Human capital in the form of skills and education can influence an employee's reservation wage. Employees with greater human capital through investments in training and education can command higher wages in the market. For example, sewing machine operators in the garment industry who are skilled in operating machinery can set a higher reservation wage since they possess an in-demand skill. Technically skilled workers in Bangladesh also tend to reserve higher wages due to their human capital. In short, human capital acquired through education and training allows workers to negotiate higher wages and set a minimum level they will accept for employment.

1. Submitted By
Tahamina Akther
ID#: 2021010004068
Semester: Spring 2021
Email: 2021010004068@seu.edu.bd
Question: Briefly explain how Human Capital can influence Reservation wage? Give one
example (within 200 words). In this connection you can take help from page number: 170
(EXHIBIT 7.7) & 171 of our book.
Answer: From wage reservation theory & Human capital theory we can say that earnings in the
employment market depend upon the employees’ information and skills.
Investments in human capital depend upon the costs of acquiring the skills and the returns that are
expected from the investment.
So we can say it that employee/ human who has the capital (skills & education) can set his wage
level , or else he can set his/er wage level which is denoted as reservation of wage.
Example : In RMG industry if we see ,Sewing Machine operators can set their wage as he has
the skills of operating machines. So job seekers(operators) do not accept wages offered by a
garments factory which he/she already determine as wages.Also we see in Bangladesh technically
skilled people set their reserve their wages.
SOUTHEAST UNIVERSITY
Southeast Business School
Class Test-1 (Assignment Based)
Semester: Summer 2021
Course Title: Compensation Management Course Code: HRM 697
Program: MBA (Friday), Section 01
Date: 6th
September 2021