SOCI 235 Lecture Notes - Lecture 19: Cegep, American Medical Association, Rent-Seeking
8 Jun 2018
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SOCI 235 – Technology and Society
Education and Training for Technological Change – Nov. 22nd
Human Capital Theory – analyses of education and training are under this
• Discussions of education and training are mainly framed in terms of this theory
• Capital – increases the productivity of labour & requires investment
o Productivity increase requires investment
o Iestet does’t orally pay off istataeously, this is iportat eause
the investment is influenced by time-lapse
• Employee skill → increases productivity of labour, can be upgraded through investment
in education and training
o Cost associated with this
o Pay-off – i.e. increases in worker productivity
• Core idea – we have an investment and a return
o But there is a gap between these two things
• Theory states that:
o 1. Education and training increase labour and productivity
o 2. Education and training require investment expenditures
Supply – supply of people with requisite skills
Demand – this can vary as well
• What happened – the demand for people with particular skills fell
Theory of wages → wages tend to be associated with employee productivity
• Personal productivity enhancing investment in education and training are likely to lead
to higher wages
Evidence supporting these theories:
• Strong association between education and earnings
o This evidence could sometimes be produced via rent seeking through
occupational licensure
▪ Occupational and professional organization can lobby to impose
educational requirements, i.e. gov. prohibits practice in an occupation
unless they meet the specific requirements, which could include
educational attainment
▪ US – range of occupations requiring licenses to practice have grown
rapidly
▪ Quebec – secondary schools teachers must do a 4 year B.Ed. program
even if they already have a B.A.
▪ Milton Freedman – argued that in the 1930s, licensure was used by
American Medical Association to limit competition from immigrating
German doctors
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o General point – requiring education qualifications impose a cost on would-be
entrants into an occupation – this reduces supply
• Cross-nationally, there is an association between level of GDP per capita and
enrolments in educational institutions
o Critique – this does’t settle the issue of ausatio; populatios of outries
could simply be choosing to consume more education as the country gets richer
Across OECD Countries:
• Upwards trend in enrolment in education, particularly in post-secondary education
If we assume human capital theory is correct/useful – who should pay for education training?
• Education may have benefits other than increasing productivity
• Effects of productivity enhancement come in the future, cost of education will be
incurred before we get the income that would allow us to pay for said education
• Problem of up-front cost and future income – dealt with through capital markets
o Capital markets are imperfect:
▪ People borrowing to finance an education will normally have collateral to
secure the loan
▪ Precise capability of a borrow is hard to determine
▪ Financial institutions have difficulty predicting the size of the future
revenue stream that will be generated by education or training because
they a’t e sure ho ell a orroer ill perfor i a progra
o While private institutions make loans that can be used for education or training,
with no government presence they would not loan as much as would be socially
optimal
This leaves us with several questions:
1. What form of assistance should the government take?
a. Covering education and training costs?
b. Running their own loan program?
c. Guaranteeing loans are made by private financial institutions?
2. What extent should government involvement vary across levels and forms of education
and training?
a. i.e. primary, secondary, trades, community college, university at a B.A., masters,
or PhD level?
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Education and training for technological change nov. 22nd. Education and training increase labour and productivity: 2. Supply supply of people with requisite skills. Demand this can vary as well: what happened the demand for people with particular skills fell. Theory of wages wages tend to be associated with employee productivity: personal productivity enhancing investment in education and training are likely to lead to higher wages. American medical association to limit competition from immigrating. Across oecd countries: upwards trend in enrolment in education, particularly in post-secondary education. Primary and secondary education largest part of the education system, often paid for by the government. Issues is which method produces better cognitive skills in lower half of cognitive distribution. 2011 64% of population aged 25-64 had completed post-secondary education programs: compared to other countries relatively high, others are mostly in the 40s and 30s.
