1 Human Capital Andri Wijanarko,SE,ME Labor Economics Series

2 Chinese Proverb Give a man a fish and you feed him for one day Teach a man to fish and you feed him for a lifetime

3 Pendidikan Lulus SMU SD SMPSMU ? Mencari jenjang pendidikan lebih tinggi

4 Pasca SMU Menikah Bekerja Kuliah

5 Mengapa Kuliah ? Disuruh orang tua Alasan Ekspektasi pendapatan Ikut-ikutan

6 Basic Concept

7 Human Capital Definition acquired skills to entering labor market. •Unique set of abilities and acquired skills Assumption •Maximizes the present value of lifetime earnings

8 Investment Ehrenberg &Smith : •Entail an initial cost that one hopes to recoup over some periode of time

9 Three Major kinds of Labor Market Investment Ehrenberg &Smith : 1.Education and Training 2.Migration 3.Search for the new jobs

10 Three Major kinds of Labor Market Investment All three investment involve an initial cost, and all three are made in the hope and expectation that the investment will pay off well into the future

11 Three Major kinds of Labor Market Investment The Knowledge and Skills a worker has generate a certain stock of productive capital

12 Three Major kinds of Labor Market Investment Job search and Migration are activities that incerase the value of one’s human capital by ncreasing the price (wage) received for a given stock of skills

13 Three Stages of Human Capital Investment A. Early Childhood The acquisition of human capital is largerly determined by decisions of others : • Parental resources and guidances • Cultural environment • Early schooling experiences

14 Three Stages of Human Capital Investment B. Teenagers and young adult • Full time students in a high school, college or vocational training program

15 Three Stages of Human Capital Investment C. Entering labor market • On-the-job training • Formal traning program

16 HIGHEST GRADE COMPLETED (USA Percent of Population in Education Category) GROUP Less than high School High School Graduates Some College Associate Degree Bachelor Degee Advance Degree All Person Gender Male Female Race White Black Hispanic

17 LABOR MARKET CHARACTERISTICS BY EDUCATION GROUP (ALL-WORKER-1996) USA Less than high School High School Graduates Some College College Graduates Labor Force Participation Rate 60.2%77.9%83.7%87.8% Unemployment Rate 10.9%5.5%4.1%2.2% Annual Earnings US$ US$ US$ US$

18 Investment : Present Value •Keputusan Investasi : Gain antara “Current Cost” dan “Future Returns” •Fakta : terdapat perbedaan nilai antara saat ini dengan yang akan datang

19 Present Value Present Value allows us to compare payment amount spent and received in different periods Note : y  Future Value r  Rate of Interest

20 Present Value The quantity Present Value (PV) tells us how much needs to be invested today in order have y dollars next year Period Value

21 Schooling Model

22 •W•Workers acquire the skill level that maximizes the present value of lifetime earnings Schooling Model •E•Education and other forms of training, therefor, are valued only because they increased earnings  Maximizes Utility

23 Age-Earning Profile Upah Usia U SMU 22 - U U KUL

24 •Biaya melanjutkan pendidikan  H •Asumsi : Highly educated  more productive •Employer membayar wage w COL untuk “mengganti” biaya pendidikan. •Worker akan melanjutkan pendidikan bila w HS < w COL Age-Earning Profile

25 Present Value of Age-Earning Profile Present Value lulusan SMU (bekerja usia th):

26 Present Value of Age-Earning Profile Present Value melanjutkan pendidikan :

27 Present Value of Age-Earning Profile Contoh : •Asumsi : worker hanya bekerja selama 2 tahun •Earning lulusan SMU : Rp

28 •Bila melanjutkan pendidikan 1 th, kemudian bekerja dengan earning Rp dan biaya pendidikan Rp Present Value of Age-Earning Profile

29 Bila Interest : 5% maka : Present Value of Age-Earning Profile Karena PV SMU < PV KUL : Worker melanjutkan pendidikan

30 Bila Interest : 10% maka : Present Value of Age-Earning Profile Karena PV SMU > PV KUL : Worker tidak melanjutkan pendidikan

31 •Rate of Interest (rate of discount) berpengaruh terhadap keinginan melanjutkan pendidikan, dapat berupa market rate of interest. •Rate of Discount also depends on how we feel about giving up some of today’s consumption in return for future rewards. •Present Oriented Worker  higher rate of discount Present Value of Age-Earning Profile

32 The Wage-Schooling Locus •Wage-Schooling Locus menggambarkan tingkat upah yang dibayarkan employer untuk tingkat pendidikan tertentu. •Ditentukan oleh juga equilibrium pasar (Supply & Demand)

33 The Wage-Schooling Locus Dollars Years of Schooling

34 Rata-rata Upah Pekerja Pria Th Sumber : BPS, Sakernas Tahun 2005

35 Rata-rata Upah Pekerja Wanita Th Sumber : BPS, Sakernas Tahun 2005

36 The Marginal Rate of Return to School •Slope of the wage-schooling locus (  w /  s) menyatakan peningkatan earnings yang diterima apabila melanjutkan pendidikan. •Menyatakan persentase peningkatan earnings untuk setiap peningkatan educational investment.

37 The Marginal Rate of Return to School Stage 1 Peningkatan $3.000 ($  $23.000) karena menambah waktu pendidikan 1 th (12 tahun menjadi 13 tahun). Peningkatan :

38 The Marginal Rate of Return to School Stage 2 Peningkatan $2.000 ($  $25.000) karena menambah waktu pendidikan 1 th (13 tahun menjadi tahun). Peningkatan :

39  Peningkatan semakin kecil  Stage 1 = 15 %  Stage 2 = 8,7 % The Marginal Rate of Return to School  Worker stop schooling bila : The Marginal Rate of Return to Schooling = Rate of Discount

40 The Schooling Decision Rate of Discount Years of Schooling r MRR s’ r’ s’’ r = MRR

41 On The Job Training

42  On-the-job training merupakan salah satu aspek penting dalam worker’s human capital stock.  Jacob Mincer : OJT memberikan kontribusi hingga separuh dalam proses pembentukan human capital. On-The-Job Training

43 On-The-Job Training Worker bekerja untuk 2 periode maka profit-maximizing (tanpa training) : TC  Total Labor Cost

44 On-The-Job Training Apabila rekruitment dilakukan dengan On-The-Job Training maka : H  Biaya training

45 On-The-Job Training GENERAL TRAINING  Skill & knowledge dapat digunakan di firm lain.  Training period : w1 w1 = VMP 1 - H  Posttraining : w2 w2 = VMP 2

46 On-The-Job Training GENERAL TRAINING  Firms provide general training, therefor, only if they don’t pay any of the costs.  Wage masa training rendah karena untuk H  Mempertahankan worker : w1 w1 < w2w2

47 On-The-Job Training SPECIFIC TRAINING  Skill & knowledge tidak dapat/tidak mudah digunakan di firm lain (not portable).  merupakan alternative wage (other firms)

48 On-The-Job Training SPECIFIC TRAINING  Firm akan mendapat gain : w2 w2 < VMP 2, namun beresiko worker keluar  firm menginginkan jaminan worker tidak keluar dari firm  Bila worker “pays” for the spesific training  w1 w1 rendah  menginginkan jaminan tidak dikeluarkan dari firm karena skill dari spesific training tidak portable.

49 On-The-Job Training SOLUTION FOR SPECIFIC TRAINING < w 2 < VMP 2 Firm dan worker share the return from spesific training.

50 Penduduk usia 15 tahun yang mencari kerja di Surabaya Th.2003

51 Perbandingan Pencari Kerja dan Lapangan Kerja di DKI Jakarta

52 Kompetensi Sarjana ORAL COMMUNICATION WRITTEN COMMUNICATION Knowledge of FieldKnowledge of Technology Ability to Work Independently Ability to Work in Team Setting Logical Skill Analytical Skill

53 See you next time…