Two Main Components Consisting Of The Age Profile of Earnings and Social Versus Private Benefits

The human capital model has multiple layers to it and it may be helpful to first decompose it into its two main components, which consist of the age-earning profile and the social versus private benefit. The first part of the HCM shows the relationship between years of educational attainment and earnings of those who have completed certain years of schooling (usually until university level) versus those who have entered the labor force with a high school degree or less. It shows that those who choose to go through with university and pursue a degree first face negative earnings (consisting of direct and indirect costs), but then witness a sharp increase in income, and their income continues to increase, higher than those with less education. The fact that those with higher education receive more income is not always true, depending on the economy and its structure, thus it is beneficial to look at the expenditure of the government on education and its consequences in terms of unemployment, earnings, and economic growth.

The MENA region includes many developing countries that may have similarities when it comes to dysfunctions in the economy. Egypt in particular presents itself as a good example for the following analysis. The unemployment rate has risen from 10% to 12% from 2010 to 2017 and yet around 600,000 jobs remain vacant. Furthermore, information on expenditure on tertiary education by the government has shown a decline from a maximum of 5.5% of total GDP in the 1980s to around 3.8% in 2010. This expenditure is in form of subsidies that make most public schools and universities free, giving access to all segments of society. This in turn is a social cost, to which the benefits are unclear. Superficially, the fact that it is accessible to everyone is perceived as a major benefit as it gives equal chances for everyone to improve their life standards and carve a career path for themselves.

In reality, there is more to be reckoned with. First, the existence of private, more advanced and modern private universities takes away of that benefit because of the disparities in skills and opportunities it creates. Second, the fact that these institutions are free gives less incentive for investment in new technologies and facilities for the students, since it would not add any revenue. To elaborate more on this point, the quality of education in Egypt is known for being less concerned with understanding and more with memorizing. This means that the skills required to compete in a global market are not realized and that the system is obsolete compared to the rest of the developed world. That somewhat explains why there is high unemployment and yet over half a million vacant jobs waiting to be filled. It can be drawn out of these facts that higher education may not be the gateway to future higher earnings, as the theory of the HCM proposes, but rather the opposite.

Order custom essay Two Main Components Consisting Of The Age Profile of Earnings and Social Versus Private Benefits with free plagiarism report

450+ experts on 30 subjects Starting from 3 hours delivery

Get Essay Help

Looking at the unemployment rates of those with intermediate education and university levels, we see that they represent almost 80% of the unemployed. These high unemployment rates are a direct cause of the “Brain drain” phenomena, which causes the most educated and qualified to leave the country in hopes to realize their aspirations in terms of earnings and career goals. The idea that they need to leave the country is directly related to the need to safeguard themselves by seeking the highest qualification possible to maximize private benefit -which is not synonymous with the social benefit that diminishes because of internal malfunctions in the educational systems. The notion that education should be free and accessible to all backfires on those who most need it to escape poverty traps and only leaves rooms to those who can afford it. Additionally, those with less financial and social capital, which comprise are a large segment of the economy, are disincentivized to even pursue education, since the indirect forgone cost of labor are much higher than future earnings (high discount rate).

Moving to the more developed, high-income areas of MENA, such as the Gulf countries, their incentive behind increasing and improving the facilities of higher education are not quite aimed at increasing earnings, but rather at having a highly educated and diverse post-oil society. This is an interesting point that goes beyond the human capital model and shows a different perspective of how the term “earnings” can be defined. The governments are more focused on mobilizing society through education, since income from oil, although high, is finite. The benefit adhering from this large investment also is at risk of diminishing, since the Gulf societies are not mainly composed of nationals. Thus it becomes a question of who ultimately benefits. As a primary analysis though, one can assume that a region with a need of Plan B for when oil goes extinct, this investment seems to be the plausible thing to do, especially for the future generations

It is interesting to note that countries within the same region have very distinct characteristics and economic structures that do not allow the predictions and premises of the HCM to prevail. In the case of Egypt, additional educational attainment seems to backfire on the majority and only benefit the few, as if the society and the individual are two unrelated things going in different directions. The Gulf countries on the other hand are at an advantage of an already relatively high income and thus their investment plans translating into a social benefit in a post-oil era have both the social and private benefit marching in the same direction. On a micro level , the decisions of the individuals to pursue additional education as opposed to working are meaningful. The results the model proposes on the other hand are not be generalized for the examples mentioned above, which is fairly valid since all proof presented is a collection of historic data and not predictions for the future.

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

Check my essay Hire Writer