Human Capital : Theory and Application. Sung Jun Jo 11.05.2005 . Who Are Workers? (Human Resources). Cost? Assets? Business partner?. Agenda. Introduction Schooling and Signaling On the Job Training Application-Executive Pay Issue Discussion. Introduction.
Sung Jun Jo
*Source : Swanson & Holton III, 2001, p.110
A. Smith, J. S. Mill, A. Marshall
T. Schultz, G. Becker,
M. Friedman, S. Kuznets, R. Solow
Different schooling decisions simply place them at different points of the common locus
Higher ability levels shift the MRR to the right, so, earnings gain resulting from an additional year of schooling outweighs the increase in forgone earning
1. Level of education of signaling must be such that non-smart workers are unwilling or unable to attain it.
2. Achieving given level of education must be cheaper for the high smart workers than for non-smart worker
NSW’s edu cost curve
SW’s edu cost curve
Not if the skills are easily portable (worker can leave)
Not if the skills are firm-specific (firm can layoff)
The employee will want to bear the full cost by accepting lower wage during training
The employer will want to bear the full cost by paying above the market value to reduce turnover
When skills are transferable…
1) increase in earnings with schooling
2) concavity of log earnings in experience
3) parallelism in log earnings experiences profiles for different education groups
log w = rs + β1t – β2t2 + other variables
*See the attached file for the further discussion
*Source : Murphy & Zabojnik, 2004
Is education really improving productivity or just signaling?
How can we measure the value of human capital?
What are the implications of human capital theories for HRD specialists?