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be a cost (i.e., cost of facility, loss of earnings for workers while in school, etc), in the longterm the yield from the investment will far outweigh the cost. Finally, the fourth section deals with 'A Concluding Note on Policy'. Here, Schultz discusses social implications and policy of his theory. This can be summarized in nine main points: 1. Existing tax laws (i.e., in 1961) discriminate against the investment in human capital. 2. Unemployment (i.e., sitting idly) causes human capital to deteriorate. 3. There are hindrances to free choices of professions. 4. There is a need to provide funds for investment in human capital, and thus, longterm public and private loans should be made available to students. 5. There should be investments made in migration (i.e., in helping people settle and find education). 6. There has been a failure to adequately invest in those who sit on the periphery of society (i.e., African-Americans, Puerto-Ricans, Mexican Nationals, etc.). 7. There has been an under-investment in human beings in general (beyond just those on the margins). 8. The return on public investment in human capital should not be returned directly to each individual. The individual will see a return in the form of wages, and will benefit from a strong economy. 9. As a society, we must assist underdeveloped countries to achieve economic growth, and to begin investing in human capital. Since this article first appeared, there has been much praise (in 1979 Schultz received the Nobel Prize in Economic Sciences) and much criticism for human capital theory. Today, many still believe that society needs to invest in people for the sake of a stronger, more productive economy, and also to increase the opportunities and choices open to the individual. At the same time, however, many criticize the Human Capital Theory as serving the needs of those in power (i.e., government and business), and not the individual. Paul Bouchard, in his article entitled "Training and Work; Myths about Human Capital" challenges seven basic assumptions contained in Schultz' theory. Briefly, they are as follows: Assumption 1: Human Capital is in investment in the future. -It is impossible to accurately predict future labour market needs. All the forecasting tools we have are problematic. Assumption 2: More training leads to better work skills.
-Organizations value particular skills and what these are often change over time. There are not necessarily 'better' skills, just ones that fit what serve the needs of the organization at the time. Assumption 3: Educational institutions play a central role in the development of human capital. -Today our traditional educational institutions are not as relevant or effective as they could be. Things change so fast that people tend to learn more on the job. Assumption 4: Employees need to improve their skills. -Work has not become more complex, in fact, with technology things have become 'easier'. The need to improve one's skills comes from having to compete in a job market with people who are in many cases over-qualified. Assumption 5: Training enhances employability. -Many individuals do not have access to training and thus access to jobs, while others may have access to training, but not to mobility within the organization. Assumption 6: Training can compensate for skill shortages. -Bouchard argues there are not skill shortages, rather there is a skill-mismatch. In other words, for various reasons, individuals with appropriate skills do not find work. Three potential reasons for this are: labour market dynamics, structural discrimination, and employee self-selection. Assumption 7: Employment and unemployment are economic concepts. -The labour market is NOT a market like any other. There are social forces present that keep people from having equal access to employment regardless of their skill and experience. A major issue with Schultz' theory is that it places the onus on the individual for becoming 'educated', finding employment, and becoming a productive member of society. The theory implies that if an individual does not succeed it is their fault (i.e., they are too lazy, not bright enough, etc.), as opposed to a bias in the system. This is a tremendous burden because for many their inability to find work is due to factors beyond their control (i.e., socio-economic status, ethnicity, gender, etc), and not necessarily to their unwillingness or inability. Finally, knowledge and skill gained through education is not necessarily what is important to employers. As Bowles and Gintis (1976) and many others have pointed out, the characteristics that an individual who has been through the formal educational system possesses (i.e., obedience, responsibility, etc), are in many cases more attractive to employers than their knowledge and skill.
Sources: Bouchard, P (1998). "Training and Work: Myths about Human Capital". In Scott S., Spencer B., and Thomas A. (Eds.), Learning for Life: Canadian Readings in Adult Education, Toronto: Thompson Educational Publishing, Inc. Bowles, S. and Gintis, H. (1976). Schooling in capitalist America: Educational reform and contradictions of economic life. New York: Basic Books. Rubenson, K (1992). "Human Resource Development: A Historical Perspective". In L.E. Burton, In Developing Resourceful Humans: Adult Education Within the Economic Context, New York: Routledge. Schultz, T. W. (1961). Investment in Human Capital. The American Economic Review 1(2), 1-17 Prepared by Tamar Kagan (OISE/UT) August 2000