Education and human capital

Ample empirical evidence links adverse conditions during early childhood (the period from conception to age five) to worse health outcomes and lower academic achievement in adulthood. Can early-life medical care and public health interventions ameliorate these effects? Recent research suggests that both types of interventions may benefit not only child health but also long-term educational outcomes. In some cases, the effects of interventions may spillover to other family members. These findings can be used to design policies that improve long-term outcomes and reduce economic inequality.

The labor market position of older workers is cause for concern in many industrialized countries. Rapid population aging is challenging pension systems. The recent economic crisis has forced many older adults out of the workforce, into either pre-retirement or non-employment. Encouraging people to work longer and fostering the employability of older workers have become priorities for policymakers. Training specifically designed for older workers might help attain these goals, since it may refresh human capital and reduce the pay–productivity gap. Training older workers might also benefit employers and society as a whole.

Income inequality has been on the rise in many countries. Is this bad? One way to decide is to look at the degree of change in incomes across generations (intergenerational mobility) and, more generally, at the extent to which income differences among individuals are traceable to their social origins. Inequalities that reflect factors largely out of an individual’s control—such as parents’ education, local schools, and communities—require attention in order to reduce income inequality. Evidence shows a negative association between income inequality and intergenerational mobility, and a positive relationship between mobility and economic performance.

Many countries are experiencing increasing inflows of immigrant students. This raises concerns that having a large share of students for whom the host country language is not their first language may have detrimental effects on the educational outcomes of native children. However, the evidence is mixed, with some studies finding negative effects, and others finding no effects. Whether higher concentrations of immigrant students have an effect on native students differs across countries according to factors such as organization of the school system and the type of immigrants.

In today's globalized world, people are increasingly mobile and often need to communicate across different languages. Learning a new language is an investment in human capital. Migrants must learn the language of their destination country, but even non-migrants must often learn other languages if their work involves communicating with foreigners. Economic studies have shown that fluency in a dominant language is important to economic success and increases economic efficiency. However, maintaining linguistic diversity also has value since language is also an expression of people's culture.

Even in OECD countries, where an increasing proportion of the workforce has a university degree, the value of basic skills in literacy and numeracy remains high. Indeed, in some countries the return for such skills, in the form of higher wages, is sufficiently large to suggest that they are in high demand and that there is a relative scarcity. Policymakers need robust evidence in order to devise interventions that genuinely improve basic skills, not just of new school leavers entering the market, but also of the existing workforce. This would lead to significant improvements in the population that achieves a minimum level of literacy and numeracy.

Workers participating in firm-sponsored training receive higher wages as a result. But given that firms pay the majority of costs for training, shouldn’t they also benefit? Empirical evidence shows that this is in fact the case. Firm-sponsored training leads to higher productivity levels and increased innovation, both of which benefit the firm. Training can also be complementary to, and enhance, other types of firm investment, particularly in physical capital, such as information and communication technology (ICT), and in organizational capital, such as the implementation of high-performance workplace practices.

A growing body of research has begun to examine the match between student ability and university quality. Initial research focused on overmatch—where students are lower attaining than their college peers. However, more recently, attention has turned to undermatch, where students attend institutions with lower attaining peers. Both have been shown to matter for student outcomes; while in theory overmatch could be desirable, there is evidence that overmatched students are less likely to graduate college. Undermatched students, meanwhile, have been shown to experience lower graduate earnings.

The difference in educational attainment between China's urban- and rural-born populations has widened in recent years, and the relatively low educational attainment of the rural-born is a significant obstacle to raising labor productivity. Rural-to-urban migration does not create incentives to enroll in higher education as the availability of low-skill employment in urban areas makes remaining in school less attractive. In addition, the child-fostering and urban schooling arrangements for children of migrants further inhibit human capital accumulation.

Evidence shows that many college graduates are employed in jobs for which a degree is not required (overeducation), and in which the skills they learned in college are not being fully utilized (overskilling). Policymakers should be particularly concerned about widespread overskilling, which is likely to be harmful to both the welfare of employees and the interests of employers as both overeducation and overskilling can lead to frustration, lower wages, and higher quitting rates while also being a waste of government money spent on education.