Human capital investments yield important\u00a0social benefits, such as increased civic\u00a0participation, reduced participation in criminal\u00a0activities and higher rates of innovation.<\/p><\/blockquote>\n
Scope of the Challenge<\/h2>\n
Human capital development has become a prominent issue of\u00a0public policy. With the rise of the knowledge economy and\u00a0rapid technological change, there is growing demand for highly skilled, adaptable workers. Empirical studies consistently\u00a0demonstrate that future growth in GDP is directly related to\u00a0the knowledge and skills of the labour force.<\/p>\n
An individual’s human capital is determined by many factors,\u00a0both hereditary and environmental.Three important factors that\u00a0public policy can influence are the nutrition and stimuli received\u00a0in the early years of life, formal education, and skills and knowledge acquired by work experience and training.<\/p>\n
Riddell’s review of available empirical evidence leads him\u00a0to two main conclusions. First, past policy interventions that\u00a0raised educational attainment typically had large beneficial\u00a0effects on the affected individuals, in terms of both labour market and health outcomes. Second, human capital investments\u00a0also yield important nonmarket and social benefits, such as\u00a0increased civic participation and reduced participation in criminal activities as well as higher rates of innovation and the associated increased growth in living standards. Investing in the\u00a0human capital of those with limited skills has thus become a\u00a0key component of social and economic policy: governments\u00a0aim to facilitate individual adjustment to structural economic\u00a0change. According to this view, education is a mechanism for\u00a0promoting equality of opportunity and social mobility.<\/p>\n
Riddell notes that the proportion of post-secondary education funded by Canadian governments has declined in recent\u00a0years and is now well below the OECD average. He also\u00a0observes that Canada ranks near the bottom of OECD countries with respect to spending on early childhood education. A\u00a0consequence of reduced public expenditure is a decline in the\u00a0quality of education, most evident at the university level.\u00a0Another is a widening of earnings differentials by educational\u00a0attainment, which would suggest that the supply of highly\u00a0educated workers is not keeping up with demand.<\/p>\n
Options for Addressing the Challenge<\/h2>\n
Riddell argues that government intervention in human capital\u00a0development is justified on both equity and efficiency\u00a0grounds.<\/p>\n
Efficiency arguments are based on three market imperfections. First, because benefits to society are not taken into\u00a0account in the private decision on how much schooling to\u00a0acquire, there would likely be underinvestment in education\u00a0in the absence of government intervention. Second, there are\u00a0credit market failures because potential students cannot use\u00a0their human capital as collateral for education loans. Finally,\u00a0some evidence suggests that education markets suffer from\u00a0imperfect and incomplete information on the quality of programs, making it difficult for students and parents to make\u00a0informed decisions.<\/p>\n
Equity rationales for government intervention involve the\u00a0promotion of equal opportunity, social mobility and a more\u00a0equal distribution of economic rewards.<\/p>\n
With these criteria in mind, Riddell argues that three key\u00a0dimensions of the human capital policy challenge deserve\u00a0attention:<\/p>\n
- \n
- Public expenditure in Canada on skills formation has been\u00a0losing out to other priorities at a time when the economic\u00a0importance of human capital is growing.<\/li>\n
- Additional public investment should be directed to areas\u00a0that have high potential returns (both private and social),\u00a0and that would otherwise receive insufficient private\u00a0investment.<\/li>\n
- An important aspect of Canada’s current situation is that\u00a0the inadequate skills of some groups present a barrier to\u00a0their maintaining a decent standard of living and\u00a0participating fully in society. Policies ought to narrow gaps\u00a0in educational attainment and skills among key subsets of\u00a0the population for both equity and efficiency reasons.<\/li>\n<\/ul>\n
Three Preferred Policies<\/h2>\n
Increase public support for early childhood education and<\/strong>\u00a0care (ECEC)<\/strong><\/p>\n
Based on overwhelming evidence of large benefits relative to\u00a0costs, Riddell proposes an ECEC program targeted toward\u00a0children at risk of developmental and educational failure.The\u00a0program would include a mix of public and private providers\u00a0or private providers alone; standards to ensure quality service\u00a0provision; and vouchers paid directly to families to encourage\u00a0the participation of families with a wide range of educational\u00a0and income characteristics. While Riddell presents arguments\u00a0for and against a targeted approach as opposed to a universal\u00a0system, he opts for the former in order to maximize the\u00a0return to public investment. However, he points out that given\u00a0Canada’s limited experience with ECEC, there is considerable\u00a0scope for experimentation and expansion based on careful\u00a0policy evaluation, a point on which Gaskell agreed.<\/p>\n
![\"riddell](\"\/wp-content\/uploads\/sites\/2\/assets\/Uploads\/riddell-sept-2008.PNG\" "\\"\\"")
<\/p>\nIncrease the compulsory school attendance age to 18 and<\/strong>\u00a0improve programs in secondary school for those at risk of<\/strong>\u00a0dropping out<\/strong><\/p>\n
Data from the 2001 census reveal that about 20 percent of\u00a0Canadians in their 20s have neither completed high school nor\u00a0obtained any post-secondary education, and this proportion is\u00a0significantly higher in rural areas and among Aboriginal students. Based on evidence that shows significant gains from an\u00a0additional year of school, Riddell proposes a statutory increase\u00a0in the school-leaving age coupled with programs to encourage\u00a0children to stay in school. Coulombe cautioned that keeping\u00a017- and 18-year-olds in school against their will might create\u00a0as many problems as it solves, but agreed that investing in\u00a0their human capital development would pay dividends.<\/p>\n
Increase merit-based post-secondary scholarships for students from low-income families<\/strong><\/p>\n
With the increasing cost and importance of post-secondary\u00a0education, there are reasons to be concerned about ensuring\u00a0equitable access for students in low-income families. Riddell’s\u00a0preferred approach would be to expand the program of grants\u00a0to low- and moderate-income families as the US has done\u00a0since the early 1990s.This would be accompanied by a deregulation of tuition fees, allowing universities and colleges to invest in quality improvements. Gaskell cautioned that given the current complex array of student aid programs, the design of any new initiative must be simple, transparent and well understood by parents and voters if it is to increase access and succeed politically.<\/p>\n
In providing an overall assessment of Riddell’s policy package, Gaskell commented that more attention must be given to\u00a0the intergovernmental, institutional and social contexts when\u00a0assessing the effectiveness of policies of educational investment.<\/p>\n
Additional public investment\u00a0should be directed to areas\u00a0that have high potential\u00a0returns and that would\u00a0otherwise receive insufficient\u00a0private investment.<\/p><\/blockquote>\n
Coulombe questioned the cost-effectiveness of Riddell’s\u00a0proposals, arguing that the policies would devote substantial\u00a0public resources to some areas in which Canada already performs quite well. A \u201csmarter\u201d policy in his view would be to\u00a0adjust Canada’s international immigration selection process\u00a0toward selecting those with skills that are valued in the\u00a0Canadian labour market. He also cited the need for better\u00a0assessment of foreign educational credentials.<\/p>\n
Conclusion<\/h2>\n
Riddell’s policy package builds on available evidence on the\u00a0economic and social benefits of public investment in education\u00a0and skills. In his view, all three interventions would provide a\u00a0high return to additional investment and address important\u00a0gaps in human capital formation that result in low skills and\u00a0unequal opportunity among some groups.<\/p>","protected":false},"excerpt":{"rendered":"
Executive Summary In confronting the challenge of improving human capital\u00a0formation in Canada, Craig Riddell provides a comprehensive overview of the evidence on the private and social\u00a0returns to education and makes a strong case for increasing\u00a0investment for particular segments of the population. In presenting his policy package, Riddell emphasizes\u00a0that large returns to existing expenditures in education […]<\/p>\n","protected":false},"featured_media":12034,"template":"","meta":{"content-type":""},"categories":[],"tags":[],"class_list":["post-10306","research-studies","type-research-studies","status-publish","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"\n\n\n\n\n\n\n\n\n\n\n\n\n\t\n\t\n\n\n\n\t\n