Phan Coxhead Vietnam Wage Paper April 14 2011 - Agricultural ...

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the Gini coefficient of average hourly wages, has been uneven. The coefficient rose from 0.38 in 1993 to
0.42 in 2002, but declined to 0.36 in 2004 and 0.35 in 2006, then finally increased again to 0.39.
While there was wage growth for all groups, its pace has been unequal across groups, and the trend has
not been linear. From 1993 through 2008, the change in log average real hourly wages was 0.66 for
women and only 0.57 for men (see Table 2). As a result, there has been a decline in the gender wage
gap. Most of this decline happened from 1993 through 2002. Since 2002, the gender wage gap has
stayed relatively stable.
The rural-­‐urban wage gap rose significantly in the 1990s, peaked in 2002, dropped in 2004 and 2006, but
climbed up again in 2008. This trend might be due to rising urban living costs and the speed with which
nominal wages kept up with this rise. In the period 2006-­‐2008, inflation rates were high in Vietnam,
largely due to higher energy and food prices. 4 These, coupled with rising real estate prices must have
pushed up urban living costs relative to rural living costs. Indeed, the urban price deflators for the years
2006 and 2008 were 1.23 and 1.18, respectively. These are very high compared to years 2002 and 2004,
when the urban price deflators were only about 1.07 and 1.06, respectively. Nominal wages might not
have increased fast enough to keep up with the unexpected and sharp increase in urban living costs in
2006, so real wage growth in 2006 for urban workers might have been lowered.
In 1993, ratio of the average wage of the Kinh ethnic majority to the average wage of ethnic minorities
was quite low at 1.08. But there was a sharp increase in this ratio from 1993-­‐2002 (1.84 at its peak in
2002). After that, it decreased to 1.34 in 2004 and became stable at this level until 2008.
Another interesting revelation from Table 1 is the wage differential between public and private sectors.
In 1993, public sector workers’ average wage was lower than that of private sector workers. But by
2002, public sector workers’ average wage was 170% that of private sector workers, as wage grew much
faster in the public sector (wage growth rates were 27.6% in 1993-­‐1998 and 23.02% in 1998-­‐2002 for
public sector, while the rates were 15.91% and 6.15% for private sector; see Table 2). In the period
2002-­‐2008 however, wage growth rate in the private sector started to catch up with that of public
sector. Consequently, public to private wage ratio declined from 1.7 in 2002 to 1.57 in 2004, then
remained stable until 2008.
Finally, wage growth has been higher for those with higher levels of education (see Table 2), leading to a
rise in skill premia. As can be seen in Figure 1, in 1993 there was hardly any skill premium, measured by
the ratio of the average wage of those with a particular educational degree to those without any degree.
This must have been a result of central planning, in which wages were institutionally set rather than
determined by market forces. From 1993 through 2002, as the economy went through a series of
domestic reforms, there was a dramatic increase in skill premium, especially for college-­‐educated
workers. It’s quite interesting however that from 2002-­‐2008, this rise in skill premium has leveled off.
4 Large capital inflows also made a significant contribution to rising inflation.