Vietnam’s Labor Market in the Race to Redefining Skills – Part 1

In recent years, Vietnam’s labor market has undergone profound changes. Major shifts in employment structures have weakened the once-decisive role of academic degrees. Employers are increasingly prioritizing practical skills, while workers are evaluated more by their ability to deliver results than by the number of certificates they hold. Data from the ILO shows that returns to education in Vietnam have nearly halved over just six years, reflecting a clear structural shift.

When new rules redefine the value of degrees and skills

Narrowing income gaps – a clear signal of change

ILO data reveals a different picture: in 2016, university graduates earned up to 127.6% more than workers with only primary education; six years later, this advantage had fallen to just 68.6%. These figures signal a decisive shift in labor market priorities – from formal credentials to execution capability. A degree still provides a foundation of knowledge, but the ability to apply that knowledge and meet specific business needs has become the key determinant of income and career opportunities today.

Wage gaps between the two sectors

Income gaps between the formal and informal sectors have also narrowed rapidly, declining from 34.1% to just 13.9%. Skilled workers outside the formal sector can now match or even surpass the income levels of formal positions. This shift poses new demands for employers: rather than relying on traditional compensation models, they must focus on creating attractive and transparent work environments while providing real opportunities for skill development.

Skills become the new “unit of value” in the labor market

The proportion of workers with intermediate vocational qualifications in the informal sector has risen sharply, reflecting strong demand for hands-on skills, rapid learning ability, and flexible adaptability. As employers increasingly prioritize problem-solving capacity and speed of response to change, practical skills have become the foundation for workers to raise their income levels and strengthen their career positioning. This dynamic explains why skills are emerging as the new “unit of value” in recruitment and career advancement.

Degrees still matter, but need to be understood correctly

A degree has not lost its value, but its meaning has evolved. The true value of education lies not in certification itself, but in how effectively learners can apply knowledge in real-world work. Employers need to clearly define core competencies in recruitment and assess candidates based on their ability to deliver results. Workers, in turn, should view education as a foundation for continuous development, rather than a final milestone in their careers.

Conclusion

Shifts in Vietnam’s labor market are forcing both employers and workers to reassess the value of academic degrees in a more pragmatic way. As skills move to the center, degrees only retain real meaning when they are tied to execution capability and value creation. These changes mirror a global trend: education still matters, but skills and performance are what ultimately form the foundation of sustainable competitive advantage.