Key questions

• What is human capital, and why are people’s education levels linked closely to their performance at work?

• Why is a nation’s prosperity so closely related to how well educated and skilled its workers are?

• Are narrow, specialized skills better than general ones, and how can we ensure these fit with people’s aspirations and the needs of employers?

• Should those who benefit most from higher education pay for it themselves?

Summary

It is a fact that better-educated societies tend to be richer and happier. Highly skilled and educated workers are simply more productive and efficient, benefiting the economy and society in general, as well as leading more fulfilling and financially rewarding careers themselves. Yet there can still be problems supplying the right kinds of skills, and this presents a dilemma for governments and employers. Education and training are expensive, so who should pay for it: the individuals who stand to directly benefit from it, their employers, or society at large? Furthermore, technological change is profoundly affecting the world of work and putting a premium on workforces with ever more specialized skills. Governments are increasingly realizing the importance of research and innovation in universities and encouraging entrepreneurship, so should learning and education be geared towards the interests and needs of employers?

Main topics and theories covered

The division of labour and the gains from specialization; skills and productivity; the skills of the future; the economics of innovation.

The economics of education

Philosophers and poets have long extolled the value of learning. Now economists are getting in on the act, pointing to the substantial material benefits that stem from having a good education system and getting the right number of people through it. And, for many parents in developed countries, a good schooling for their children, followed hopefully by university, has become something of an obsession. Likewise, governments nervously eye league tables of educational attainment and steal policies from countries at the top. Yet education is expensive, time-consuming and difficult to get right. We have all probably been served enough coffee by recent graduates in shops and cafes to know that its benefits are long-term and uncertain.