Labor Economıcs (ENG) — Ünite 6 Soru-Cevap

Human capital represents the productive capacity of a worker. Investments in education, on-the-job training, health, mobility, and migration increase human capital and its value.

Workers change jobs and move across regions and countries to receive a higher price for each unit of human capital they possess. Therefore, mobility and migration are considered human capital investments.

Higher levels of schooling will enable workers to hold betterpaying, more prestigious jobs with better working conditions. They may also enjoy better social outcomes (e.g., social status) if educated people
are appreciated by society. 

Present value is the value today of future earnings streams.

PV=(600000/1.3)+(800000/1.3²)=934,9

It is the opportunity cost, namely the forgone earnings as a high school graduate. 

Direct costs include school fees, expenditure on books and supplies, any private tutoring fees, and accommodation costs beyond what would be incurred if the individual did not attend university.

Since costs are more near-term than benefits, with a higher discount rate, it becomes more likely that
the present value of high school education exceeds university education. Therefore it is more likely that there will be a decrease in demand for university education as a result of higher discount rates. 

Higher direct and indirect costs also make it less likely for an individual to attend university.

The wage-schooling locus is positively sloped, showing that more-educated individuals earn more than less-educated individuals.

Wages do not increase linearly with schooling but rather at a decreasing rate, giving the wageschooling locus a concave shape. The concavity is due to the diminishing returns to schooling.

Marginal rate of return (MRR) to schooling is the percentage change in earnings resulting from one more year of schooling.

Because of the concavity of the wage-schooling locus discussed above, the MRR schedule is downward sloping: higher schooling levels are associated with a lower MRR.

The optimal level of schooling determined where the discount rate is equal to MRR. If MRR is greater than the discount rate, it makes sense for the individual to acquire more schooling. As the individual acquires
additional years of schooling, the MRR becomes smaller and eventually equals the individual’s discount rate. Continuing to invest beyond optimal years does not make sense since additional years will have a return less than the discount rate r0.

The benefits of schooling are likely to extend beyond the person acquiring the education. In other words, schooling is likely to have positive externalities, such as improved infant, child, and adult health outcomes, reductions in crime, higher parental investment in children’s education, and higher civic participation (Haveman and Wolfe, 1984, 1995; McMahon, 1999).

Formal and informal training on the job constitute important channels through which additional human capital is acquired.

Although on-the-job training is quite diverse, it can be broadly categorized into general training and specific training.

General training increases the productivity of workers in all firms. In other words, the skills acquired through general training are transferable. On the other hand, specific training increases the worker’s productivity only in the firm that offers the training. It is not transferable. An example of general training can be a training course that enhances the computer skills of the firm’s workforce. The skills learned through the program are equally useful in another firm. In specific training, workers in a specific firm might
be given a training course on a computer software program that is specific to the firm. Although the
skills learned will increase the worker’s productivity in that firm, they will not be useful elsewhere.

The higher the value of specific training, the less likely it would be for the firm to want to lay off the worker or for the worker to want to quit his job. This also explains why, during a slump in economic activity, it is more likely for newly hired workers to be laid off than workers with more seniority on the job (i.e., the
‘last hired, first fired’ phenomenon). Workers with seniority have more specific skills invested in them
than newly hired workers. Furthermore, as noted above, the value of the marginal product of labor
for workers with seniority exceeds their wages, so even if the output price falls, it is still likely that the
firm benefits from employing such workers.

Labor mobility is a broad concept that refers to a situation in which a worker changes his/her employer,
occupation, or place of residence due to work.

Labor turnover refers to a job change initiated by the employer or the worker.

Migration may take the form of internal migration, immigration, emigration, or return migration.

Economic migration is voluntary. As discussed earlier, migrants decide whether to move to a new
geographic area within the country or overseas by considering the costs and benefits of migration.
Forced migration, on the other hand, is involuntary. Some events, such as political unrest, wars, natural
disasters, and the like, force individuals to migrate.