International Human Capital. Theoretical background and Spanish perspective

Daniel Miravet Arnau

Department of Economics at Universitat Rovira i Virgili

University of Limerick - Kemmy Business School

26th of September 2012

1. Basic concepts

1. Basic concepts

What is human capital?Theoretical knowledgePractical knowledge

What we are able to doHow we can do it

1. Basic concepts

2 main theoriesHuman capital theoryThurow's model

Where is productivity?Does it reside in the worker?Does it reside in the workplace?

1. Basic concepts

Human capital theoryProductivity resides in the workerAs a result

The more you learn, the more productive you become

The more productive you become, the better you are paid

Acquiring new knowledge, is always well retributed

1. Basic concepts

Thurow's modelProductiviy resides in the workplaceEmployer does not know what are workers'

skills.There are 2 queues:

The first one is composed of potential workers who are ordered according to their academic credentials

The second one is composed of job vacancies ordered by workplace quality

1. Basic concepts

Thurow's modelProductiviy resides in the workplaceEmployer does not know what are workers'

skills.There 2 queues:

The first one is composed of potential workers who are ordered according to their academic credentials

The second one is composed of job vacancies ordered by workplace quality

1. Basic concepts

Thurow's modelAcademic credentials work as signals of real

skills

PeopleJob

vacancies

1. Basic concepts

Thurow's modelWhat would happen if...?

People

Job vacancies

1. Basic concepts

Thurow's modelCompetition among potential workers

• The more educated, would get the best jobs

• The less educated, would get crowded out

Inflation of credentialsRemember that productivity resides in the workplace

2. Measures of human capital

2. Measures of human capital

In what consists human capital?Traditional measures of human capital

• Formal education• Experience• Training

More recently competences have also come to the front

2. Measures of human capital

Formal educationResearchers have measured it as years of

education receivedIt is an individual investment decision

• When you estudy you expect future higher earnings and being able to access qualified jobs

• In exchange:– Fees and other direct costs– Opportunity costs– Tranferred income

2. Measures of human capital

ExperienceResearchers have measured it as years of

experienceThere is evidence that learning is very

important during the first years of experience.

It decreases afterwards.

2. Measures of human capital

TrainingDifferent forms of training:

• Outside the firm• Within the firm

– Swim or sink– Presential classes– On-line– Tutorised by other members of the firm

• General or specific training?– Who is paying for it?

2. Measures of human capital

CompetencesTraditional measures of human capital are

not enough• Quantity vs quality

Residual inequality• It is have been proved that apparently

identical workers according to traditional mesures receive different wages

2. Measures of human capital

CompetencesThere must be something else:

• Ability of acquiring competences• The opportunity to use them

Can be defined as “transfereable skills”• They can be used widespread

2. Measures of human capital

CompetencesAlmost impossible to classify

• Communication abilities• Leadership• Organization of time• Team working• Problem solving• Creativity• Adapting to changes...

3. Spanish perspective

3. Spanish perspective

Source: Own elaborated using data provided by INE

3. Spanish perspective

Missfunctions in Spanish formal educationUntil the 80's low percentages of university

graduatesSuddenly, people start to go to universityHowever, vocational education is almost

forgotten until very recentlyAs a result, there is still a large percentage

of population poorly qualified

3. Spanish perspective

Source: Education at a glance 2011

3. Spanish perspective

Evolution of the maximum level of education attained. 25-64 years old.Source: Panorama de la Educación (2011)

3. Spanish perspective

Maximum level of education attained by countries. 25-64 years old.Source: Panorama de la Educación (2011)

3. Spanish perspective

% of university graduates by age.Source: Panorama de la Educación (2011)

3. Spanish perspective

The question isWas the Spanish economy ready to absorb

such an amount of highly qualified workers who were replacing low qualified workers?

3. Spanish perspective

When the bubble was growingBuilding industry was paying relatively high

wages to non-qualified individualsMore and more non-qualified workers were

required• Studying seemed non-sense

(investment decision)• Continuous waves of immigrants

3. Spanish perspective

When the bubble was growingThe wage-differential between qualified and

non-qualified workers reducedEducation at a glance 2011 (data of 2008)

3. Spanish perspective

Wage differential between university graduates and below upper secondary education (2011). Source: Panorama de la Educación (2011)

3. Spanish perspective

Overeducation A large percentage of university graduates

are not able to find a job that is in accordance with their education level attained

Comparative % of overeducated peopleNieto and Ramos (2010)

3. Spanish perspective

...and the bubble burstThe end of the massive demand of workersBumping-down and crowding-out effects

Source: Own elaborated using data from INE

3. Spanish perspective

Source: Education at a Glance 2011

3. Spanish perspective

As a summaryHighly qualified individuals are relatively

cheap• They have grown too fast• Overeducated• Less affected by unemployment

Not enough intermediate although improving

Non qualified are the biggest problem

Thanks for your attention

Daniel Miravet Arnau

Department of EconomicsUniversitat Rovira i Virgilidaniel.miravet@urv.cat