Economics of Education Part 2.pptx

Economics of Education
Part 2
Human Capital Theory
Wednesday, December 21, MED 603 1

• In the past labour was viewed as a static factor of
production
• So when economists were discussing economic progress
they were emphasizing on money, capital goods and natural
resources
• Economic development was understood to be dependent
on capital inputs only, and the human being was only a
consumer of the economic products
• Now there is a recognition of the importance of training of
the labour force to improve productivity

• The beginnings of relatively new interest in the role of
human capital dates back to the early 1960s
• Schultz (1961) put forward the argument that increases in
value of total output in relation to increases in existing
factors of production could be attributed to investment in
human capital
• He argued that all human beings possess some abilities
needed in production
• It is within this context that human beings constitute what
in economic terms is seen as ‘capital’

• Human capital is the component of the labour force due to
the influence of education and training
•Human capital is the human being who is endowed with
knowledge, skills and expertise to be used in various ways,
to operate the social and economic system in a given society
•Various sectors of the economy require varied human skills
and abilities
• Human capital, in the form of the educated and skilled
personnel is a pre-requisite for the viability of capital
projects

• The recognition of the importance of human capital has led
to mass educational development programmes, and the rise
of the amount of resources allocated for education
• It is actually the emphasis placed on ‘capital’ in production
that has given rise to the phrase ‘human capital’
• Capital is now understood as any form of productive
investment, whether physical capital or human capital

Similarities Between Physical and Human Capital
• Both physical and human capital are means of production,
in that they are necessary for production of goods and
services
• Both physical and human capital are capable of making
returns over the investments made on them over a period
of time

Differences Between Physical and Human Capital
Physical Capital
• It ultimately goes to
extinction
• It can be sold
• It is only a usable resource
• It is required only in some
sectors of the economy
• It is manufactured
Human Capital
• It does not go to extinction
even when it becomes
outdated, it can be updated by
education
• It cannot be sold
• It is usable but also it decides
on the use of other resources
• It is required in all sectors of
the economy
• It is created through
investment in education

Problems of Human Capital Development
• Developing countries are experiencing problems in
developing the human capital
•Some of the problems are:
1. The rapidly growing population
• Growth rate in most cases is above 2% per annum
• So large part of the population is below working age and
therefore non-productive
• So greater percentage of the national resources are
required to invest in their education
• Pressure on available resources is very high

Problems of Human Capital Development
2. Increasing Unemployment
• The rate of increase in the labour force, exceed the rate of
increase in jobs
• There is a concern for human resource development planner as
to what to do with the surplus labor
• So unemployment is rising
3. Inability to measure the actual contribution of human capital
to national development
• Productivity of labour depends on other factors: natural ability,
motivation, initiative, social background etc.
• Many people with low level of education succeed, and their
abilities are not directly acquired through education

Problems of Human Capital
4. Incentives
• How do various sectors of production induce persons to
prepare for, and engage in occupations which are important
for the national growth
• Rewards of some categories of personnel and technicians
are not sufficient to attract the numbers needed
• e.g. Remuneration packages of teachers are often
inadequate, earnings of engineers and scientists are often
inadequate compared to administrative officers in the
government and politicians

Possible Ways of dealing with the Problems
1. The Rapidly Growing Population
• There is no ready made solution
• Stakeholders are the best to decide on how to tackle these issues
• The mandate to deal with this issue involve many sectors, not
only the human resources development planners
2. Increasing Unemployment
• Consider ways and means of absorbing surplus manpower and
direct it to productive activities
• Through building modern industries and rural transformation

Possible Solutions to the Problems
3. Measuring the Actual Contribution of Human Capital to
National Development
• Apply special methods to estimate the contribution
• Estimate the cost of producing labour force
• Use this to estimate the expected returns on the investment
incurred in educating the relevant proportion of the labour force
4. Incentives
• Give scholarship support for particular kinds of education
• Remove barriers to people progressing in their occupation

Education and Economic Growth
• Investment is necessary for national development
•Education is one of those important investments for
economic growth and national development
Definition
• Economic Growth: is the increase in the output in the
economy compared to the previous years
•It is measured by taking the rate of increase of the national
income

National Income
• National income is the sum total of all earned and unearned
income in the economy
Development
• Development is growth of the economy plus change
• The implication is that development incorporates both
growth in the income of the people as well as change in
their social, cultural, political quality of life
•So development is both a qualitative and a quantitative
dimension

• It is generally believed that education tends to raise the
earnings of the educated
• Therefore investment in education accelerates economic
growth
•It is similarly believed that education, through its various
processes is instrumental to any national development

How Education Contributes to Economic Growth
• There are two major ways education contributes to
economic growth
1. By improving the literacy level of the labour force
2. By helping in the acquisition of relevant skills and
expertise
Improving the Literacy Level of the Labour Force
• Better educated person is likely to do a better job than a
less educated one, because additional education is expected
to give the educated better ways of doing things

• Acquired literacy helps the individual to:
1. Have positive orientation towards life and its related
activities
2. Accept and appreciate changes and innovations which
may enhance productivity
3. Improve his health habits, which have implications for his
effective contribution to the economy
•Sick individual can hardly make any meaningful
contribution to the economy
4. Generate ideas and information that assist others to
improve their performances within the economy

Education as a Source of acquisition of skills and expertise
• Political, social and economic skills are taught and developed by
educational institutions
• The level of acquisition of skills varies with the length of time
spent in educational institutions
• Two main ways in which acquisition of skills facilitate economic
growth:
1. The educated individual has a better mastery of the tools and
techniques required for performing a given job
• This leads to higher job productivity and job efficiency

2. The Management of resources (physical and human) better
• Many countries have abundance of resources and skilled labour
force
• But may lack the capacity to manage them effectively
• The acquisition of relevant management skills ensures that both
the human and physical resources are in balance through
effective planning, organization, controlling, evaluating and
coordinating
• It is only when resources are well utilized that effective
productivity in any economy can be envisaged
• Tanzania needs to improve on this

Efficiency of the Educational System
Definition
• Efficiency can be defined as the relationship between inputs
and outputs, whereby economic efficiency is increased by a
gain in units of output per unit of input
• If the same output can be produced by using less inputs
efficiency has improved
• Similarly if greater output can be achieved by using the
same level of inputs, efficiency has improved
•In education we can view efficiency by looking at the use of
buildings, teachers, class size, time to cover curriculum etc.

Efficiency of the Education System
• Cost per enrolled students is normally different from cost
per successful students
• This is because there are dropouts
• This makes the cost per successful students to be higher
than cost per student enrolled
• The difference measures the efficiency of the educational
system
•The lower the difference the more efficient the system

Problems of measuring efficiency
• The problem for economists and educators, is how to mix
the inputs in the right proportions to achieve the most
efficient outcome
• In addition we ask ourselves what output should we
measure?
•It is difficult to specify a unit of output
•Because educational systems have no single well
defined indicator of output
•In education some efficiency measures include
•Cost per full time equivalent student, student teacher
ratio and percentage of classroom time utilized

Types of Efficiency
• There are two types of efficiency: internal efficiency and external
efficiency
Internal Efficiency
• Internal efficiency is concerned with the relationship between
inputs and outputs within the education system or within
individual institutions
• An educational system is said to be internally efficient when it
turns out graduates without wasting any student-year, or without
dropouts or repeaters
• Internal efficiency is improved when more education outputs are
produced using given or fewer education resources

Types of Efficiency
External Efficiency
• External efficiency of an educational system involves the
relationships between general and vocational education and
between schools and world of work
• An internally efficient education system may be externally
inefficient if the graduates it turns out are not what the
society, economy, or the higher levels of education wants
• The graduates may be wrongly qualified, not meeting the
university entrance requirements, not employable or
redundant

Promotion of External Efficiency
• To promote external efficiency it may be necessary to
estimate the number and skills that will be required in the
country at a future date
• If we succeed to estimate the number and kinds of skills
that will be required in the country at a future date and
enroll students in programs corresponding to the future
requirements, then we are promoting external efficiency
• Serious efforts have to be made by both curriculum
specialists, educational administrators and planners to
reduce the level of external inefficiency

Wastage
• In the past section we saw that efficiency in education include
the flow of students through the system with minimum wastage
and the quality of learning achieved in the system at given levels
• The concept of wastage cannot be separated from efficiency
Definition
Education wastage means the inefficient use of educational
resources
• It includes dropouts, repeaters, non employment of school
leavers, brain drain, and inadequate utilization of teachers ..

Wastage
• Inadequate utilization of educational resources implies that
in a school system, the teachers posted to the school are
not properly utilized
• In this situation it is possible that some teachers do not
have classes to teach, or teach very little
• It is also possible that some buildings are lying idle

Causes of Wastage
• There are three categories of wastage depending on:
A. The nature of educational inputs
B. The nature of processing
C. The nature of output
A. Wastage due to the nature of Educational Inputs
• This type of wastage is due to the nature and ability of students,
nature and type of educational resources , the goals of the
educational system and the content of curriculum
• The manifestation is through the number of dropouts within the
educational system

Causes of Wastage
• In our case, most of the students drop out because of
•Poor health and death
•Truancy
•Financial difficulties
•Poverty
•Learning difficulties among students
•Parents wish
•Early pregnancy and marriages

Causes of Wastage
• The nature and types of educational resources also may
cause dropouts
1. Lack of teachers and basic facilities for education
• Primary and secondary schools in the rural areas lack
essential facilities
• The problem of science is due to inadequate resources for
science practical training
•Even the problem of mathematics in most cases is due to
the lack of mathematics teachers

Causes of Wastage
2. Nature and goals of the educational system may cause
wastage
•It could be noted that where the goals of the educational
system are practical oriented then the products would be
gainfully employed on graduation
•But where goals emphasise literacy and general education
the products would be unemployed
3. Nature of the content of the curriculum could cause
wastage.
• Some programs do not have big demand in the job market

Causes of Wastage
B. Wastage due to the Nature of Processing
• This has to do with the administrative system, the
examination system, or the certificate system
• The nature of the administration or management of the
school system could be faulty
•The administrator may be autocratic or high-handed
•The administrator may be laissez faire who allows
everything to go its own way without making effort to
correct
•The nature of the examination system may also be faulty

Causes of Wastage
C. Wastage due to the Nature of Output
• The graduates from the educational system may not
conform to the initial objectives
• The graduates may find it difficult to fit in the society
•e.g. somebody who studied in a non-computer literate
system may not fit well in a computer literate job market
• The graduates may not be fully employed
• The graduates may not have acquired the changes and
thoughts desired by the larger society

How to Reduce Educational Wastage
Addressing Causes of Health Problems:
•School heads and medical units of schools should monitor
students health so as to detect those who are sick and need
medical attention
Addressing Financial Inability to Pay Fees
• The Ministry of Education, Voluntary organisations, financial
institutions and wealthy individuals should award bursaries
and scholarships to students to prevent dropping out
because of financial problems

To Address Shortage or Nature of Educational Inputs
• The quality of teachers should be improved by making sure that
they go for periodic training
• Educational institutions should organize conferences, seminars
and workshops for serving teachers to assist them to improve
their teaching methods and techniques
• TIE should make sure that instructional materials are available
To Address the Nature of Output
• More emphasis should be put on science and technology
• The graduates should acquire behavior and thoughts desired by
the society to fit well

To address weaknesses in the Teaching/Learning Processes
•Appointing authorities should make sure that administrators
are qualified and competent
• Politics should not influence the appointment of
educational administrators of educational institutions
• Educational institutions should lay emphasis on continuous
assessment, and discourage the motive of certificate
acquisition

Effectiveness of Educational System
• Effectiveness is normally defined in terms of the
achievement of objectives
• An effective school is one in which students progress further
than might be expected from consideration of its intake, it
adds extra value to its students’ outcomes
•e.g. A Secondary school is said to have achieved its
objectives if its students perform well in the national
examination
• So an activity is performed effectively if it achieves the
objective it for which it was planned

Effectiveness of Educational System
• Some scholars argue that effective or ineffective schools are
especially effective or ineffective for the underprivileged
and the initially low achieving students
• The implication is that effective schools can overcome
powerful impact of social disadvantage
• The more effective schools tend to improve the attainment
of all students, but do not remove overall patterns of the
difference related to students backgrounds

Effective School Characteristics
• Effective schools have the following general factors:
1. Productive climate and culture
2. Focus on central learning skills
3. Appropriate monitoring
4. Practice oriented staff development
5. Professional leadership
6. Parental involvement
7. Effective instructional arrangements
8. High expectations

Processes of Effective School
Processes of Effective Leadership
• Being firm and purposeful
• Involving others in the process
• Exhibiting instructional leadership
• Frequent personnel monitoring
• Selecting and replacing staff
Processes of Effective Teaching
• Unity of purpose
• Consistency of practice
• Collaboration and collegiality

Processes of Effective School
Maintaining Focus on Learning
• Focus on academics
• Maximising school learning time
Producing a Positive School Culture
•Creating a shared vision
• Creating an orderly environment
• Emphasising positive reinforcement
Creating High and Appropriate expectations for all
• For students and for teachers

Economics of Education Part 2.pptx

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