Graduate unemployment and ‘over-education’ rising

As a new batch of graduates emerged from Vietnam’s universities in recent weeks, the country was facing twin problems of increasing unemployment among young people and a phenomenon of ‘over-education’ – graduates who fail to find jobs that use their skills.

By October last year, Vietnam already had 165,000 unemployed graduates, or some 17% of the overall jobless total.

A report by Ho Chi Minh City’s Centre for Forecasting Manpower Needs and Labour Market Information predicted in a report released in May that only half of those who graduated this June would be able to secure a job within a few months.

But problems in matching graduates to jobs and of youth unemployment in general have been apparent since the country’s economic slowdown in 2010.

In a recent high-profile case, Le Thi Huyen from Thanh Hoa, a province some 180 kilometres from Hanoi, could not find a job linked to her degree in banking finance. Eventually she accepted a low-skill job as cashier for a small restaurant as she continued to look for further opportunities.

“When I applied for this major [banking finance], I thought I would have many opportunities to work at either a public or private bank,” Huyen, a graduate of the Vietnam Banking Academy, told the local Dan Tri in an interview. “But it was not that simple in reality.”

Stories of engineering graduates who drive taxis or graduates working as restaurant waiters or in supermarkets have become increasingly common.

Some critics blame the problem on over-expansion of the higher education system and a mismatch between graduate supply and market demand.

Graduate oversupply

In February, the Thanh Hoa provincial authorities revealed there were already some 25,000 unemployed bachelor degree holders in the province, many from teacher training colleges and others with degrees in popular subjects such as information technology, economics and business administration.

According to official media, Le Quang Tich, deputy director of Thanh Hoa’s Department of Labour, blamed the situation on an oversupply of graduates.

The Danang City Labour Department also said it had an abundance of workers who had university degrees, with employer demand able to absorb only one in 10 graduates. It was much easier for blue-collar workers to find jobs in the city, local media reported.

Danang, a large port city in central Vietnam, now has eight universities producing thousands of graduates each year.

Minister of Education Pham Vu Luan has said that the universities are not necessarily offering subjects that “society needs”.

In addition university education was often of low quality and universities turned out graduates “who still cannot meet the requirements of employers, especially English and informatics knowledge”, Luan said.

Demand is higher for technicians and less skilled workers in the 100 industrial zones and export processing zones around the country, which employ some 500,000 people. Only 5%-7% of these workers are graduates, Luan said.

Le Duy Luong, human resource director of a Japanese electronics company in the Hoa Cam Industrial Zone, was quoted by the news service as saying in April that hundreds of blue-collar workers at the company had university degrees.

Economic recession

With the economic recession in Vietnam expected to continue, an estimated 12,000 new university graduates in finance could become unemployed or be forced to switch to another sector, according to the Institute of Manpower Banking and Finance, or BTCI.

Vietnam would have around 32,000 new graduates in finance and banking this year, but only some 20,000 were likely to find jobs in finance and banking institutions, as banks cut back on recruitment.

Some experts have argued that a high business bankruptcy rate is another reason behind rising graduate unemployment.

Official data from the Vietnam Chamber of Commerce and Industry show that some 58,000 companies went out of business in 2012 – an increase of 9% over 2011 and 35% over 2010. The chamber does not expect the situation to improve in the next few years.

Many other companies are not growing, and are not recruiting new graduates during the downturn, and this particularly affects young people.

According to the International Labour Organization, or ILO, some 50% of unemployed people in Vietnam in 2012 were aged 15-24. The unemployment rate for young Vietnamese is three times higher than the overall unemployment rate.

“Increasing numbers of young people are turning to part-time jobs or find themselves stuck in temporary employment. Skills mismatch of youth labour markets has become a persistent and growing trend whereas over-education and over-skilling coexist with under-education and under-skilling,” said the ILO in Hanoi in May, at the release of its report, Global Employment Trends for Youth 2013 – A generation at risk. This was the case in numerous countries.

ILO Vietnam Director Gyorgy Sziraczki said: “It is time to strengthen the link between education and training and export growth, economic diversification and the creation of more and better jobs.”

HE boom to blame?

But local critics have argued that the current unemployment problem is a consequence of the boom in higher education. In 2012, Vietnam had 412 universities and colleges, three times the number in 1987 and double the number of institutions in 2002.

Vo Tong Xuan, rector of Tan Tao University, said it was “unreasonable” for the Ministry of Education and Training to approve more than one university providing similar courses within a province.

However, according to experts, unemployment cannot be resolved by the education sector alone, but requires an integrated solution and the involvement of other state organisations and NGOs.

Parliamentary deputies appear to have little confidence that the education ministry can tackle the unemployment problem effectively.

In a vote in the national assembly last month, Minister Luan was among three top government officials – the others were the governor of the state bank and the minister of health – who received the lowest vote of confidence.