The process of forming human capital owing to education.
Macris, Maria ; Man, Mariana ; Boca Rakos, Ileana Sorina 等
Abstract: The paper approaches an extremely interesting matter
regarding the evolution of the process of forming human capital owing to the educational system. In order to carry out this study we have started
from a thorough documentation concerning the leading part played by
human capital in society, in general, and at an educational level, in
particular. The analysis of the approached issue has emphasized certain
aspects regarding the evolution of the complex process of forming human
capital owing to education.
Key words: capital, formation, education, investment
1. INTRODUCTION
Human capital and education in present-day economy rely upon
settling the knowledge stage of the research field. Today's
economies consider the investments in education and in employees'
formation at least as important as patrimony investments. We live in an
information-based economy where technology and production methods
rapidly and constantly change. The formation of human capital should be
approached at least according to the manner physical capital is analyzed
while educational reform should be directed towards the notion the
economists call "capital formation"--although the formation of
the human capital is sometimes forgotten. There are quite a lot of
specialized works in the field so that the approach we have in view
might also interest other specialists.
In the future, the approach may be developed by taking into account
the new economic and social context affected by the economic world
crisis that requires a special attention given to the development of
human capital owing to education with a view of matching the demands of
society and labour market.
2. THE PROCESS OF FORMING HUMAN CAPITAL OWING TO EDUCATION
The process of acquiring and using certain productive goods such as
lands, buildings or equipments is frequently called "capital
formation". The formation of capital is a primary means of
increasing labour productivity. Basically, it represents, from the point
of view of the amount, the result determined by each employee while the
increase of labour productivity is synonymous with higher salaries and
economic prosperity. When a person or a company acquires a
"real" good, such as a new device in order to determine future
incomes, they expect the investment to be efficient. Nevertheless, a
minimum income determined by such an investment is required. This
minimum income shows anticipated inflation and various other risks
associated with the investment. Such a minimum income is often called
"normal" income or "normal" profit; any other
income, besides the previously mentioned one, is called
"economic" profit.
No product created itself so far nor did it create another one
beginning with conception up to its complete achievement. Let's
consider, for instance, a car: inventive people are required in order to
imagine what a new car might do, how it can be elaborated, manufactured,
tested, and, finally, used. These innovators and creators have several
common traits, and one of them regards a certain degree of education.
Once the car has been built and is ready to be used, other people are
required to do this thing. These people too need a certain degree of
education; they all embody the "formation of human capital".
Education plays an essential part in forming "human
capital" and in determining an individual's chance from an
economic perspective. Business environments, of course, display a lot of
stories connected with people who, although having attended only high
schools or even less, have had huge success and made extraordinary
fortunes. At the same time, in certain countries, economy witnesses a
lot of persons who, although having their PhDs, earn financially small
wages. Nevertheless, leaving aside such exceptions, the more persons are
educated the higher the chances and economic success.
This is not only a theoretical observation; it may also have
important practical consequences upon economic growth. Certain
governmental policies, for instance the fiscal one, may discourage
individuals in their attempt to attend higher levels of education;
accordingly, the productive capacity of national labour force decreases.
Education generally determines the growth of individuals'
anticipated incomes during their life, being perceived as a long term
effort. Nevertheless, in case individuals' taxes are higher as
their incomes increase, fiscal policy discourages them to use their time
and required resources in order to get a higher level of education. High
taxes punish success and discourage people to act with a view of getting
it, no matter whether the required actions represent more work or a
higher level of education. In other words, in case taxes grow with
incomes, they discourage the formation of human capital according to the
same manner they discourage work, savings or investments in physical
capital.
The formation of human capital can also be discouraged through
other means which are less known or understood. For instance, within
present-day economy, most families understand the importance of higher
education. In case educational effort is going to decrease, it will
mostly discourage the families having modest incomes rather than the
well-offs. The families having higher incomes are able to bear to a
larger extent the increased costs of higher education than the families
with lower incomes.
In quite a lot of cases, governments have roughly dealt with the
formation of human capital as compared with the formation of physical
capital. An essential feature of individuals as producers of economic
value is given by the sum of their capacities, experience, and
knowledge. As individuals, we develop our human capital owing to life
experience, professional training, and education; the quality and amount
of our human capital determine to a large extent our capacity to
contribute to the development of economy or to our own earnings
(http://econlib.org/LIBRARY/CEE Category.html, 2010).
For generations, families have made sacrifices in order to help
certain of their children study more; they accordingly considered that
they were offering their children a better life. Sometimes this is only
a belief in the intrinsic higher quality of the life of an educated
person. Most often, parents have understood that a higher level of
education determines increased opportunities of building a career, of
getting higher incomes, and of gaining financial safety.
Education is important during all good and stable periods as it is
more probable that an individual that might have success in several
fields is ready to direct oneself towards those activities which are
mostly demanded on labour market. And when economy does not function
properly, such a higher level of mobility regarding one's job
allows the individual to adapt in case circumstances are not favourable
(Bedrule-Grigoruta, 2006). Economists have tried to determine an
anticipated efficiency of the investment in an individual's
education. Accordingly, considering anticipated costs (study fees) and
anticipated incomes, they have focused upon the calculation of
efficiency rate which results out of the income differences of various
levels of education. Specialized works have reached an important
conclusion, namely that "education has a more important effect upon
the macro level than upon the micro one" (Heckman & Klenow,
1998).
Education brings society an extra-benefit which is not manifest at
the individual level. The formation of human capital is very important
for an individual's own capacity to contribute to the development
of economy and to earn more; nevertheless, one should not ignore the
social consequences of a population having a higher level of education.
Education brings society numberless benefits, a lot of them having
important effects upon the manner economy, companies, and institutions
function. A higher level of education may be associated with stability.
Stable families properly evaluate the consequences of education than
disorganized families. The more a people are educated the more its
communities are stable as confidence and self-consciousness encourage a
higher respect for human rights.
In case of Romania, one can state several unhappy findings
connected with the stage of education benefits within society's
development. One of the most evident gains of democracy is the fact that
it offers its citizens the right and capacity to administrate their own
life and education, beginning with a certain level, without State's
intervention. Yet, one of the most important dangers of democracy shows
itself when individuals continually exert these rights and capacities
and ignore the external events that influence their lives and the future
of the nation. The relative easiness of getting higher education
diplomas or even doctoral studies ones, during a certain period of
economy, as has happened in Romania or in other East European countries,
is not going to determine the expected effects at a macro-economic
level, or at the practical level of companies' or
institutions' behaviour. At its turn, democracy, with its respect
for human rights--for instance, the right to education--is the most
natural political system capable to support an economy based upon flee market.
In case of Romania, among the elements that characterize an
educational system, one can enumerate: transparency, simplicity,
difficulty in administering the funds required by "education
investments" as well as the improper treatment of the educational
staff as compared with other social categories. On the other hand, the
teaching staff and the organisms representing them when facing
educational policies are concerned by the degradation of salaries and
work conditions as well as by their marginalized position in adopting
the decisions regarding individuals' inclusion within educational
systems (Pirvu & Macris 2010). Collective negotiations concerning
certain components of the educational system (salaries, work conditions,
etc.) are rare and inexistent in certain countries; the argument for
such attitudes is the decreased level of the public field budget for
education as compared with that of the highly developed countries. The
strikes and protests of the educators or of those being educated
determine governments to admit the need of radical reforms of the
present educational systems at the disposal of the citizens with a view
of forming the future human capital.
An important preoccupation of world-wide governments consists in
adapting education and individuals' formation to the needs of
economy through displaying a real necessary relation between education
and labour market. This correlation is also shared by the companies and
institutions interested in employing as they are sensitive to the
capacity of the educational system to offer their potential employees
enough abilities and skills that make them ready to face the challenges
of global economy and competitors.
The State contributes to the carrying out of an investment process
in education owing to giving credits to students or to paying certain
non-taxable scholarships. In the economic field, the funds for research
and development, as percent of CDP, are quite small while investments in
education are also reduced. Within a flee and globalized market and
although they are better developed and richer than the Romanians, the
English, Irish, Finish or even Taiwanese have found out that they do not
possess enough public funds so that they can provide the sums required
by education with a view of carrying out its part as a main factor of
economic growth. The solution they have found out is "the
public-private partnership" understood according to two different
aspects: the first one is that of encouraging private education while
the second one is that of encouraging the system of sponsorships for
education made by private natural or juridical persons.
3. CONCLUSION
Investments in the development of human capital owing to education
and training are required in order to strengthen the system's
capacity to face the rapid changes in society and labour market.
Nowadays, Romania has to rapidly carry out its goal regarding the
investment in human capital; and to do this, it is necessary to go
through several stages, not only conceptual, but of mentality, as
follows:
* Understanding the fact that, without a rapid and deep progress of
the educational system, we are going to have neither economic growth nor
the increase of the living standard no matter how much money the
European Union or any other international institution would allocate us.
* Changing the management mentality of the Ministry of Education,
Research, Youth, and Sports with a view of a real re-organizing and
reforming of the whole educational system.
* Changing the mentality of the citizens, of the business men and
women, parents and children, understanding that investments in education
represent the most important future objective.
The formation of human capital owing to investment educational
processes is a global responsibility of all individuals and governments.
4. REFERENCES
Becker, G.S. (2011). Human Capital, Available from:
http://econlib.org/LIBRARY/CEECategory.html. Accessed: 27.02.2011
Bedrule-Grigoruta, M. (2006). Capitalul uman si investitia in
educatie, Scientific Annals of "Alexandru loan Cuza"
University of Iasi, Economic Sciences, Vol. 52-53, ISSN 0379-7864, Iasi
Heckman, J. & Klenow, P. (1998). Human Capital Policy, in
Policies to Promote Capital Formation, M. Boskin Editor, Hoover
Institute
Pirvu, Gh. & Macris, A. (2010). Economia contemporana a
Romaniei, Politica de integrate europena in domeniul educatiei, Vol. 9,
Universitaria Publishing House, ISBN 978-606-510-797-7, Craiova
