DETERMINANTS OF WAGES IN THE ENTERPRISE SECTOR IN VIETNAM

Abstract

The development of enterprise sector in Vietnam leads to the formation of labor market for this sector with more jobs created and increasingly higher wages for workers. The purpose of this study is to assess the determinants of wages in the enterprise sector and withdraw policy implications for a sustainable increase in workers' income in this sector. The empirical study is conducted at the local level with all 63 provinces nationwide in the period from 2008 to 2015. The results reveal that labor productivity, quality of labor, number of enterprises, the share of large enterprises over total number of enterprises, business profits and economic growth have positive effects on wages as increases in these factors lead to higher wages. Meanwhile, increase in the size of labor force puts downward pressure on wages. The finding also provides strong evidence that the labor market in the enterprise sector in Vietnam is highly competitive when labor wages fluctuate according to the forces of market supply and demand.

Keywords: Wage determinants, competitive labor market. Vietnam's enterprise sector