Vietnam attracted $34.65 billion in registered foreign direct investment (FDI) in the first half of 2026, 61 percent more than the same period in 2025. At the same time, realized FDI reached $13.03 billion, its highest first-half level in five years. Observers including Harvard’s Growth Lab have also pointed to Vietnam’s increasingly diverse and sophisticated export base as a source of strong long-run growth prospects. By conventional measures, the country’s development model is working.
Despite this, another important labor-market signal has been moving in the opposite direction. Since the late 2000s, the wage premium earned by staying in school has been falling, with particularly marked falls for university graduates. This does not necessarily mean that education has become less valuable in itself. It may instead mean that the economy is not creating enough jobs that make productive use of advanced skills.
Whatever the reality, it has important implications for the Vietnamese government’s ambition of reaching high-income status by 2045. The gains from moving workers out of agriculture and into factories and services cannot continue indefinitely; future growth requires sustained productivity growth rather than labor reallocation alone. So far, Vietnam’s FDI model has succeeded on employment quantity but underperformed on occupational upgrading.
Drawing on 13 years of nationally representative Labor Force Survey data, a recent study that we conducted found that for every 100 jobs created in foreign-invested firms, an additional 100 jobs emerge in the same district – a local employment multiplier of roughly one to one. This is a large spillover, and a compelling reason why FDI has become such a central part of Vietnam’s growth story.
Foreign firms accounted for around one-tenth of total employment in 2023, up from almost nothing before 2000. Factory jobs raise household incomes and local spending, creating employment in other businesses.
The composition of these additional jobs, however, presents a more sobering picture. Of every 100 additional non-FDI jobs associated with foreign investment, roughly two-thirds are in services and only one-third in manufacturing. Most are generated by small, often informal household enterprises: i.e., the restaurants, repair shops, and retail stalls that spring up around industrial zones to serve factory workers.
Looking at the occupations themselves reveals the same pattern. For every 100 FDI jobs, only about 13 to 15 additional high-skilled cognitive jobs emerge, compared with 41 to 45 blue-collar production jobs and 27 to 31 clerical or service positions. The educational profile of jobs created elsewhere in the local economy largely mirrors Vietnam’s existing workforce, in which lower-secondary education predominates. Put simply, Vietnam’s FDI-led expansion has overwhelmingly been a jobs boom built on basic schooling rather than a skills boom. That helps explain why the country’s impressive educational progress has yet to translate into equally strong economic returns to education.
Vietnam has continued to invest in education. By 2023, workers with tertiary qualifications accounted for about 18 percent of total employment. Yet the economy has struggled to put those skills to productive use. Manufacturing employed 25.4 percent of the workforce but only 16.5 percent of tertiary-educated workers. Just 11.5 percent of manufacturing workers held a tertiary qualification, below the economy-wide average.
FDI-intensive provinces generally offer higher nominal wages. But the additional wage premium is not larger for better-educated workers. Moreover, part of the apparent wage advantage may simply compensate for higher housing and service costs in fast-growing industrial locations. FDI can therefore raise wages without necessarily strengthening the financial reward for remaining in education.
This changes the choices facing households. When a reasonably paid factory job is available after lower-secondary school, continuing in education becomes more costly, especially for poorer households that cannot easily forgo an immediate income. Grade 9 completion rate is now more than 90 percent, but Grade 12 completion remains below 60 percent. Simply expanding university places will not solve this demand-side problem. Unless the economy creates more jobs that reward advanced skills, Vietnam risks experiencing a growing graduate mismatch, in which educated workers are pushed into relatively low-productivity services, progression through upper-secondary education slows, and the country continues to lose talent abroad.
The policy question, therefore, is how to make capital, technology, and skills complementary. This is not an argument against foreign investment. FDI has been central to Vietnam’s structural transformation, export growth, and employment creation, and will continue to be so.
But it does suggest that Vietnam should broaden its definition of high-quality investment. Registered capital, exports, and headline job numbers should be assessed alongside occupational upgrading, wage progression, firm-based training, technical and managerial employment, engineering and research functions, and durable local-supplier development. Policymakers should distinguish a local spending multiplier from a productive capability spillover. A new restaurant or transport job is valuable, but it is not equivalent to a new engineering team, supplier certification, or transfer of production know-how.
Introducing local-content or skills quotas would be risky, and flexible investors may simply respond by locating elsewhere. More promising are incentive-compatible measures that lower the cost of undertaking sophisticated activities in Vietnam. These include reliable infrastructure, industry-linked training, applied research support, innovation services, and predictable regulation. Far from abandoning labor-intensive FDI, Vietnam’s objective should be to ensure that investment shifts towards more complex tasks and creates ladders within and beyond the factory.
Another part of the solution lies in Vietnam’s domestic economy. Resolution 68, issued by the Politburo of the Communist Party of Vietnam in May 2025, identifies the private sector as the most important driving force of future growth. That is a step in the right direction, but its success will be judged on whether a wide range of domestic firms can acquire technology, discover profitable niches, and scale up their operations.
Domestic firms are indispensable to Vietnam’s economic future because productive capabilities become embedded in an economy only when local businesses can learn from foreign investors, supply them, compete with them and develop innovations of their own. Better access to finance, easier formalization, and fairer competition would allow young and medium-sized firms to experiment, invest, and hire skilled workers. Export-promotion and network-building institutions can help them find buyers, enter global value chains, and learn from international partners.
Education policy must also connect more directly to labor demand. Public-private training partnerships, apprenticeships, and jointly designed curricula can improve matching, but they should be evaluated by whether graduates move into jobs that use and deepen their skills.
Place matters as well. Industrial and urban policy should combine reliable infrastructure with universities, vocational colleges, applied research centers, transport, housing, and public amenities. Such clusters could attract more sophisticated activities and the mobile skilled workers they require.
Vietnam does not need to choose between foreign investment and domestic enterprises. It needs domestic firms capable of learning from, supplying and eventually competing alongside foreign investors; and foreign investors whose success increasingly depends on Vietnamese skills and capabilities.
The fact that FDI has had a local jobs multiplier effect is worth celebrating, but is not evidence of technological or human-capital upgrading. Vietnam’s earlier growth model mobilized labor from agriculture into manufacturing; the model of the future must reward learning, innovation, and productivity.