human capital theory education

Human Capital Theory Related terms: Download as PDF About this page Entrepreneurship, Psychology of 4 Human Capital Human capital theory is concerned with knowledge and

human capital theory education

Human capital theory education
Alongside intermittent labor force attachment, several studies show a wage penalty for women associated with the presence of children. In a regression model utilizing data from 1968–88, Waldfogel ( 1997 , p. 212) identifies a penalty in hourly wages associated with having a child, and a larger penalty for two or more children, even after controlling for actual employment experience and factors such as education. The effects of family and domestic labor responsibilities are thus likely to be cumulative, lowering women’s earnings through reducing employment experience and the capacity to retain career paths. While some may interpret such findings as evidence that a proportion of the gender pay gap is non-discriminatory and simply due to individual choices, others may observe that women’s disproportionate responsibility for family care affects the range of choices available (see Motherhood: Economic Aspects ).
The empirical study of education-related earnings differentials was developed in tandem with human capital theory (see inter alia Becker, 1964 ); the idea is that educational attainment has a casual impact on labor market outcomes through improved productivity. Of course, the fact that more educated workers tend be more productive does not prove that education is the cause of their higher productivity. Indeed, many commentators have noted that interpretation of positive earnings differentials for the more educated as a causal impact of education may not be correct due to differential selection into HE by more able individuals and those from higher-income families. As such, it may be that higher-ability/income people select into education more so that the positive coefficient on education in a wage equation is actually upward biased. The existence of ability bias of this form has been studied in detail, from the highly influential work of Griliches (1977) onward, and confirmed in research since. Empirically, it is the case that the education coefficient falls once ability proxies are included (this is because ability is positively correlated with both earnings and education).

There is a widening gap between the Caribbean and both developed and emerging economies. In the Caribbean and Latin America, higher education is enduring a prolonged crisis where universities lack critical resources, technology and even intellectual capability to effectively prepare employees to compete in the global economy. The region has approximately 26% of the eligible individuals enrolled for post-secondary education. Many academicians and even politicians firmly believe that without a quality education, employees would not be able to produce at levels needed to compete in the global market and as such, there is an immediate need for focusing on education as a growth strategy. Compared with curriculum in developed nations, there is also a need to focus on what is relevant in the business, cultural, political, and social environments. Business, political, and religious leaders also play a critical role in ensuring that children are staying in school. In many parts of the Caribbean, young children are spending all day at farms, fishing, or just staying at home versus going to school. These are the same individuals who companies will be hiring as employees and who are supposed to produce goods and services to customers around the world. It is plainly a system that fails to educate the population, hence a workforce that lacks the education, knowledge, and skills necessary to perform effectively. It is for these very reasons that education is one of the pillars of proactive social policy aimed at the implementation of the universal principles enshrined in the human rights declaration and United Nation�s World Summit (United Nations, 2002).
Psacharopoulos, G. & Woodhall, M. (1997). Education for Development: An Analysis of Investment Choice. New York: Oxford University Press.

Human capital theory education
Encyclopedia of educational philosophy and theory.. ed. / Michael Peters. Berlin : Springer Science + Business Media, 2015.
T1 – Human capital theory in education

Also according to the theory, other benefits of education may be realised in terms of greater productivity and less need to incur costs. An example of educational benefit that improves production possibilities is the greater labour market productivity of those with additional schooling. And the lesser dependency on subsidies in educated communities is an example of benefit that reduces costs for tax-payers (Vila, 2000). In addition, a large body of literature in macroeconomics has underscored that productivity spillovers are important determinants of economic growth and that an increase in aggregate human capital will have an effect on aggregate productivity [3] which is as a results of an increase in an individual’s education on productivity (Moretti, 2005).
This essay is a critical reflection on the Human Capital Theory (HTC), focusing on its principles, critiques and current thinking. According to Psacharopoulos et al. (2004a), the HTC has roots in the works of classical authors such as Adams Smith (1776) and Alfred Marshall (1890). The former concluded that ‘a man educated at the expense of much labour and time may be compared to one of those expensive machines… and the work he learns to perform should replace to him the whole expense of his education’. The latter referred to industrial training as ‘a national investment’. Much later authors such as Mincer (1958), Schultz (1961) and Backer (1975) gave ‘meat’ to this theory when they affirmed that time and money spent on education builds human capital hence one should be able to estimate the rate of return (RoR) on such investment, in a way similar to investment in physical capital. In short, the H TC states that a person’s education is an investment (involves costs, in terms of direct spending on education and the opportunity costs of student time) in her/his human capital (akin to investment by a firm in physical capital), which makes the individual more productive and accrue him/her a future stream of benefits (superior productivity, higher wages and other non-monetary benefits to the individual and the society).

An organization is often said to only be as good as its people. Directors, employees, and leaders who make up an organization’s human capital are critical to its success.
The theory of human capital has received a lot of criticism from many people who work in education and training. In the 1960s, the theory was attacked primarily because it legitimized bourgeois individualism, which was seen as selfish and exploitative. The bourgeois class of people included those of the middle class who were believed to exploit those of the working class.