Human Capital And Signaling Models For Understanding Indigenous Disadvantage In Employment

Answer one of the following questions:

1. Discuss the range of measures of Indigenous disadvantage. Is the scientist’s cultural bias a serious problem in measuring the wellbeing of Indigenous people?

2. Outline the human capital and signalling models of education choice. Do these models help or hinder our understanding of Indigenous disadvantage in employment?

3. Can remote Indigenous communities be made viable? Discuss proposals involving (1) rebuilding social capital, and (2) reforming property rights.

The Human Capital and Signaling Models

Human capital model recognizes the importance of education as an investment that eventually produces benefits in the future. More so, it forms the basis of neoclassical analysis of education, labor markets and economic growth. While Australia has been generally influenced by public choice and screening models the impact of the signaling and human capital in particular is rife in the market. Primarily, the human model of education is based on the notion that schools exist chiefly to teach students through providing them with skills and information that will be valuable in their life. With regard to other investments, a sacrifice of current income must be accepted for generation of both non-monetary and monetary returns in future. In light of this, the paper undertakes an analytical perspective in laying out their role in the indigenous communities with regard to employment. That is whether these models are beneficial or not in the quest for employment.

Signaling alludes to the idea that one party referred to as an agent is able to convey credible information about itself to another party known as the principal. Such information is tailor-made to capture the interest of the recipient with regard to the opportunities that are present within its capacity. Signaling is primarily common in the job market where potential employees seek to send indications about their ability level to the eventual or potential employer through acquisition of the education credentials (McKay, Mijovi?-Prelec & Prelec 2011). The value of these credentials is rooted from the fact that employers believe that the information from such credentials has a positive correlation with having a greater capacity and also generally difficult for the low ability employees to obtain. In other words, the credentials enables the employer to have a reliable as well as distinguishable low ability workers from high ability workers.

 The asymmetric information is a likely catalyst in the most economic transactions whereby the assumed inequalities in the overall access to information upsets the normalization process in the market for the exchange of goods and services. When one party sends information, it is then interpreted in terms of adjusting the purchasing behavior in response to the signal. This is done through offering a high price than if the signal had not been received. Job-market signaling in the market is revealed through potential employees seeking to sell their services for a specific price or wages to the employers. Employers are generally have the will to pay quite a higher wage so as to have better workers employed in their firms (Ployhart & Moliterno 2010). Even though the individual may be knowing what their abilities are, the employing firm is basically in the dark about this and only relies on the information that the other party provides which in this case is the employee. Employers are not able to observe such an intangible trait and so must rely on the academic credentials that the employees provide during their recruitment in the firm.

Signaling model recognizes the asymmetrical flow of information between the employer and the employee with regard to the educational qualifications. Education credentials are chiefly used as the overall signal to the organization further underscoring the that there is a certain level of skill, ability and knowledge that an individual is in possession of which contributes to their overall welfare considering their capacities to handle the task that have been allocated to them. This narrows down the informational gap (Olaniyan and Okemakinde 2014). In essence, it is beneficial to all the parties concerned as long as the signals paints a desirable attribute. Some signals do not add value to the employer and may result into disastrous effects to both the employer and the employee.

The Asymmetric Information and Signaling

The human capital and the signaling models are vital for the understanding of the indigenous disadvantage in the employment sector. This can be enhanced through the following diverse ways. First, Human Capital theory is significant because it assists policy makers and researchers in the eventual evaluation of the relationship that exists between the economic and social benefits as outputs and the education and training as inputs. It is the relationship of these two important components that springs into action the value of the education on the indigenous population in Australia. Realizing the importance of social benefits with respect to the inputs in terms of training is vital for indigenous population. The human capital theory provides scores of information that lays out the framework developed within it. According to Eide & Showalter (2010), extensive research within this scope suggests that having an increase in the amount of schooling is associated with an increase in the wage rate, growth in the Gross Domestic Product, a lower crime rate, better health care outcomes and most of a higher civic participation rate.

Indigenous population is made aware of these benefits through understanding the human capital model. Such a model will also offer these people an opportunity to evaluate the relative efficiency of having public investments for programs that focus on encouraging more schools. When school becomes the central point in this evaluation, it makes the individual indigenous people recognize the need and importance of education in that particular order (Currie 2009). More so, it also puts in fray the vitality of economic growth on the back of education centered on education and training that can be used to achieve the goals that have been decided on.

Policy development for the key purpose of incentivizing investment in the individuals’ own education is spearheaded by the Human Capital model. Indigenous community needs to understand that the pursuit of education is forged on the back of recognition of benefits and costs at the same time (Goldlücke & Schmitz 2014). The costs come in terms of foregoing potential earnings in the current period while benefits come in terms of higher wages that could be realized in future. Using the Human capital model, indigenous population is able to understand policymakers with respect to the development of policies such as dual enrolment programs and student loans in changing the costs and increasing the likelihood of the pursuit of education (Becker & Woessmann 2009).

Signaling model is another important aspect that the indigenous community can use to understand their grievances in pursuing education for the betterment of their life. While education is an important component of life, signaling model recognizes the significance of other avenues to achieve a self-fulfiling life. The indigenous population have been brainwashed into the belief that a white collar job is the ultimate degree that a successful life can be pegged on with regard to employment opportunities. When such a mentality is dismantled, it means that other avenues such as the informal sector is put into focus (Carey, Tang & Larrick 2016). Despite more emphasis being put in education, the informal sector or rather means of survival in a dynamic economy provides an important alternative to fulfilment in that manner.

 Signaling in particular is vital for answering questions regarding the optimal levels of social investment in the education particularly centering on the quality. Investments are particularly more productive when they are made while the costs and benefits are investigated. Particularly, policy interventions are particularly important when signaling model is explored. Popularization of the informal sector is important regarding the role that it plays in the getting the employment opportunities which in this case involves self-establishment whereby an individual is able to find a niche in the market. Such a niche will provide an avenue that the less fortunate are not able to access (Dee 2004).

In conclusion, both the human capital and signaling models are important to the indigenous population in Australia because they essentially provide a lot of information that is important for their employment. Economic growth and development is an underlying aspect of the human capital model. They primary provide a lot of information regarding the factors that contribute to increased productivity as well as higher earnings. Education provides a higher monetary returns which provides a substantial information on the indigenous to ignite their interest in the pursuit of education to get more opportunities for employment. Signaling is also vital in providing information on the alternative methods of employment without having education credentials by first of all recognition of policies that create more roles for educational non-partisans.

References

Dee, T. 2004. “Are there civic returns to education?”Journal of Public Economics, 88, 1697-1720.

Eide, E. & Showalter, M. 2010. Human capital. In D. Brewer & P. McEwan (Eds.) Economics of Education (pp. 27-32). San Diego, CA: Elsevier.

McKay, R., Mijovi?-Prelec, D., Prelec, D. 2011. "Protesting too much: Self-deception and self-signaling". Behavioral and Brain Sciences. 34 (1): 34–35

Carey, K.,Tang, S, & Larrick, R.P. 2016. "Betting Your Favorite to Win: Costly Reluctance to Hedge Desired Outcomes". Management Science 14 (3): 16-19.

Goldlücke, S., Schmitz, P.W. 2014. "Investments as signals of outside options". Journal of Economic Theory. 150: 683–708

Ployhart, R.E. and Moliterno, T.P., 2011. Emergence of the human capital resource: A multilevel model. Academy of Management Review, 36(1), pp. 127-150.

Olaniyan, D.A. and Okemakinde, T., 2008. Human capital theory: Implications for educational development. Pakistan Journal of Social Sciences, 5(5), pp. 479-483.

Becker, S.O. and Woessmann, L., 2009. Was Weber wrong? A human capital theory of Protestant economic history. The Quarterly Journal of Economics, 124(2), pp. 531-596.

Currie, J., 2009. Healthy, wealthy, and wise: Socioeconomic status, poor health in childhood, and human capital development. Journal of economic literature, 47(1), pp. 87-122.