plg515 l5.pptx
TRANSCRIPT
EDUCATION AND DEVELOPMENT
L e c t u r e 5 P L G 5 1 5 5 O c t o b e r 2 0 1 5
Human Capital Theory
Pre-Lecture Debate
An increase in the number of college/university graduates is
beneficial for the socio-economic development of a country.
vsThe expansion of higher education
is detrimental to the socio-economic development of a
country.
Contents
1. The idea
2. The background
3. The theory
4. Education as investment in human capital
5. Individual returns of the investment in education
6. Criticism of the human capital theory
1. The idea
“There is such a thing as investment in human capital […]. So soon as this is recognised, the distinction between economy
in consumption and economy in investment becomes blurred.
[…] consumption is investment in personal productive capacity.
This is especially important in connection with children: to reduce unduly expenditure on their consumption may greatly lower their efficiency in after-life. Even for adults […] a check
to personal consumption is also a check to investment.”
– A. C. Pigou, 1928
2. The background
2. The background
Modernization: the process by which agrarian societies are transformed into industrial ones
Consequences of modernization to labor: The nature of labor has changed – people “work smarter” due
to Technological innovations A more efficient use of knowledge The role of knowledge has become more important A higher proportion of white collar jobs (Drucker)
Education has become necessary from being a luxury
2. The background
Consequences of modernization to labor: Women have entered the labor market due to
Unequal sex ratio – lack of males after the World Wars Changes in the types and structure of jobs Reduced fertility – or is this the result of female labor? Financial reasons – or is female labor a covert salary cut?
More working women > it is more difficult to find a job for the less educated (of both sexes)
3. The theory
3. The theory
Human beings seen as capital goods Related to the theories of Adam Smith and Karl Marx
Human beings need useful knowledge and skills for their subsistence
Knowledge and skills are a form of capitalDirect investment in education and health results in
economic developmentDevelopment of human capital
Improves the quality and productivity of the labor force Increases the competitiveness of national economies in the global market
4. Education as investment in human capital
4. Education as investment in human capital
Education Is a basic component of social, economic and
political development
Has an economic value
Contributes to economic growth (Adam Smith, 1776; Wheeler, 1980)
4. Education as investment in human capital
Investment in education Contributes to national economic growth (Marris,
1982)
Increases the income of the poor (Jamison and Lau, 1982)
Improves the productive skills and capacities of the national labor force (Denison, 1962; Schultz, 1961)
4. Education as investment in human capital
Investment in education Has a significantly higher return rate than
investment in physical capital > most of the economic growth comes from investment in education (Schultz, 1963)
Based on the above notions, the World Bank has provided loans for educational development since 1962
5. Individual returns of the investment in education
Education is an investment for the students and their families, too:
The qualification of the individual determines one’s labor opportunities and choice
High-prestige jobs usually require high qualification
In most societies, higher degree means higher income
5. Individual returns of the investment in education
Education is an investment for the students and their families, too: The income gap is not the same, however,
throughout the life cycle Age-earning profiles – an example from Thailand:
5. Individual returns of the investment in education
BUT…The ability problem
Highly educated individuals tend to have the ability, self-discipline and motivation to earn higher salaries
Higher degree and higher income may be result of the same individual abilities
5. Individual returns of the investment in education
BUT…Sometimes the returns are insufficient
Many skilled blue collar jobs offer high reward Expansion theory (Archer)
Deflation in value of college degree Percent of college graduates has increased substantially The progress of the disadvantaged offset by education inflation
It is not the knowledge and skills of humans but credentialism in the society what has increased Education is a channel of social reproduction (Bourdieu)
6. Criticism of the human capital theory
6. Criticism of human capital theory
Investment or consumption?It is not appropriate to regard expenditure
for education as an investment
6. Criticism of the human capital theory
Investment in human capital does not work automatically Discrepancy between labor demand and the skills of new
graduates The dominant value system and working culture of
education, health etc. employees may reduce or counter the impact of investment
It is the quality of education what really matters Test scores show many students lack functional abilities Investment does not guarantee better results
6. Criticism of the human capital theory
Sometimes the returns are insufficient Many skilled blue collar jobs offer high reward Educational expansion theory (Archer, 1982)
Deflation in value of college degrees Percent of college graduates has
increased substantially The progress of the disadvantaged
offset by educational inflation
It is not the knowledge and skills of humans but credentialism in the society what has increased Education is a channel of social reproduction (Bourdieu &
Passeron, 1990)
Everybody
Nobody
Statements for debate (Lecture 6)
Alternative education and home schooling are beneficial to the learners.
(deschooling, diploma disease, alternative education)
vs
Alternative education and home schooling are harmful to the learners.(alternative education, functionalist theory, human capital theory)