A range of economic issues have been analyzed by different economists and most of these issues are related to economic growth, yet human capital produces personal economic growth which eventually corresponds to national or social aggregates. Human capital plays a paramount role in enhancing personal, social and national economic growth. Mincer (1981) puts personal income contribution at the center of economic growth analysis. Different approaches have been used to analyze economic issues that are important in life. Mincer (1981) foresaw the fact that human capital earnings function previously seen as irrelevant would become the cornerstone of modern labor research and important tool in economic issue analysis. This paper seeks to provide a detailed evaluation of the approaches to economic issue analysis.
Evaluation of Approach to Analyzing an Economic Issue
Mincer played a paramount role in revolutionizing the economics by integrating empirical tests with theories of economics as he helped come up with concepts of human capital. Most economic issues are linked to human capital as a key economic concept in the current society despite the fact that it was not realized until two centuries ago (Teixeira. 2007, p. 13).
At the national level, it is vital to view human capital as a primary factor of production when it works in coordination to the national physical capital (Mincer, 1981, 92). This means that the contribution of human capital to the economic growth is greater when the volume of physical capital is large and vice versa is true. Therefore, in production systems with more labor, the contribution of this human capital is very significant. Mincer (2017) further provides that the framework of a complete production function indicates that human capital growth is both a consequence and a condition of national economic growth.
Most analytical approaches are focused on depicting human capital activities as merely embodiment and transmission in people of existing knowledge but this is not the case. Human capital activities also encompass the production of new skills and knowledge which brings about innovation and technical change that propels all national production factors. An effective and detailed analysis of economic issues should cover all aspects that encompass and affect human capital activities. The latter function of human capital as Mincer (2017) stipulates generates global economic growth no matter the differences that might occur as a result of their geographical locus.
Economic growth encounters a wide range of issues and most of these issues are pioneered to human capital concepts even though they are analyzed independently. Most economists and researchers choose to analyze human labor concepts differently yet they are similar. The fact is that these concepts are the same and when it comes to economic problems, they should be used to apply to the same economic problem; economic growth at macro-level and at the micro-level as individual economic growth. Mincer (1981) categorized human capital analysis in two key categories; human capital and personal economic growth and human capital and national economic growth.
It is important to analyze human capital at a personal level and their contribution to economic growth independently because individuals differ in acquired and inherent abilities. The human capital analysis focuses mainly on acquired capacities developed through both formal and informal learning at school and at home respectively. It is also acquired through training, work experience and mobility that occur in the labor market (Propper " Smith 2008, 124).
The central idea that is associated with the theory of human capital is that whether deliberate or not, the human labor activities involve costs and benefits, and as such, can be analyzed for making economic decisions for either public or private purposes. The costs associated with human capital involve direct earnings and expenses or consumptions that students, trainees, and workers that engage in the mobility of labor forego (Teixeira. 2007, p. 13). Provided that labor capital activities benefit production and consumption in the future, the costs incurred in the acquisition of human skills and knowledge should be regarded as an act of investment.
Investments in the mobility of labor market such as; job training, job choice and work effort occur across the working life, while investments in knowledge and skill acquisition and other labor capital maintenance continue throughout an individual’s life. According to Mincer (1981) the key aspects to consider in the analysis include;
a. School Education
Human capital analysts initially exclusively focused on the investment made in school education. Since the time of Adam Smith, economists recognize the importance of education as a social or private investment yet only recently; economists have come up with the statistical and conceptual examination of costs, return and return rates to education evidence (Propper " Smith 2008, 124).
b. Post-school Human Capital Investment
Human capital investment does not cease at the time an individual terminates school. The educated workers earn higher but the fact is that these earnings are different and thus, they have to be analyzed independently.
c. Preschool Investments and Women's Education
The inherited abilities are important in the analysis of the human capital stock, yet the there is a fine line between heredity and environment and thus, even family members end up being affected by environment thus, should be analyzed independently (Teixeira 2007, p. 13). Researchers have found that intellectual and physical deficiency depicted by infants in poor environmental conditions can be avoided by changing their environment and improving nutrition and their mothers’ at and after childbirth (Propper " Smith 2008, 124). On the same hand, subsequent child care involvements are regarded as an investment when the individual grows to develop better adult health and also when they end up having greater productivity as adult workers.
Human capital and national economic growth, on the other hand, is analyzed on the basis of; human capital as a factor of production, human capital and technology and lastly, human capital and population. According to Mincer (1981) with all these aspects taken into consideration during analysis of economic issues, better information can be achieved.
Conclusion
Human capital activities have direct effects economic growth. Patterns of “demographic transition” are congruent with both national and global economic growth. Human capital is regarded as a link that enters economic demographic changes’ cause and effects. It is for this reason that it is advisable for economists to include all aspects of human capital analysis in the approach they use to analyze economic issues. They should consider human capital both on micro-level; human capital and personal economic growth and on the macroeconomic level; human capital and national economic growth. With both micro and macro-levels considered and all their concepts applied, economic issue analysis will never go wrong.
References
Le Grand: J., Propper, C " S. Smith (2008) The Economics of Social Problems. Chapter 3, Palgrave Macmillan.
Mincer, J. (1981) ‘Human Capital and Economic Growth’, NBER Working Paper Number 803. (download at http://www.nber.org/papers/w0803). Published in Economics of Education Review (1984), volume 3(3), pp 195-205.
Teixeira. P. N. (2007) Jacob Mincer: A Founding Father of Modem Labor Economics, Chapter 3, Oxford University Press.
