Human Capital Investment and Employment

Human Capital Investment and Employment

            Human capital investment is a critical factor in determining the marginal labor productivity of an individual and his/her income; that is, the added productivity per hour of hiring an extra employee (Young, 2019). Education increases one’s employability, and the salary one can get from a specific job. College education, for instance, equips people with skills and knowledge vital for the delivery of work in diverse job specifications. Depending on the demand and supply of labor in different industries, education in various disciplines increases one’s probability of getting a job in that industry at different rates. A key concept in workforce employment is unemployment. The higher it is, the less likely that one will get a job in the desired field. Different forms of unemployment exist. The following are some of the main types.

Disguised unemployment occurs when one’s job does not lead to the complete utilization of skills and knowledge. In other words, the employee would have offered more into the position. This kind of unemployment leads to the loss of money that the worker would have earned if the job provided him/her with an opportunity to use their skills entirely.

At times, an employee spends time moving from one job to another. Such a move often results from a voluntary decision by the individual; he/she may move to look for an appointment with higher pay or for education to earn them a better job. Such constitutes frictional unemployment, which is naturally a part of the natural unemployment rate. Any economy can have frictional unemployment since both economic and personal factors contribute to its existence. In other words, it is part of the standard labor turnover (Amadeo, 2019)..

Technological advancement creates structural unemployment – a condition in which employers’ skill demands do not match those offered by workers. Many companies today, for instance, use data analytics and artificial intelligence to study trends of market and consumer behavior. Such functions require workers to possess skills in data analysis, which not all available workers possess. The lack of skills and knowledge determined by the employer constitutes involuntary, structural unemployment.

Some unemployment arises from cyclical economic movements in which an economy attains a peak and a trough at different instances. The United States has experienced this form several times, with the most recent taking place around the year 2008. This type of unemployment results from a decline in the aggregate demand and supply due to economic decisions such as financial deregulation. The government can prevent cyclical unemployment by choosing actions that prevent the fall of aggregate demand and supply. The year 2008 recession, for example, could have not occurred were it not for the failure by the government to regulate the mortgage industry.

Income Policies

Researchers provide a range of techniques through which an economy can reduce income inequalities. One of the ideas offered is an equitable education policy that provides all people with equal education opportunities and standards. Such a system would ensure that all people have fair access to employment opportunities. Some people argue that education would work better than unemployment relief policies, which do not eliminate the underlying factors (Amadeo, 2020). A second technique for controlling inequality is through equitable taxation. Under this measure, every citizen pays the tax that corresponds to his/her income. Other measures include the provision of subsidies that help more people to start and maintain businesses.

References

Amadeo, K. (2019). Frictional Unemployment with Examples, Causes, and Rates. Retrieved 7 April 2020, from https://www.thebalance.com/what-is-frictional-unemployment-examples-causes-rates-3305517

Amadeo, K. (2020). Income Inequality in America. Retrieved 7 April 2020, from https://www.thebalance.com/income-inequality-in-america-3306190

Young, J. (2019). Law of Diminishing Marginal Productivity. Retrieved 7 April 2020, from https://www.investopedia.com/terms/l/law-diminishing-marginal-productivity.asp