Professional Documents
Culture Documents
is grossly misleading. There are a number of factors which may impact on the
profitability of a company (other than its productivity). As the following video clip
suggests declining profitability reduces the company's ability to pay high salaries
and drives down the graduate premium. As a consequence people see that
investing in education is risky and may leave them with lots of debts rather than
handsome returns.
View the attached video clip (Clip_3_HCT_negative.wmv)
Screening Theory (ST) argues that, despite, prima facie appearance, it is not at all
clear that it is the knowledge and skills acquired at school to which increased
productivity has to be attributed. Much of high school education for instance is
spent on a broad liberal arts curriculum (including, e.g., reading novels, learning
about history, biology): all general knowledge not immediately being linked to
productive outputs. The riddle in the human capital model is: why do employers pay
more to more educated people even though much of the knowledge acquired in
formal eduaction has no plausible bearings on productivity?
ST explains the riddle. The education system, according to ST) is a filtering device
which separates the more talented from the less talented and ranks them.
Employers are not particularly interested in the specific curricular content learned in
school but they appreciate this bundle of natural intelligence, stamina, docility,
communication skills, which a good ranking in school entails. Hence, according to
ST, formal schooling is less about skills formation but about revealing talents.
Especially, as long as it is paid by third parties (be it the government or the students
themselves), formal education is the most cost-effective screening device
employers can think of.
Which theory is right, HCT or ST? In reality it is plausible to assume that both factors
play a part: the skills and attitudes inculcated at school on the one side, and talent
and out of school socialization on the other. It is difficult to separate these factors.
Questions proposed: You may consider the following questions: (i) Which theory
seems more convincing to you, HCT or ST? (ii) What aspect both theories have in
common? (iii) It is argued that the difference between the two theories is important
because they may lead to different policies. Can you imagine in which way?
General advice about inserted activities or questions: Generally activities
are meant as contolling your own understanding and skills. You are
welcome to post your solution. Once a correct solution is posted there is
no need for repetition.
_______________________________
Reference:
-- Schultz, T. W. (1961). Investment in Human Capital. American Economic Review,
51, 1-17.
because an individual has a higher education does not mean he/she will not
be filtered out of the equation. Individuals get caught up in governmental
policies and legislation, human resources policies, paying higher salaries or
salary caps, which the ability to pay higher salaries drives down the graduate
premium. As risky as education may seem to some; it is still even more risky
to apply for a job without it. I think that HCT theory is more prevalent.