ECON 419 - CSUF: Literature Review on Economics of Education System

This literature review delves into the economics of the education system, examining the intricate relationship between education, earnings, and the labor market. It begins by establishing a conceptual framework that highlights the positive effects of education on human skills and employment ability. The review explores the connection between earnings and schooling, emphasizing the role of the Human Development Index (HDI) and addressing the challenges faced by developing nations in prioritizing education. Furthermore, it investigates income inequality among college students, noting its impact on earning potential and the increasing opportunity cost of education. The analysis also considers the changes shaping the labor market, focusing on the demand for technological skills and the importance of innovation in retaining talent. Finally, it touches upon the relationship between employment and wages, advocating for policies that promote skill development and reduce wealth drain. Desklib offers students access to this document and a wealth of study resources, including past papers and solved assignments.

Running head: Economics of the Education System
Economics of the Education System
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Economics of the Education System
Chapter 2: Literature review

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Economics of the Education System
Table of Contents
Introduction......................................................................................................................................3
Conceptual framework.....................................................................................................................3
Relationship between the earnings and the schooling.....................................................................5
Income inequality among the college students................................................................................7
The changes shaping the labor market...........................................................................................10
Relationship between employment and wage................................................................................12
Conclusion.....................................................................................................................................14
Summary of the chapter.................................................................................................................15
Reference list.................................................................................................................................16

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Introduction
In the whole economy, the development of education and the job is one of the important
aspect and it is closely related with the development of the knowledge and skills. In modern
world the hiring of the employees are solely depending on the skills and the knowledge that the
employees are having. It is important for the global economy is depending on the development of
the business. The completely international economy is depending entirely on the skills and
potentiality of the human resources. Education is one of the tools that is helping in the
development of skills and potentiality of the employees. In order to increase the production
ability, the development of skills and potentiality is going to be increased by the level of the
education. However, in most of the developed nations, the education in the employee is one of
the important aspect that most of the organization is looking for the skills and technologies that
will be looking for the development of business. There is a close relationship among the earnings
of the employees and the schooling education. The study is going to highlight the relationship
among income inequality among the college students. Moreover, the changes shaping in the
labor market is going to depend solely on the demand from the economy. Most of the labor
markets of international market in nowadays, is depending entirely on the demand for the
technology and how the skills of labors are in demand.
Conceptual framework
In order to increase the identification of positive effects of education on the development
of human skills, the study has taken the impact of education and the employment ability of the
employees. It is important for the whole economy to indulge in the identification of the skills and
potentiality of the employees so that they can hire well-educated and highly skilled employees.
The virtual world of the real business is depending hugely on the big data analytics and jobs

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using big data. It is important in the sense that through the incorporation of using advanced level
of the education, the economy has to prepare a stage so that the employees will be able to learn
many new technologies. On the other hand, through the introduction of better and effective
development of resource utilization technologies, the employees will be willing to indulge the
development of better trainings. However, in order to understand the utilization of resources
regarding the education, the government will be willing to identify the scopes and choice that the
country will be willing to indulge the development and learning of this big data analytics. It is
important to identify the scope of advanced level of education so that the student will be able to
learn new technologies. The conceptual framework is going to identify the resource utilization
that the economy will be using in order to meet the requirements of the economy. It is important
in the sense that through the incorporation of income inequality among the education level of the
employees and continuation of long run education of the company. This is important aspect in
the sense that even today many families having low-income group is facing stiff problems in
sending their children to school and higher education. In certain countries, the unemployment is
increasing and the employees having medium knowledge are facing stiff competition in the job
market, as they are not getting jobs as per their desired level and skills. This in turn is not helping
the economies to grow and they will be looking for the lack of initiatives in using resources is
leading to the drain of wealth and migration of employees into other economies. Through the
development of demand of mixed kind of employees in the economies, the employees those are
having mixed level of knowledge are getting jobs in other economies based on their knowledge
and designation. It is important to absorb the power and knowledge of the employees so that
their skills and capabilities can be utilized in an effective manner. Through the innovation in the
spread of knowledge and they can minimize the drain of knowledge that is leading to drain of

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wealth from one economy to other economy. This is true in the sense that it will definitely
increase the development of economic growth and the employees will not be able to grow as
desired level. It is important for any country to minimize the drain of wealth.
Relationship between the earnings and the schooling
Considering the development of relationship among the earnings and the schooling
mainly identifies the human development index that is prevailing in the economy. On the other
hand, the human development index will highlight the importance of education and how the
standard of living is improving within the economy is performing. In most of countries that are
in the developing stage is actually having low rate of HDI (Cañibano & Woolley, 2015).
Countries like Latin America, South America, African countries are having very low human
development index. It is important in the sense that through the improvement of the human
development index is going to improve the education system in the economy. The HDI shows
the fact that how the country is improving and investing part of the countries income in
improving the standard of living within the economy (Coccia, 2017). It is important for all the
economy to indulge the development of the education system that is prevailing in the economy.
On the other hand, in many developing nations, especially in countries like India and some of the
Asian countries the concept of education is not yet clear for the people living in the villages.
Most of the people living in the villages believe that education can bring more negativity within
them.
In the latter half of 20th century, the classical economists understood that there has been a
strong relationship with the education and the earning of the employees. The importance of
earning benefit will be having huge benefit for the whole economy as part of the economic,
social growth, racial and ethnic discrimination, gender discrimination, income discrimination and

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the determinants of demand for education. However, it has been seen that in recent times rapid
increase in the number of years in schooling has happened in the recent years, and even the
average schooling was 7.8 years and returns to schooling was estimated at 8.7% (Strong link
between education and earnings, 2018).
Figure 1: Relationship between higher education and technology
(Source: Strong link between education and earnings, 2018)
The above diagram is showing the relationship among the returns and investment from 1970-
2010. The graph is showing that as the return of investment is increasing the development of the
education. From the year 1970 the return is falling till 1980 and after that return is growing but at
a flat rate and the enrolment is increasing to high trend from 2000 to 2010. However, the
development of education is still predominant for the females compared to the males.
This is important in the sense that in most of the village, it is important for the schooling
and increasing the production ability of the employees will be able to increase the use the
resources in an effective and improved manner (Conlon, Ladher, Halterbeck & Economics,
2017). Through the incorporation of better activity and learning abilities will be able to identify
the development of better improvement in the technology. Development of two important

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hypothesis in the form of human capital hypothesis and screening hypothesis will be able to help
in the development of better innovation in the technology. Through the improvement in the
human resources the production ability will be able to increase the return of the development.
The development of screening hypothesis will allow the development of comfort zones that the
HR and organization will not be facing the situations so that they will be able to highlight the
demand of the organizations and will be able to hire the organizations (Dang, 2017).
The schooling is an integral part of the development of human index and how the human
resources will be willing to able to allocate their skills and potentiality that the economy will be
gaining importance. Through the development of the correlation among the education and
earning that will be highlighted and in about 30 countries it has been seen that strong correlation
has been seen among the categories economic, sociological and psychological explanations.
However, in the market of perfectly competitive market most of the organizations will be willing
to avoid vocational skills and will be focusing more on the technological skills (Deming &
Figlio, 2016). It is important for the development of the skills and potentiality that will be able to
drive the organization to a better position. This is important in the sense that it will be helping
the development if better business and in the world of competition, it is important to increase the
technological knowledge of the employees so that the migration of employees and drain of
wealth can be avoided. Through the implementation of better knowledge of the employees, it
will be helpful for the organizations increase the innovation process that will definitely allow the
human resource to learn many new things.
Income inequality among the college students
In the modern phase of life, the inequality is increasing among income and wage in US is
increasing since 1970. It has been seen that with the increase in income, the difference is

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increasing among various age groups. This income inequality is increasing among the high
school education and college education. About 1/3rd of the income inequality is happening
among the students and it is important in the sense that it is having a direct impact on the
development of earning in the economy (Duckett & Willcox, 2015). The remaining 2/3rd of the
inequality is prevailing within the groups. The group consisted of college education is having
difference as high as 16%. The income inequality is having a direct impact on the development
of the education system within the economy. In order to identify the pros and cons of the
development of better resources, it is important for the economy to minimize the development of
the whole income.
In the modern world of education achievement and joking the labour force is going to be
most challenging in the sense that in the modern time, the opportunity cost of the education level
is increasing by huge margin. The cost of education is increasing as more branches of education
is improving. It is important in the sense that the demand of the employees skilled with
vocational training is not getting jobs as per their criteria. In order to implement the whole
resources it is important for the developed nations to indulge the improvement in the human
resources base that are well equipped with the technological innovations and presence of
knowledge is highly important and gradually is in high demand (Grin, 2016). The modern
business world is demanding the taste of big data in their business. It has been seen that in most
of the developing nations, the economy is allowing the development of big data, the students
from college degree are getting the opportunity to learn and mostly the village schools, and the
high school students are not getting any kind of opportunity.
The income inequality and the consumer price index is going to show an upward trend
among the employees and even during the participation in the labor market. Through the

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calculation of percentile calculations, it can be seen that in the year 1972, the amount of the
differential is about 13.47 dollars and the CPI increased to about 18.55 dollars in the year 1955.
Lower half of the distribution is having impact on the 55.74% in dispersion. Increase in income
inequality is mainly increasing because of the fact that income of the students is decreasing and
the purchasing price of the consumer are increasing and price of most goods are increasing by
huge margin. One the other hand, the development of income inequality is making the whole
economy more fragile. It has been seen that there is a strong correlation between the family
income and attendance in the college (Hanushek & Woessmann, 2015). In most of the village
and semi urban economies most of students are not willing to attend the school if their family
income is very less. Rather they will try to look into getting some jobs so that they can reduce the
burden of their families. It is common in India and its subordinate’s villages and rural economy
will be aiming to indulge the development of the resources and how the countries will be able to
highlight the utilization of the capitals that will be assigned for the development of education
level (Heck & Mu. 2016). It is important in the sense that through the development of the
dynamic nature of the job market strong correlation among the variables will be identified among
the economy that is indulging the development of education. Until date many bright students
have to sacrifice their careers mainly due to the income of their parents is a big concern.
Most of the developed nations will be looking for the development of education and in
order to increase the skills of employees the countries mainly looks for the use of better and
upgraded technologies that will allow the increase of the skills and technologies that will be
looking to enhance the development of soft skills of the employees. It is important for the study
to deal with the development of human development index, the government will be playing
intense role regarding the allocation of roles and regulations that will be indulging in the

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development of high level of education, and they will be able to increase the skills of the
employees to utilize the resources. On the other hand, the innovation in the technology in the
distribution of education, the developed nations will be able to identify the gaps in the human
resources (Hoddinott, 2016).
The changes shaping the labor market
In the modern labor market, the shape and the composition of the labor market is
changing and is becoming more dynamic in nature. The more and more dynamic nature of the
job market is going to identify the development of employee relationship and through the
incorporation of better education opportunity will allow the incorporation of better learning
opportunity of employees. It will definitely highlight the incorporation of better understanding of
knowledge opportunity will allow the employees to highlight and understand their skills
especially in the technological ground (Holmes & Mayhew, 2016). The dynamic nature of the
job market is basically showing some incorporation of better resource utilization and the
developing countries like South Africa should incorporate better education facilities that will
allow the economy to incorporate better knowledge and education distribution system that will
make the employees more educated from the primary stage and even from the schooling level.
Choosing the subject based on the demand of the market is going to introduce the development
of better skills and technology that will allow the economy to segregate the development of the
education and will allow the incorporation of better marketing of the products (Hulsmann, 2016).
It is important in the sense that good teachers will be bringing in better level of education that
will easily allow the economy to indulge a bargaining power of the employees regarding
negotiation of the wages.

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Increased number of uneducated labors in the economy will put pressure on the
development of unemployment in the economy and the unemployment will be more of structural
unemployment. The organization will not be able to absorb the pressure of the unemployment as
the skill set of the employees demanded by the company will not match the supply of the
employees from the economy. This will give rise to the increase of labour unions that will bring
the development of better innovation in the technologies that will allow the economy to indulge
the development of gaps and that will create unemployment even in the upcoming time period.
Through the incorporation of better technology and the government policy will be bringing in
better level of technological upgradation that will definitely allow the economic performance to
increase (Koch, Nafziger & Nielsen, 2015) Introduction of objective based study will definitely
allow the incorporation of better resource utilization will allow the economy to indulge more
level of investments in the economy and they will be highly satisfied with the ways of
performance for the economy. This is important in the sense that it will be highlighting the
incorporation of better resource utilization, the development of basic understanding and
understanding the international language that will allow the other countries to so trade with
countries having highly skilled employees.
Figure 2: Structure of the labour market