Education and qualifications as skills

Abstract

The chapter begins with an introduction of the basic economic model of investment in human capital and the subsequent literature measuring economic returns to education. This is followed in the second section by a discussion of two theories that question the human capital link between education and labour market skills. The first argues that education is a device to signal to potential employers that the individual has high natural abilities whilst the second argues that education sorts workers into different labour markets segmented by wider socio-economic forces. Section 3 considers two more recent developments. The first involves sequential analysis in which the decision-maker learns more about his or her abilities and opportunities as a result of participating in education whilst the second uses a 'skill ecosystem' metaphor to express how educational institutions, students, employers, and policy-makers can combine to sustain a high skills, high-wage equilibrium or reinforce a low skills, low wage equilibrium. The chapter finishes with a brief conclusion in the fourth section.