Education and human capital

Education shows great resilience to shocks—labor demand for highly skilled workers has remained high in all kinds of economic conditions. Public policy for education and human capital includes increasing the economic and social returns on education, fostering greater educational attainment, encouraging social and economic mobility, and providing vocational education, training, and lifelong learning.

  • Youth sports and the accumulation of human capital

    Positive contributions to cognitive and non-cognitive skills justify public support of youth sports

    Michael A. Leeds, February 2015
    In response to declining budgets, many school districts in the US have reduced funding for sports. In Europe, parents may respond to difficult economic times by spending less on sports clubs for their children. Such cuts are unwise if participating in sports is an investment good as well as a consumption good and adds to students’ human capital. The value of sports is hard to measure because people who already possess the skills needed to succeed in school and beyond might be more likely to participate in sports. Most studies that account for this endogeneity find that participation in youth sports improves academic and labor market performance.
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  • Youth labor market interventions

    Comprehensive programs that focus on skills can reduce unemployment and upgrade skills in OECD countries

    Jochen Kluve, December 2014
    Reducing youth unemployment and generating more and better youth employment opportunities are key policy challenges worldwide. Active labor market programs for disadvantaged youth may be an effective tool in such cases, but the results have often been disappointing in Organisation for Economic Co-operation and Development (OECD) countries. The key to a successful youth intervention program is comprehensiveness, comprising multiple targeted components, including job-search assistance, counseling, training, and placement services. Such programs can be expensive, however, which underscores the need to focus on education policy and earlier interventions in the education system.
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  • Who benefits from firm-sponsored training?

    Firm-sponsored training benefits both workers and firms through higher wages, increased productivity and innovation

    Benoit Dostie, April 2015
    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.
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  • What is the economic value of literacy and numeracy?

    Basic skills in literacy and numeracy are essential for success in the labor market

    Anna Vignoles, January 2016
    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.
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  • What effect do vocational training vouchers have on the unemployed?

    Vouchers can create a market for training but may lengthen participants’ unemployment duration

    Anthony Strittmatter, November 2016
    The objective of providing vocational training for the unemployed is to increase their chances of re-employment and human capital accumulation. In comparison to mandatory course assignment by case workers, the awarding of vouchers increases recipients’ freedom to choose between different courses and makes non-redemption a possibility. In addition, vouchers may introduce market mechanisms between training providers. However, empirical evidence suggests that voucher allocation mechanisms prolong the unemployment duration of training participants. But, after an initial period of deterioration, better long-term employment opportunities are possible.
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  • University study abroad and graduates’ employability

    There is a positive association between study abroad and graduates’ job prospects

    Giorgio Di Pietro, December 2014
    In recent decades, the number of university students worldwide who have received some part of their education abroad has been rising rapidly. Despite the popularity of international student exchange programs, however, debate continues over what students gain from this experience. A major advantage claimed for study abroad programs is that they can enhance employability by providing graduates with the skills and experience employers look for. These programs also increase the probability that graduates will work abroad, and so may especially benefit students willing to pursue an international career. However, most of the evidence is qualitative and based on small samples.
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  • University dropouts and labor market success

    Dropping out of university can be more advantageous than not having enrolled in university at all

    Sylke V. Schnepf, September 2015
    With university education continuing to expand worldwide, university dropouts will make up a large group in future labor markets. Dropping out is routinely viewed as a negative indicator. However, data on university dropouts does not generally provide information on their labor market outcomes, so empirical evidence is sparse. The studies that have examined the issue show that dropping out can be more of an advantage than not having enrolled in university at all. Many dropouts are more likely than upper secondary school graduates with no university education to progress in their careers. And many graduate later in their life.
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  • University autonomy: Improving educational output

    Universities deliver more competent graduates and higher quality research if they are more autonomous and well-funded

    Jo Ritzen, March 2016
    University autonomy and funding is an important aspect in university-level education due to its impact on graduates’ competencies, and on the quality and quantity of research produced. Political factors influence the amount of autonomy allotted to public universities in specific countries. There is sufficient evidence to suggest that an increase in autonomy for universities would provide better educational outcomes and have a direct impact on labor market productivity. However, the debate on autonomy has been overshadowed by discussions on tuition fees and student aid in political circles.
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  • Trade, foreign investment, and wage inequality in developing countries

    Exposure to foreign trade raises the skill premium in countries with a large stock of educated workers and reduces it in others

    Alessandro Cigno, November 2015
    Liberalization of foreign trade and investment raises the domestic ratio of skilled to unskilled wages (skill premium) if the country has a sufficiently well-educated workforce, but lowers it otherwise. Wide wage inequality is undesirable on equity grounds, especially in poor countries where the bottom wage is close to the breadline; but it gives parents an incentive to invest in their children’s education. The incentive will be ineffective, however, if parents cannot borrow for their child’s education because of underdeveloped credit markets or because they are too poor to finance the investment from their own income and savings.
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  • The value of language skills

    A common language facilitates communication and economic efficiency, but linguistic diversity has economic and cultural value too

    Gilles Grenier, November 2015
    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.
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