Education and human capital

The Mincer equation—arguably the most widely used in empirical work—can be used to explain a host of economic, and even non-economic, phenomena. One such application involves explaining (and estimating) employment earnings as a function of schooling and labor market experience. The Mincer equation provides estimates of the average monetary returns of one additional year of education. This information is important for policymakers who must decide on education spending, prioritization of schooling levels, and education financing programs such as student loans.

Although early human capital theory recognized the relevance of workers’ experience, its focus was on education and formal training. More recent studies show that much of the performance of newly hired workers is driven by learning by doing or learning from peers or supervisors in the workplace. Descriptive data show that workers learn a lot from the various tasks they perform on the job. Informal learning at work seems to be relevant for all age groups, although it is more meaningful for younger workers’ performance. Informal learning is far more important for workers’ human capital development than formal training courses.

Multiple job-holding, or “moonlighting”, is an important form of atypical employment in most economies. New forms of work, driven by digitalization, may enable its future growth. However, many misconceptions exist, including the belief that multiple job-holders are only low-skilled individuals who moonlight primarily for financial reasons, or that the practice increases during economic downturns. Recent literature highlights the significant links between moonlighting and job mobility. Multiple job-holding allows for the development of workers’ skills and spurs entrepreneurship.

Evidence suggests that productivity would be much higher and unemployment much lower if the supply of and demand for skills were better matched. As a result, skills mismatch between workers (supply) and jobs (demand) commands the ongoing attention of policymakers in many countries. Policies intended to address the persistence of skills mismatch focus on the supply side of the issue by emphasizing worker education and training. However, the role of the demand side, that is, employers’ rigid skill requirements, garners comparatively little policy attention.

Increasing instruction time might seem a simple way to improve students' outcomes. However, there is substantial variation in its effects reported in the literature. When focusing on school day extensions, some studies find no effects, while others find that an additional hour of daily instruction significantly improves test scores. A similar pattern arises when examining the effect of additional days of class. These mixed findings likely reflect differences in the quality of instruction or in the activities that are being replaced by additional instruction. Hence these elements need to be considered when designing policies that increase instruction time.

The negative correlation between women's education and fertility has been observed across regions and time, although it is now weaker among high-income countries. Women's education level could affect fertility through its impact on women's health and their physical capacity to give birth, children's health, the number of children desired, and women's ability to control birth and knowledge of different birth control methods. Each of these mechanisms depends on the individual, institutional, and country circumstances experienced. Their relative importance may change along a country's economic development process.

Measuring workers’ productivity is important for public policy and private-sector decision-making. Due to the lack of a general measure that captures workers’ productivity, firms often use one- or multi-dimensional performance measures, which can be used, for example, to analyze how different incentive systems affect workers’ behavior. The public sector itself also uses measures to monitor and evaluate personnel, such as teachers. Policymakers and managers need to understand the advantages and disadvantages of the available metrics to select the right performance measures for their purpose.

Apprenticeship training programs typically last several years and require substantial investments by training firms, largely due to the associated labor costs for participants and instructors. Nevertheless, apprentices also add significant value in the workplace. One tool to measure the costs and benefits of training for firms is employer surveys, which were first introduced in the 1970s in Germany. Such cost–benefit surveys (CBS) help to better understand a firm's demand for apprentices and to identify market failures. Therefore, CBS are an important tool for designing effective training policies.

Around ten countries currently use a variant of a national income-contingent loans (ICL) scheme for higher education tuition. Increased international interest in ICL validates an examination of its costs and benefits relative to the traditional financing system, time-based repayment loans (TBRLs). TBRLs exhibit poor economic characteristics for borrowers: namely high repayment burdens (loan repayments as a proportion of income) for the disadvantaged and default. The latter both damages credit reputations and can be associated with high taxpayer subsidies through continuing unpaid debts. ICLs avoid these problems as repayment burdens are capped by design, eliminating default.

New Zealand is a small open economy, with large international labor flows and skilled immigrants. After the global financial crisis (GFC) employment took four years to recover, while unemployment took more than a decade to return to pre-crisis levels. Māori, Pasifika, and young workers were worst affected. The Covid-19 pandemic saw employment decline and unemployment rise but this was reversed within a few quarters. However, the long-term impact of the pandemic remains uncertain.