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The dynamics of human capital and the world of work

Towards a common market in contemporary tertiary education

Author - Aidan Kenny


 


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6 Organisation of Economic Cooperation and Development

The OECD similarly has provided policy makers with numerous reports calling for reform and modernisation of the tertiary sector. Investment in education and training is perceived as crucial to economic development in the new global economy as reliance on natural resources, agriculture and manufacturing declines, while the services and technologies needed to feed unfettered consumerism begin to play a dominant role in economic growth. According to Donald Johnston, Secretary General of the OECD

Knowledge, skills and competences constitute a vital asset in supporting economic growth and reducing social inequality in OECD countries. This asset, which is often referred to as human capital, has been identified as one key factor in combating high and persistent unemployment and the problems of low pay and poverty. As we move into knowledge-based economies the importance of human capital becomes even more significant than ever.

(OECD 1998: 3)

The OECD (2008) argues that increased investment in education and training throughout the lifespan (lifelong learning) is a necessity to stimulate economic growth due to several factors:

  • Globalisation internationalisation of national economies, reduction in trade restrictions, advances in technology, cheaper accessible transport, multi-nationals operating on a international stage, mobility of capital.
  • Change in demographics ageing populations, lower birth rates, living longer, population mobility.
  • ICT digital revolution, significant increase in ICT take up, increase in broadband and internet connectivity, increase in web-based activities.
  • World of work working fewer hours, more temporary work, insecure employment, shorter careers, increased female participation.

The OECD notes that investment in education and training makes a positive contribution towards economic development: ‘if the average time spent in education by a population rises by one year, the economic output per head of population should grow by between 4% to 6% in the long run’ (Keeley 2007: 34). The return to the individual is also substantial: graduates are more likely to have above average earnings compared to those that only hold secondary school qualifications or lower. According to the OECD: ‘There is a strong identifiable relationship between human capital growth and the growth not just in output but also in labour productivity’ (1998: 65). Consequently the higher the level of human capital the greater the potential productivity gains and economic growth.

In the current knowledge-driven, globalised environment there is increased competition between nation states to attract high-level human capital, leading to both the ‘brain drain’ and ‘brain gain’ analysis. As such human capital is perceived as a valuable resource, subject to the competitive practices of the free market. This can have drastic effects on developing countries that lose the potential benefits that might arise from the human capital of some of their brightest citizens. This is one of the risks of investment in human capital that developing countries face, humans are not like other forms of tangible capital (money, resources, land, etc.), human capital is intrinsically located in the person, who can decide how and where to apply their knowledge skills and competence.


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