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

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2 1 Human Capital Andri Wijanarko,SE,ME andri_wijanarko@yahoo.com Labor Economics Series

3 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

4 3 Pendidikan Lulus SMU SD SMPSMU ? Mencari jenjang pendidikan lebih tinggi

5 4 Pasca SMU Menikah Bekerja Kuliah

6 5 Mengapa Kuliah ? Disuruh orang tua Alasan Ekspektasi pendapatan Ikut-ikutan

7 6 Basic Concept

8 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

9 8 Investment Ehrenberg &Smith : •Entail an initial cost that one hopes to recoup over some periode of time

10 9 Three Major kinds of Labor Market Investment Ehrenberg &Smith : 1.Education and Training 2.Migration 3.Search for the new jobs

11 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

12 11 Three Major kinds of Labor Market Investment The Knowledge and Skills a worker has generate a certain stock of productive capital

13 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

14 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

15 14 Three Stages of Human Capital Investment B. Teenagers and young adult • Full time students in a high school, college or vocational training program

16 15 Three Stages of Human Capital Investment C. Entering labor market • On-the-job training • Formal traning program

17 16 HIGHEST GRADE COMPLETED (USA 1996 - Percent of Population in Education Category) GROUP Less than high School High School Graduates Some College Associate Degree Bachelor Degee Advance Degree All Person 18.333.617.37.215.87.8 Gender Male Female 18.1 18.4 31.9 35.1 17.4 17.3 6.6 7.8 16.4 15.1 9.5 6.2 Race White Black Hispanic 17.2 25.7 46.9 33.9 35.1 26.0 17.3 18.8 13.2 7.3 6.7 3.6 16.1 10.0 6.6 8.1 3.6 2.6

18 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$ 17.430US$ 24.248US$ 29.096US$ 46.552

19 18 Investment : Present Value •Keputusan Investasi : Gain antara “Current Cost” dan “Future Returns” •Fakta : terdapat perbedaan nilai antara saat ini dengan yang akan datang

20 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

21 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 012345 Value 100.000110.000121.000133.100146.410161.051

22 21 Schooling Model

23 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

24 23 Age-Earning Profile Upah Usia 18 65 U SMU 22 - U U KUL

25 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

26 25 Present Value of Age-Earning Profile Present Value lulusan SMU (bekerja usia 18-64 th):

27 26 Present Value of Age-Earning Profile Present Value melanjutkan pendidikan :

28 27 Present Value of Age-Earning Profile Contoh : •Asumsi : worker hanya bekerja selama 2 tahun •Earning lulusan SMU : Rp 100.000

29 28 •Bila melanjutkan pendidikan 1 th, kemudian bekerja dengan earning Rp 250.000 dan biaya pendidikan Rp 40.000 Present Value of Age-Earning Profile

30 29 Bila Interest : 5% maka : Present Value of Age-Earning Profile Karena PV SMU < PV KUL : Worker melanjutkan pendidikan

31 30 Bila Interest : 10% maka : Present Value of Age-Earning Profile Karena PV SMU > PV KUL : Worker tidak melanjutkan pendidikan

32 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

33 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)

34 33 The Wage-Schooling Locus Dollars Years of Schooling 121314 20.000 23.000 25.000 18 28.000

35 34 Rata-rata Upah Pekerja Pria Th. 2005 Sumber : BPS, Sakernas Tahun 2005

36 35 Rata-rata Upah Pekerja Wanita Th. 2005 Sumber : BPS, Sakernas Tahun 2005

37 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.

38 37 The Marginal Rate of Return to School Stage 1 Peningkatan $3.000 ($20.000  $23.000) karena menambah waktu pendidikan 1 th (12 tahun menjadi 13 tahun). Peningkatan :

39 38 The Marginal Rate of Return to School Stage 2 Peningkatan $2.000 ($23.000  $25.000) karena menambah waktu pendidikan 1 th (13 tahun menjadi 14 14 tahun). Peningkatan :

40 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

41 40 The Schooling Decision Rate of Discount Years of Schooling r MRR s’ r’ s’’ r = MRR

42 41 On The Job Training

43 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

44 43 On-The-Job Training Worker bekerja untuk 2 periode maka profit-maximizing (tanpa training) : TC  Total Labor Cost

45 44 On-The-Job Training Apabila rekruitment dilakukan dengan On-The-Job Training maka : H  Biaya training

46 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

47 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

48 47 On-The-Job Training SPECIFIC TRAINING  Skill & knowledge tidak dapat/tidak mudah digunakan di firm lain (not portable).  merupakan alternative wage (other firms)

49 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.

50 49 On-The-Job Training SOLUTION FOR SPECIFIC TRAINING < w 2 < VMP 2 Firm dan worker share the return from spesific training.

51 50 Penduduk usia 15 tahun yang mencari kerja di Surabaya Th.2003

52 51 Perbandingan Pencari Kerja dan Lapangan Kerja di DKI Jakarta

53 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

54 53 See you next time…