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marriageandhumancapitalinvestment.pptxMarriage and human capital investment
ECON 339: marriage and human capital investment
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What is human capital?
“Schooling, a computer training course, expenditures on medical care, and lectures on the virtues of punctuality and honesty are also capital. That is because they raise earnings, improve health, or add to a person’s good habits over much of his lifetime. Therefore, economists regard expenditures on education, training, medical care, and so on as investments in human capital. They are called human capital because people cannot be separated from their knowledge, skills, health, or values in the way they can be separated from their financial and physical assets.”
Becker, http :// www.econlib.org/library/Enc/HumanCapital.html
(Library of Economics and Liberty)
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“Human capital is represented by the aggregation of investments in activities, such as education, health, on-the-job training and migration that enhance an individual’s productivity in the labour market.4 More recently, this concept has been extended to include non-market activities.5 For the purpose of this paper, we define human capital as the aggregation of the innate abilities and the knowledge and skills that individuals acquire and develop throughout their lifetime.”
Laroche*, Mérette, and Ruggeri (1998), http :// www.fin.gc.ca/pub/pdfs/wp98-01e.pdf
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Text: no definition, but equates human capital with skills
Focus in economics for a long time was on cognitive skills, and how those affected earnings in labour market
More recently, focus has turned to non-cognitive skills
especially the “big five”personality traits of extraversion, agreeableness, openness, conscientiousness, and neuroticism.
http://psychology.about.com/od/personalitydevelopment/a/bigfive.htm
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Why might there be gender differences in human capital acquisition?
1. Laws or social norms dictating differences:
- admission to university, or allowed to graduate from university (Oxford, 1920)
- views of women’s sensitivity, emotional stability, ability for logical reasoning….
…….
2. choices:
- by families: different treatment of sons and daughters
- by individuals: different fields of study
- different levels of education
- different majors
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Percentage of women among university graduates, by field of study, 1992 and 2008
Total – Instructional programs 56.4 60.0
Architecture, engineering and related services 17.5 22.2
Mathematics, computer and information sciences 35.2 30.4
Personal, protective and transportation services 18.2 44.9
Business, management and public administration 51.4 53.0
Agriculture, natural resources and conservation 36.7 55.9
Physical and life sciences, and technologies 45.6 57.3
Humanities 63.7 64.3
Visual and performing arts and communication technology 65.9 66.5
Social and behavioural sciences, law 59.3 67.0
Other instructional programs 73.6 69.4
Education 72.6 76.1
Health, parks, recreation and fitness 68.0 77.0
Sources: Statistics Canada, Postsecondary Student Information System, 1992 and 2008.
http://www.swc-cfc.gc.ca/rc-cr/stat/wic-fac-2012/glance-statistical-eng.pdf
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Market return to human capital?
Data on gender wage gap for full-time employees OECD* countries
Gender wage gap = [median male wage – median female wage]/median male wage]
http:// www.oecd.org/gender/data/genderwagegap.htm
Wag gap varies across occupations
*OECD = The Organisation for Economic Co-operation and Development; 34 countries; founded in 1961
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■ The gender wage gap is complex and results from a variety of factors.
■ traditional “women’s work” pays less than traditional “men’s work.”
■ most women workers are employed in lower-wage occupations and lower-paid industries. Women work in a narrower range of occupations than men and have high representation in the 20 lowest-paid occupations.
■ more women than men work part-time.[x] About 70% of part-time workers in 2013 were women, a proportion that has remained steady for three decades.[xi] Women working part-time or temporary jobs are much less likely to receive promotions and training than those in full-time jobs.[xii]
■ A large portion of the wage gap remains unexplained and is partly due to discrimination. An estimated 10-15% of the wage gap is attributed to gender-based wage discrimination.[xiii] Wage discrimination and employment discrimination refer to different things.
http://www.canadianwomen.org/facts-about-the-gender-wage-gap-in-canada
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Optimal investment in human capital with high return in market?
Will depend on expectations about time spent in market work.
What raises wages/income? human capital
– through education or experience
Given education, wages typically increase over time in market – so, with age – at a decreasing rate.
So: if women spend less time in the market than men, their wages will be lower
→return to any given level of human capital lower for women than men…..on average.
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Suppose men and women had same education, same starting salary at age 20, but women out of labour force ages 30-40 (to raise kids) and could start again with wages when left.
Annual earnings earnings trajectory men:
earnings trajectory women
20 retirement age
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Consequences of time out of labour force?
1. Lower lifetime market earnings for women
→return to human capital lower
2. Incentive to invest in human capital for market lower for women than for men, on average
3. Given education costly, a woman who anticipates taking time out of the market will rationally choose to spend less to acquire market human capital than will a man who anticipates staying in market.
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Summary?
If women anticipate working less time in the market than men, then they will rationally invest in less market human capital.
If women have lower levels of human capital that the market values, and they are expected to work less, then they will be less valuable for some firms and they will be offered lower wages/fewer jobs.
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If men and women are offered different wages for the same jobs, then men may have an absolute advantage in the market sector. Does this mean they also have a comparative advantage, and hence women are more suited to homework than their husbands are?
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Market return to marriage?
For men, there seems to be a wage premium for marriage: married men have higher incomes than otherwise identical single men.
Why?
i) marriage makes men more productive in the market: more reliable, less burdened by homework responsibilities (laundry, social life…)? Or
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ii) men who have higher market productivity are also more attractive in the marriage market, and are more likely to marry – either because of higher potential earnings, or some third quality that is positively correlated with both market productivity and marriage success.
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Evidence?
Mixed, but support for specialization in marriage as causal.
Possible related evidence on the lesbian wage premium:
Wages of never-married lesbians are higher than those of heterosexual women or previously married lesbians. Argument is that never-married lesbians less likely to leave market for marriage, and hence have greater investments in market human capital. Also, some evidence that in lesbian couples there is less specialization.
Daneshvary et al (2009) “Previous Marriage and the Lesbian Wage Premium”, Industrial Relations A Journal of Economy and Society (Impact Factor: 1.48). 06/2009; 48(3):432 - 453. DOI: 10.1111/j.1468-232X.2009.00567.x
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