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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  • Why is youth unemployment so high and different across countries?

    Young people experience worse labor market outcomes than adults worldwide but the difference varies greatly internationally

    Francesco Pastore, January 2018
    In Germany, young people are no worse off than adults in the labor market, while in southern and eastern European countries, they fare three to four times worse. In Anglo-Saxon countries, both youth and adults fare better than elsewhere, but their unemployment rates fluctuate more over the business cycle. The arrangements developed in each country to help young people gain work experience explain the striking differences in their outcomes. A better understanding of what drives these differences in labor market performance of young workers is essential for policies to be effective
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  • Why do STEM immigrants do better in one country than another?

    Where STEM immigrants were educated strongly influences their economic success and possibly their impact on innovation

    Garnett PicotFeng Hou, April 2019
    Canada, the US, and most Western countries are looking to STEM (science, technology, engineering, and mathematics) immigrants to boost innovation and economic growth. Canada in particular has welcomed many STEM immigrants over the past quarter of a century. In the US, there is an ongoing debate about whether the H–1B visa program is being used effectively to attract more STEM immigrants. Interestingly, significant differences exist between the two countries in earnings and likely the innovation activity of highly educated immigrants, which highlights the likely role of immigration policy in determining such outcomes.
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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 Updated

    There is a positive association between study abroad and graduates’ job prospects, though it is unclear if the link is causal

    Giorgio Di Pietro, May 2019
    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 actually 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 are also expected to 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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