IT Impact on Wage Disparities in Vietnam
IT Impact on Wage Disparities in Vietnam
Research article
Open Access Full Text Article
ABSTRACT
The world is undergoing rapid transformation, propelled by groundbreaking advancements in sci-
ence and technology. Within this dynamic and ever-evolving landscape, the advent of the Fourth
Industrial Revolution, often referred to as Industry 4.0, has significantly extended the boundaries
of human existence. This era is marked by the seamless integration of physical and digital realms,
which are primarily driven by two pivotal elements: data and connectivity. As industries increas-
ingly rely on digital technologies, the workplace is being redefined, and workers are required to
adapt to these changes. Embracing artificial intelligence and related technologies in the workplace
can empower the workforce of the 4.0 era, enabling them to drive heightened productivity, achieve
their desired income levels, and and reduce economic economic disparities. This study aims of this
study is to investigate wage differentials between two distinct labor groups: those utilizing infor-
mation technology (IT) in their work and those who do not. Specifically, it seeks to understand
whether adopting IT-related skills can bring workers tangible financial benefits for workers. Using
data from the Labor Force Survey (LFS), the study employs both the Oaxaca-Blinder decomposition
1
University of Economics and Law, Ho and quantile regression methods to understand wage disparities across different income levels
Chi Minh City, Viet Nam comprehensively. The study's findings of the study highlight that, beyond traditional wage deter-
2
Vietnam National University, Ho Chi
minants such as education, qualifications, and gender, the use of IT significantly impacts workers'
Minh City, Vietnam earnings. Employees who leverage IT in their job roles tend to command higher wages. Further-
more, the study reveals that income inequality is notably reduced among workers who utilize IT,
3
University of Management and indicating that IT is crucial in promoting both individual wage growth and a more equitable income
Technology, Ho Chi Minh City distribution.
4
Ho Chi Minh University of Banking, Key words: Quantile regression, Oaxaca-Blinder composition, information technology (IT), wage
Viet Nam disparities
Correspondence
Dong Nguyen Thi, University of
Economics and Law, Ho Chi Minh City, INTRODUCTION relationship between IT adoption and wages is mul-
Viet Nam tifaceted, reflecting the intricate interplay of techno-
Vietnam National University, Ho Chi
The world is undergoing a profound transformation
logical progress, labor market dynamics, and organi-
Minh City, Vietnam driven by the 4.0 industrial revolution. This era marks
zational strategies. Hence, exploring the correlation
Email: dongnt@[Link] a convergence of digital technologies like automation,
between IT and income is vital for fostering sustain-
artificial intelligence, and computer communications,
History able and equitable employment in the future.
• Received: 9-5-2024 shaping a smarter and more adaptable manufacturing
With its rapidly growing economy and increasingly
• Revised: 29-9-2024 landscape. The development of information technol-
international working environment, Vietnam is being
• Accepted: 8-10-2024 ogy (IT) has made the world feel smaller, breaking
• Published Online: 31-12-2024 strongly impacted by the Fourth Industrial Revolu-
down geographical barriers and enabling global con- tion. The boom in information technology is opening
DOI : nectivity in both work and communication. In this up many new job opportunities, especially in fields re-
[Link] landscape, mastering IT skills opens doors to expand- lated to automation and artificial intelligence. How-
ing job scopes and accessing modern, flexible work ever, along with these opportunities come many chal-
environments. It paves the way for individuals to en- lenges, such as the need to retrain the workforce, wage
ter a more equitable society, where earnings align with disparities between industries and geographical ar-
Copyright skills and are unaffected by gender, race, or location. eas, as well as the risk of job losses in traditional oc-
© VNUHCM Press. This is an open-
However, the widespread adoption of IT-driven au- cupations. Therefore, studying the correlation be-
access article distributed under the
terms of the Creative Commons tomation can also bring challenges such as job losses, tween IT applications and wages in Vietnam not only
Attribution 4.0 International license. job transitions, or reduced wages in specific sectors, helps clarify technology’s impact on the domestic la-
posing risks to workers. While some traditional skill bor market and provides a scientific basis for develop-
sets may still offer stability in select cases, the overall ing appropriate labor and wage policies. This is crucial
Cite this article : Thi D N, Ngoc T L T, Quang V T. Information technology and wage disparities between
labor groups: An empirical study in Vietnam. Sci. Tech. Dev. J. - Eco. Law Manag. 2024; 8(4):5622-5630.
Science & Technology Development Journal – Economics - Law and Management 2024, 8(4):5622-5630
for Vietnam to maximize the benefits of the Fourth that higher rates of female employment in the indus-
Industrial Revolution while minimizing its negative try can reduce wage disparities. In addition, stud-
impacts on the workforce. ies are showing the opposite aspect, they believe that
education is not the most important factor for work-
LITERATURE REVIEW ers’ wages. Sorel and Shinners 19 analyzed data from
The wage gap is a significant concern for both the gov- Georgia in 2017, suggesting that while education is of-
ernment and workers alike. From the government’s ten considered the primary wage determinant, gender
perspective, it reflects the economic health and the ef- exerts the most substantial influence in their study.
ficacy of socio-economic management. When wages In the context of the fourth industrial revolution,
are fairly distributed across society regardless of gen- the factors influencing wages have evolved, with the
der, location, or ethnicity, it boosts productivity and advent of various new concepts, notably the pivotal
fosters a fair and equitable society 1–3 . For workers, role of Information Technology (IT). When Genz,
their salary isn’t just a paycheck; it’s the value of their Janser 20 studied the relationship between technology
labor and the foundation upon which they build their adoption and wages, they devised a novel technol-
lives. It’s a unique commodity shaped by personal at- ogy index. This index offers detailed insights into the
tributes like education, experience, age, gender, and digitalization levels of workplace tools, enabling re-
occupation 4–8 . searchers to probe the impact of IT on wage dispar-
The wage gap has been discussed since Edgeworth’s ities. Their findings revealed that German workers
time, over a century ago, shedding light on why using IT command higher salaries than their non-IT
men and women earn different salaries despite per- counterparts. Similarly, Shair, Zahra 21 conducted a
forming the same tasks 9 . Later, economists like study on wage disparities among workers in Pakistan,
affirming that socioeconomic factors and IT profi-
Becker 10 , Mincer 11 , Schultz 12 delved into wage dis-
ciency play significant roles. Individuals adept at uti-
parities through an economic lens. They not only
lizing digital skills tend to earn more than those lack-
identified causes of the wage gap but also developed
ing such capabilities.
econometric models to analyze how factors like hu-
Moreover, the capacity for IT application is inter-
man capital affect wages. Mincer and Jovanovic 13 ex-
twined with labor proportion in the industrial sector.
plored wage disparities across occupations and indus-
Integrating IT into industries bolsters labor produc-
tries, suggesting that workers are motivated to seek
tivity, leading to a reduction in labor proportion 22 .
higher-paying positions to maximize their earnings.
However, Yang, Si 23 presented contrasting findings.
Card 14 took a broader perspective, suggesting that
Their study unveiled a negative correlation between
wage dynamics vary among workers, economies, and
technology and workers’ wage rates. They suggest that
over time. Therefore, factors such as age, education,
the influence of IT diminishes wages for workers en-
gender, and industry influence wage functions. Simi-
gaged in both physical and online business operations.
larly, Moock, Patrinos 15 expanded the wage function
In summary, wage disparities have long been a sig-
to assess the impact of education level on wages, find-
nificant concern and a focal point of economic re-
ing that it varies by region and gender. Specifically, search. Previous studies not only identify the causes
educational level has a stronger impact on wages in of wage gaps but also develop economic models to ex-
the public sector than in the private sector. Similarly, plore the impact of various factors on earnings. While
this impact is stronger in women than in men. most research traditionally examines factors like ed-
Alsulami 5 surveyed 2,470 individuals in Saudi Ara- ucation, location, and demographics, recent investi-
bia, identifying factors like field of study, education gations emphasize the role of contemporary factors,
level, experience, and industry as influential in de- particularly workers’ proficiency in applying IT. How-
termining salaries. Among them, education level ever, most studies have primarily focused on analyz-
and occupation are the two factors that have the ing the direct impact of IT on wages, overlooking
strongest impact on salary differences. Sakellariou salary inequalities between IT users and non-users.
and Fang 16 concluded that education level signifi- Therefore, this study aims to explore wage dispari-
cantly affects wages, especially in urban areas. Con- ties, highlighting how earnings vary across different
versely, Trung, Tien-Trung 17 found that only college groups of workers.
degrees or higher impact wages in Vietnam.
Akdogan-Gedik and Gunel 18 focus on the demo- METHODOLOGY
graphic, social and economic factors influencing the This study approaches Mincer earnings function 7 and
gender wage gap at the multinational level, revealing the expanded wage function 14 using the quantile re-
Science & Technology Development Journal – Economics - Law and Management 2024, 8(4):5622-5630
gression method for estimation. This method, ini- monthly wages as the dependent variable. The wage
tially introduced by Koenker and Bassett Jr 24 , was is measured in thousand VND per month, and this
later utilized by Buchinsky 25 to analyze wage dispar- value is transformed using the natural logarithm for
ities. What sets this method apart is its capability to regression analysis. The explanatory variables in the
estimate regression parameters across various quan- regression model include professional qualifications,
tiles of the dependent variable. This enables a more age, housework time, region, and gender. Specifically:
detailed description of the relationship between the
dependent variable and explanatory variables at each • The professional qualification variable is divided
quantile. into four categories: no professional qualifica-
Let group A represent workers who do not utilize tion, primary or secondary vocational qualifi-
IT, and group denote those who integrate IT into cation, college or university qualification, and
their paid work. LnW denotes the natural logarithm postgraduate qualification. Three dummy vari-
of workers’ wages, and X represents the explanatory ables are created to analyze these qualifications,
variables. Therefore, the regression model for the with the group of workers who do not possess
quantiles of the two labor groups can be expressed as any professional qualifications serving as the
follows: reference group. This allows for comparative
LnWa =Xa β τ a +ε τ a with the residual assumption analysis between the baseline group and those
ετ a = 0 with vocational, college, or postgraduate qual-
LnWb = Xb β τ b +ε τ b with the residual assumption ifications. In addition, the age variable, which
ετ b = 0 serves as a proxy for work experience, includes
In these equations, β τ represents the regression coef- workers between the ages of 19 and 64, thus en-
ficient to be estimated at the τ percentile, where τ be- suring the analysis focuses on those within this
longs to the range (0, 1). This coefficient has the small- working age range.
est total error difference at the τ percentile. Quantile
• Additionally, the authors suggest that unpaid
regression can be conducted for any quantile within
housework time often has an inverse relation-
the range (0, 1). This article focuses on computing
ship with income from formal employment; as
regressions at standard quantiles, including 0.1, 0.25,
housework time increases, income from work
0.5, 0.75, and 0.9.
tends to decrease. However, for workers pro-
After quantile regression, the wage gap will be as-
ficient in information technology (IT), flexible
sessed using the Machado and Mata approach 26 .
time management and remote working capabil-
While the Oaxaca-Blinder method primarily exam-
ities may help mitigate the negative impact of
ines mean disparities 27 , Machado and Mata 26 ana-
lyzed the differences between distribution quantiles, housework time on income. Conversely, work-
offering enhanced flexibility and deeper insights into ers who lack IT skills may find it harder to bal-
the wage disparities. ance housework with paid work, leading to a
Let LnWab = Xa β τ b represent the hypothetical wage more significant negative impact on their in-
function constructed under the assumption that both come. To assess this differential impact, the
groups of workers possess similar characteristics. In study includes a ”housework time” variable to
this scenario, the wage gap between these two groups compare its effects on two cohorts: those who
of workers is decomposed by Machado and Mata know how to use IT and those who do not. This
(2005) as follows: allows for a clearer analysis of the interaction be-
LnWa – LnWb = (Xa β τ a - Xa β τ b ) + (Xa β τ b - tween housework time and the ability to utilize
Xb β τ b ) technology at work, leading to more convincing
By grouping the common factors, we derive the fol- research results.
lowing wage disparity decomposition function: • Finally, dummy variables for region and gender
LnWa - LnWb = (β τ a - β τ b ) Xa + (Xa - Xb )β τ a (3) are included in the model as control variables.
The first term on the right-hand side signifies the
wage gap resulting from disparities in regression co-
efficients. Meanwhile, the second term represents the
RESEARCH DATA
wage gap attributed to distinctions in the characteris- The study utilizes data from the Labor Force Survey
tics of the two worker groups. 2022 (LFS 2022), an annual survey conducted by Viet-
Based on the extended Mincer wage function and the nam’s General Statistics Office. Its primary objective
availability of existing data, this study uses the log of is to monitor fundamental information concerning
Science & Technology Development Journal – Economics - Law and Management 2024, 8(4):5622-5630
Table 1: Summary of variable definition
lnwage/ilnwage Natural logarithm of the monthly wage re- 8.718 9.063 8.635
ceived by a worker
fa_time/ifa_time Unpaid housework time during the week 14.763 15.952 14.476
(hour)
the Vietnamese labor market systematically. This na- In all the figures below, the horizontal axis repre-
tionwide survey covers households and their mem- sents the percentiles of the regression, corresponding
bers. The investigation methodology of the LFS is to workers across different income levels, from low
guided and technically supported by the International to high. The vertical axis displays the regression co-
Labor Organization (ILO). In 2022, the survey col- efficient values at various percentiles, simultaneously
lected data from over 800,000 observations. After fil- indicating wage disparities between the two cohorts
tering for individuals aged 19 to 64 and ensuring all based on the explanatory variables.
necessary information for the research model, the re- Figure 1 shows the regression coefficients for dummy
maining dataset comprises 342,793 observations. The variables representing educational levels for two co-
variables lnwage, age, male, beinter, col_uni, postgra, horts: those using IT in their paid work and those
fa_time pertain to the wage function of workers who not using IT. In the non-IT group, the regression co-
do not use IT in their work. Meanwhile, ilnwage, iage, efficients for primary or intermediate qualifications
imale, ibeinter, icol_uni, ipostgra, ifa_time are vari- are consistently higher across all quantiles than other
ables belonging to the wage function of the group of qualifications. This indicates that lower qualifications
workers who use IT in their work. The descriptive have a pronounced impact on wages within this work-
data are presented Table 1. force, outweighing the effect of advanced degrees and
highlighting an imbalance in the labor market. Tùng
RESULTS AND DISCUSSIONS Nguyên 28 explains that the current Vietnamese labor
The results of OLS regression and quantile regression market requires many low-skilled workers for man-
for the wage function in two labor groups are pre- ual tasks, prioritizing physical strength over special-
sented in Tables 2 and 3. Based on these tables, the ized skills. In contrast, educational degrees are signif-
authors will reevaluate the regression coefficients in icant for workers using IT in their jobs, with salaries
graphical format for easier comparison. increasing with higher qualifications. Comparing the
Science & Technology Development Journal – Economics - Law and Management 2024, 8(4):5622-5630
Table 2: Quantile regression for the group of workers not using IT
Quantile regression
Note The stars indicate the level of significance for the t-statistics: ***, **, * denote significance at the 1%, 5%,
and 10% levels, respectively.
Quantile regression
Note The stars indicate the level of significance for the t-statistics: ***, **, * denote significance at the 1%, 5%,
and 10% levels, respectively.
IT worker group exhibits a gradual increase. to employment, business, finance, and personal devel-
opment. This advantage empowers individuals in this
group to enhance their skills and knowledge, thus im-
proving their living standards. The findings suggest
that IT could catalyze the narrowing of the wage dis-
parity between urban and rural areas.
Based on the analysis results above, the article sug-
gests several ideas to improve the wage disparities to-
wards a more positive trajectory:
Firstly, workers should recognize that education and
Figure 6: Decomposition of wage disparities by la- professional skills are lifelong assets that significantly
bor group in Vietnam impact their earning potential, not just in a short pe-
riod of time in their careers. Therefore, they should
devise suitable strategies and plans to enhance their
Lastly, Figure 6 showcases the findings regarding the
qualifications. It’s crucial to foster both critical think-
wage gap between the two labor groups. Generally,
ing and practical skills not only within educational
workers who utilize IT tend to earn higher salaries
settings but also in the workplace. Moreover, the na-
than those who do not, across all quantiles. Notably,
tional education system should evolve to foster close
this discrepancy widens in the lower percentiles, di-
collaboration between schools and businesses, ensur-
minishes in the middle percentiles, and experiences a
ing a harmonious balance between labor market de-
slight resurgence in the higher percentiles. This dis-
mand and supply.
parity predominantly stems from differences in la-
bor characteristics, mirroring the overall difference Secondly, the research findings underscore the po-
line trend, whereas the variation attributed to regres- tential for narrowing the wage gap through IT profi-
sion coefficients across quantiles exhibits a more sub- ciency. This highlights the importance of IT knowl-
tle fluctuation. edge alongside education and professional skills.
Workers should equip themselves with essential IT
CONCLUSION AND skills and knowledge to navigate the modern work
RECOMMENDATIONS environment effectively. Additionally, governmen-
Based on data from the LFS Vietnam 2022, this study tal efforts to enhance workers’ IT capabilities are
employs a quantile regression model in conjunction paramount. The state should enact policies sup-
with the Oaxaca-Blinder difference decomposition porting technology access for marginalized workers.
method to investigate the influence of IT application Strengthening communication campaigns about the
on wage disparities among labor groups. From the re- advantages of IT will further empower individuals to
gression outcomes, several conclusions can be drawn leverage IT safely and effectively.
as follows: Lastly, gender wage inequality persists, stemming
For workers who don’t utilize IT in their paid work, a
from a complex interplay of socio-economic and cul-
higher level of education doesn’t significantly impact
tural factors. In Vietnamese society, women of-
their earnings. This outcome reflects the prevailing
ten shoulder primary responsibilities for family and
situation in Vietnam, with an oversupply of middle
childcare. Naturally, increased time spent on house-
managers and a shortage of skilled workers. It un-
hold duties correlates with reduced income. To ad-
derscores deficiencies in training policies that fail to
dress gender inequality in the workforce, government
align with practical needs. Additionally, age and time
spent on household chores negatively affect the wages collaboration is essential. Policies supporting mater-
of this group. The combination of age and education nity leave and childcare should be introduced to en-
level suggests that these workers typically engage in sure postpartum women don’t miss out on career op-
straightforward tasks, relying more on physical health portunities. Simultaneously, women should enhance
than cognitive prowess. their professional skills and capabilities to overcome
Conversely, a notable feature for workers who incor- barriers in the workplace. In particular, acquiring soft
porate IT into their paid endeavors is the minimal skills like foreign languages and IT proficiency will
wage gap across regions. This implies that these work- significantly contribute to narrowing the gender wage
ers can access to diverse information sources related disparity.
Science & Technology Development Journal – Economics - Law and Management 2024, 8(4):5622-5630
Công nghệ thông tin và chênh lệch tiền lương giữa các nhóm lao
động: Nghiên cứu trường hợp Việt Nam
TÓM TẮT
Thế giới đang thay đổi rất nhanh nhờ những tiến bộ đột phá của khoa học và công nghệ. Trong
bối cảnh đó, cuộc cách mạng công nghiệp 4.0 đã mở rộng không gian sống của con người, tạo
nên một sự hoà quyện tinh tế giữa môi trường thực và môi trường số với hai đặc điểm nổi bật là
dữ liệu và kết nối. Nếu người lao động trong thời đại 4.0 biết tận dụng trí tuệ nhân tạo cho mục
đích công việc, họ có thể sẽ tạo ra năng suất cao và nhận được mức lương kỳ vọng cũng như đạt
được bình đẳng về kinh tế. Mục đích của nghiên cứu này là điều tra sự chênh lệch tiền lương giữa
hai nhóm lao động riêng biệt: những người sử dụng công nghệ thông tin (CNTT) trong công việc
và những người không sử dụng. Sử dụng dữ liệu từ Khảo sát lao động – việc làm (LFS), nghiên cứu
sử dụng cả phương pháp phân tích Oaxaca-Blinder và phương pháp hồi quy phân vị để cung cấp
hiểu biết toàn diện về sự chênh lệch tiền lương giữa các mức thu nhập khác nhau. Những phát
hiện nhấn mạnh rằng, ngoài các yếu tố quyết định tiền lương thông thường như trình độ chuyên
môn và giới tính, việc sử dụng CNTT tác động tích cực đến thu nhập của người lao động. Những
nhân viên tận dụng CNTT trong công việc của họ có xu hướng được trả lương cao hơn. Hơn nữa,
nghiên cứu cho thấy bất bình đẳng thu nhập giảm đáng kể trong số những người lao động sử
dụng CNTT. Những kết quả này nhấn mạnh vai trò quan trọng của CNTT trong việc thúc đẩy cả
1
Trường Đại học Kinh tế - Luật, Việt tăng trưởng tiền lương cá nhân và phân phối thu nhập công bằng hơn.
Nam Từ khoá: Hồi quy phân vị, phân rã Oaxaca-Blinder, công nghệ thông tin (CNTT), chênh lệch tiền
2
Đại học Quốc gia Thành phố Hồ Chí lương
Minh, Việt Nam
3
Trường Đại học Quản lý và Công nghệ
[Link], Việt Nam
4
Trường Đại học Ngân hàng, TP. HCM,
Việt Nam
Liên hệ
Nguyễn Thị Đông, Trường Đại học Kinh tế -
Luật, Việt Nam
Đại học Quốc gia Thành phố Hồ Chí Minh,
Việt Nam
Email: dongnt@[Link]
Lịch sử
• Ngày nhận: 9-5-2024
• Ngày sửa đổi: 29-9-2024
• Ngày chấp nhận: 8-10-2024
• Ngày đăng: 31-12-2-204
DOI : [Link]
Bản quyền
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mở được phát hành theo các điều khoản của
the Creative Commons Attribution 4.0
International license.
Trích dẫn bài báo này: Đông N T, Tú L T N, Văn T Q. Công nghệ thông tin và chênh lệch tiền lương
giữa các nhóm lao động: Nghiên cứu trường hợp Việt Nam. Sci. Tech. Dev. J. - Eco. Law Manag. 2024,
8(4):5622-5630.