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Chapter 9

Chapter 9. Investments in Human Capital: Education and Training. Human Capital Investments: The Basic Model I. Human Capital Investment Education and Training Job Search and Migration Costs of Human Capital investment Direct Expenses Forgone Earnings Psychic Costs.

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Chapter 9

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  1. Chapter 9 Investments in Human Capital: Education and Training

  2. Human Capital Investments: The Basic Model I • Human Capital Investment • Education and Training • Job Search and Migration • Costs of Human Capital investment • Direct Expenses • Forgone Earnings • Psychic Costs

  3. The Investment Decision I • Present Value Method - Investment should take place if : Present Value of Benefits > Costs of Investment, or, Net Present Value > 0 • Internal Rate of Return Method - Investment should take place if: When PV is set equal to costs, the rate of return, r, exceeds that of other investments

  4. Figure 9.1: The Optimum Acquisition of Human Capital

  5. The Demand for College Education I • Consumption vs. Investment Benefits of College • Alternative Earning Streams - H.S. vs. UTEP • Gross and Net Benefits of College

  6. Figure 9.2: Alternative Earnings Streams

  7. The Demand for College Education I Factors That Influence Investment Decision • Discount Rate - Present vs. Future • Stream of Benefits and Age • Costs (Including Psychic Costs) • Earnings Differentials and Education Level

  8. Table 9.1: Changes in College Enrollments and the College/High School Earnings Differential, by Gender, 1970-2004

  9. Education and Age/Earning Profiles I • Average Earning and Education • Concavity of Age Earning Profiles and On-The-Job Training • “Fanning Out” of Earnings Differentials and On-The-Job Training

  10. Figure 9.3:Money Earnings (Mean) for Full-Time, Year-Round Male Workers, 2005

  11. Women and the Acquisition of Human Capital I • Age/Earning Profiles - Comparing Men and Women • Concavity of Women’s Age Earning Profiles and On-The-Job Training 1. Traditional Roles of Women 2. Interrupted Careers • Changes in the Acquisition of Higher Education by Women

  12. Figure 9.4:Money Earnings (Mean) for Full-Time, Year-Round Female Workers, 2005

  13. Table 9.2: Labor Force Participation Rates, Part-Time Employment Status, and Hours of Work in the United States, by Gender (2005)

  14. Figure 9.6: The Increased Concavity of Women’s Age/Earnings Profiles

  15. Table 9.3: Percentages of Women among College and University Graduates, by Degree and Field of Study, 1971 and 2004

  16. Is Education a Good investment for Individuals? I Rates of Returns and Bias 1. Upward Bias - Separating the Impacts of Education and Ability 2. Downward Bias - The Exclusion of Employee Benefits and Non Monetary Benefits

  17. Table 9.4: International Comparisons of Schooling, 2002-2003

  18. Figure 9.7: The Benefits to Workers of Educational Signaling

  19. Figure 9.8: The Lifetime Benefits and Costs of Educational Signaling

  20. Figure 9.9: Requiring a Greater Signal May Have Costs without Benefits

  21. Figure 9.5: Investments in On-the-Job Training over the Life Cycle

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