Labour Economics, Essay Example | Topics and Well Written Essays - 1000 words

Labour Economics, - Essay Example Discussion and Analysis Theoretical Models of Economics of Education The most frequently used model for the assessment of education economics is the schooling model. The model perceives education as a form of investment by which the people who are taking the services get themselves trained with certain skills that in future help them to work and earn wages. For example, workers who had not taken specialised training for making pins would not be able to deliver the products and earn money. On the other hand, the person who has technical training would be able to work for some organisation that would add to his living. Hence it is extremely essential to acquire skills. In the same way, both of a high school pass-out and a graduate would be able to earn money, but the former would have less specialised education and thus would always earn less than the graduate unless he upgrades himself with the necessary education. Thus the return out of higher education is definitely positive and it adds value to the earning capacity of a person in the later stages of life. The second most popular theory regarding the economics of education is the signalling model. This theory states that when a person completes his education it signals for the labour market that he is capable of doing work efficiently and therefore the person can be employed. It determined the employability of the person. The Marxist approach to education is somewhat different from the approaches discussed above. According to Marx, skill development and education were two different phenomena. The capitalist society would encourage the development of skills so that more and more workers get specialised skills and help to increase in the total productivity. This would only benefit the capitalists by increasing their profits. Instead Marx emphasises on education and states that proper education would liberate the individual from the exploitation of the bourgeois and would make the economy a socialist one (Carneir o and Heckman, 2003, p. 4). The following graph describes the relationship between the age of a person and the return on investment. The opportunity cost of funds is constant over the entire period of time. It must also be noted that there is a trade of between the time that a person engages himself for education and the time that is spent for earning some income. In the figure we find that the marginal rate of return on investment decreases over the life of the person. At the preschool level the return is the highest it is the lowest at the post school level where the curve becomes asymmetric. Hence if the person is engaged more in higher education, then he has to bear a lot of opportunity cost because the time that the person spends in educating himself could have been used for earning a livelihood. Instead the person has to bear an expense. Empirical Approaches and Difficulties in Measuring Rate of Return on Education Most of the empirical researches have proved that in all cases of high enrolment in particular countries, the growth rate has increased. Thus a positive correlation is found to exist in the level of education, rates of educated and the growth rate of the economy (Boser, 2011, p. 8). There is also a noticeable corollary along with this. The countries that have shown the least difference in the male and female