Econ 14 Files
Econ 14 Lecture
Notes
Lecture 33: Economics of Education
 |
Economics 14 |
Lecture 33: Economics of Education
education as an investment in human capital
spending on education
higher education
school reform
Education as an Investment in Human Capital
Human capital is the skills, training, education, knowledge, and ability possessed by workers. Education and training are means of developing human capital.
Skilled workers are those with lots of human capital; unskilled workers possess little human capital. Skilled workers receive a higher wage than unskilled workers because (1) skilled workers have produce more valuable output than unskilled workers and (2) the supply of skilled workers is smaller than the supply of unskilled workers.
Spending on Education
Most of the benefits from education are private benefits: better educated workers receive higher wages. So why is K-12 education publicly funded?
external benefits of education:
- less likely to commit crime
- less likely to be on welfare
- more likely to be productive citizens who pay more in taxes than they collect in government benefits
- diversity in the classroom may foster social stability
Higher Education
Why is college so much more costly than elementary and secondary education?
College professors are paid more than elementary and secondary school teachers. College professors also teach less than elementary and secondary school teachers. Colleges have expensive libraries and laboratories.
School Reform
merit pay and tenure for teachers
- teachers tend to be paid solely on the basis of education and seniority
- cannot be fired after they have taught for a set number of years
- when pay is not based on performance, there is an incentive to do as little as possible
- tenure adds to the lack of performance incentives for older teachers
Teacher unions argue that teachers work to the best of their ability at all times and that letting principals hand out merit raises and fire bad teachers would foster cronyism. Besides, the pay of teachers is low in general.
 |
David A. Latzko Business and Economics Division Pennsylvania State University, York Campus office: 13 Main Classroom Building phone: (717) 771-4115 fax: (717) 771-4062 e-mail: web: www.yk.psu.edu/~dxl31 |
 |