information via

informal channels such as teachers,

relatives, and friends who do not fully

understand the policy as well as the demand

of labor market This leads to impulsive

career choices Many students study in

vocational school because training course

are free, and they can receive financial

support for meal and travel Even, some

students participate in vocational training

because they are invited by their friends

These sources of information are very

prevailing in rural, remote and mountainous areas

"My class teacher said that this vocational training program will be free; and training time will be also quick So I told my parents to let me go to school" – Student 1,17 year – old, female

"My friends informed me about this program Because my classmates would take part in, courses would be funny, and there would be no tuition fee, I also ask my parents to let me attend" – Student 2, 17-year-old, male

It is evident that there is a lack of an independent intermediary mechanism in

providing both services and information on

career counseling, to address the actual

needs of vocational trainees for long-term

benefits of vocational training program It

would be fruitless if the students or

participants merely target at exempting

tuition fee or attendance for fun This

intermediary mechanism will contribute to

mitigating asymmetric information and

promoting the sustainable effectiveness of

the vocational training

The vocational training programs mainly

focus on secondary school students with

policy related to boarding schools (based on

Decision 53/2015 / QD-TTg) because the

importance of the vocational training is not

properly and fully understood Persuading

high school students to attend vocational

schools or colleges is extremely difficult for

training institutions Among 257 students

who participated the survey, there were only

16 students earning college degrees (Hoa

Binh College of Technology and

Technology, 2019) These students

graduated in the first graduation wave in the

school year of 2019 Such a change has to

be monitored to inform future policies that

could intervene in the decreasing rate of

learners in vocational schools In fact,

according to a report of the Ministry of

Home Affairs and UNFPA, the rate of

college education in the Northern midland

and mountainous regions, including Hoa

Binh, accounted for 23.4% (2015)

“For the past few years, there have been

more enrollments in the 9 - year system

(learning both high school and vocational

training courses), mostly poor households

who are exempted from tuition fee and even

receive base salary according to the policies

related to boarding schools But it is

impossible to recruit college learners, I don't

know why”- Manager of provincial

vocational training institution 1, male

The difficulty in recruiting high school students may come from the competition with enterprises who are willing to recruit unskilled workers with relatively high salaries

“To me, it is understandable when they are unable to recruit learners Vocational training usually takes time but is does not guarantee a job Young people who are willing to do manual work may earn around 5-7 million VND per month If they go to

Ha Nam, Bac Ninh province, their income would be higher In the long term, of course, the vocational training would be better because it would be unstable for the unskilled labors in the future, but local people just care about short-term profit first

”- Commune official 1, male

Additionally, many students choose the vocational training but do not know about supportive policies, which leads to difficulties in attending the vocational schools and miss out the positive impact of the policy

“I don't have enough resources to go to school (paying whole sum of tuition) to study it) Besides, I worked for employers, they did not want to teach me much because they are afraid of me quitting the job when I know everything It was challenging, they did not teach me much In the first year, I only knew how to wash hair while my hometown did not train these types of jobs”- Student 4, 24 years old, female

Although vocational training in Vietnam

is a form of short-term training, and it has been shown its important impacts on income and other social aspects (Nguyen Quang Tuyen, Le Van Tham 2014; Pham Thi Toan,

Le Thi Luong 2017), the vocational training

is, in reality, the last option for the ethnic minority youths, even after manual labor More importantly, the ethnic minority

learners who attend the vocational schools,

deciding and choosing career are mainly

based on reasons like tuition fee exemption

or the trend of their peers or relatives rather

than relying on the demand of labor market

or their appraisal Of the 84,000 trained

workers in Hoa Binh from 2013 to June

2018, there were 43,000 workers trained

under 3 months and short-term courses

(Department of Labor, War Invalids and

Social Affairs 2018a)

Addverse selection is also seen by the

activities of the state stakeholders in

managing vocational training system The

vocational teaching at the training

institutions faces difficulties due to the

information asymmetry among state

management agencies, including the

problem of opening new branches In order

to ensure the quality of training, and to be

granted a license to open a branch, the

General Department of Vocational

Education requires an institution to ensure

the facilities and the quality of lecturers;

however, the Department of Home Affairs is

in charge of recruitment, the Department of

Finance allocates a budget for facilities –

both require intricate licenses

“When we asked the General Department

of vocational training (MOLISA) to open a

new licensed vocational training program,

they asked about teachers and facilities to

ensure the quality of training When coming

to the province, the Department of Home

Affairs and the Department of Finance for

investment asked a series of complicated

legal documents relating to recruitment and

operating licenses It is very tiring”-

Manager of Provincial vocational training

institution 1, male

As a consequence, the training

institutions are confronted with various

challenges, especially when opening new

classes and meeting social needs This caused a higher transaction costs in developing vocational training programs in reality

Enterprises are also another factor in vocational training, as it relates to the use of the labor force of vocational training However, due to some specialized characteristics and lack of trust in the quality

of the vocational training, their recruitment

is pretty limited

“There were few enterprises in my hometown and they were rarely in touch with the vocational training institutions and the state management agencies, partly because of their job demands There is a garment factory cooperating with the state agency, but mainly to train women because they want these workers to be familiar with their manufacturing line as fast as possible, while the training process like my school takes longer time They also do not trust the quality of training in the state's educational institutions The machines of these institutions, even if being invested, are not

as modern as the enterprises” - District official 1, female

Another reason is that the salary for the trained workers must be higher than the untrained, so enterprises are not interested in using the trained workers According to Point b, Clause 1, Article 5 of Decree No 157/2018 / ND-CP regulated the regional minimum wage for employees working

under labor contracts: “Laborers who have undergone the vocational training is paid at least 7% higher than the regional minimum wage” This may be the reason why

enterprises prefer to recruit unskilled workers because they can gain the training costs and lower the initial salaries when signing contracts with new employees A report of the Department of Labor, Invalids

and Social Affairs in Hoa Binh in 2018 also

stated that “There has not been a link

between the vocational training institutions

and the enterprises in training coordination,

student post-graduation” (Department of

Labor, War Invalids and Social Affairs in

Hoa Binh Province 2018b)

“After graduation, many students have to

conceal their vocational training diploma

because the enterprises tend to recruit

manual employees, which helps them

acquire training contracts and save the cost

of salary” - Manager of provincial

vocational training institution 2, male

This is a crucial issue that the state

management agencies must pay attention to

because if the particular policies related to

the enterprises, the vocational training

institutions and vocational training

curriculum for the ethnic minority youths

cannot be changed, and the rural workers

would not be encouraged and motivated to

attend the programs which will affect the

efficiency of the program

Secondly, moral hazard as a result of

asymmetric information can be seen in the

responsibilities and activities of vocational

training institutions in Hoa Binh province

The main purpose of the schools is to recruit

more students for greater benefit from the

state's financial support rather than targeting

on their future professions and the

high-quality training courses and career

orientation, which adversely affecting the

initial goals as well as the benefits of

students

Furthermore, they are stakeholders which

theoretically get much more information

than others in supportive policies and

vocational training programs They could

take advantage of these to seek benefits

However, there is also asymmetric

information in vocational training institutions because there is no information and coordination mechanism in recruitment and training The district-level vocational education centers in Hoa Binh are invested significantly in facilities with ten billion VND per center but focus on primary training only, which is not cost-effective Each year, the centers receive the budget allocation from the Department of Labor, War Invalids and Social Affairs to arrange vocational training classes under Project

1956 for non-agricultural jobs

Regarding agriculture job, it is under the management of the Agriculture and Rural Development sector; some localities designated teaching centers but some others assigned agriculture extension centers or community learning centers There are also programs that work together with vocational schools in the province to train labor force locally The vocational training is ineffective and there are many negative effects partly because of the failure to get proper information, and especially the slow process of budget transfer

“Every year, after the need of assessment, we would send the report to the district Then if there is an allocation of budget, we will see how much is available to open a class Last year there were more than

100 million VND to organize 3 classes This year, the budget was 508 million, and we tried to open more classes The last June we receive money Under the pressure of class opening and budgeting, we hardly move forward” – Manager of district vocational training institution 4, male

As a result, they tried to focus on disbursement of allocated budget from government instead of training qualified vocational programs

There is little coordination among 39

vocational training institutions in Hoa Binh

and even the competition in enrollment

which leads to negative issues and waste of

social resources

“After the Decision 53/2015 / QD-TTg

on the policies related to boarding schools,

we can recruit the plus-9-year system,

meaning after 3 years, the learners would

earn 2 diplomas Students who are eligible

for benefit from the vocational training

policy would take part in our school, but the

problem is that colleges like us are not

allowed to teach the universal subjects like

at high school It is truly difficult for us to

collaborate with the district vocational

schools to teach the universal subjects No

matter how effective their work is, they still

get the same salary, so there is no incentive

to boost the process of policy

implementation We proposed to open the

department of general education in colleges

to teach the universal subjects, but policy

and procedure are complicated”- Manager of

Provincial vocational institution 1, female

Paradoxically, while the provincial

colleges are confronting difficulties in

recruitment for vocational classes in the

two-year and three-year programs, the

authority agencies still let the central

colleges open many classes in Hoa Binh

There have been even violations in opening

training classes in these institutions

According to the investigation of the

Ministry of Labor, War Invalids and Social

Affairs in 2018, there were violations of the

education law at the Northwest Mechanical

and Electrical College Particularly, it

illegally trained 2179 students at 14

off-campus locations without accreditation and

license (Hoang Long 2018)

“There were some colleges opening

classes here but most learners were

commune officials who wanted to be eligible to apply to the civil service exams later In the class of information technology, they arranged for 8 - 10 computers, then officials take these computers away They just wanted to know how to turn on – off the computer, type and open texts Graduates then have an IT certificate to put on their resume” – Commune official 3, female

“In fact, it is difficult to collaborate with others I just ask them for data to collect and report They sometimes do not have the information and then they ask me again It is necessary to have a mutual management mechanism to be able to improve the efficiency”- District official 1, female

This is also pointed out by Oxfam's 2014 study, which reveals that there is no coordination mechanism and no general rules for allocating budget and management decentralization leading to challenges in planning and implementing the vocational training policies for rural workers (Oxfam 2014)

Lastly, principal agent problem happened

in the process of implementing their state managing responsibilities of local authorities and department of Labor, War Invalid and Social affairs at district and provincial level

Local authorities are an important stakeholder in vocational training in rural, remote and mountainous areas According to the criteria of the National Targeted Program on New Rural Development under Decision 1980/QD-TTg in 2016 in order for the Northern midland and mountainous communes to meet the new rural criteria, the percentage of trained workers must reach at least 25% It is not only to mention the effects of vocational training on the youth but also to contribute to the overall development or the area In reality, however,