Human Capital Theory

Table of contents

To what extent can Human Capital Theory provide a plausible explanation for inequalities in the labour market? Illustrate your answer with examples of labour-market segmentation tied to race or gender or social class.


Human capital theory can be identified as studies of organisations, individuals or nations which accumulates stock of productive skills and technical knowledge from study of investments (Becker, 1964). By following the judgement of human capital theory it can be said that it represents a path for the individual to develop his or her charisma to the labour market .

Human capital theory is used as a analysis of theoretical frame , development of competence , formal education and job tenure probably are the crucial aspects for the individual’s perceived employability. As a result investment of individuals in these respects would be essential factors in identifying their perceptions of the possibilities that exist for gaining new employment (Judge and Bretz, 1994 et al, 1995).

Efficiency losses and Gender differences:

In recent times around 50 % of woman around the world are in the labour force officially, approximately 1/3rd of all workers are constituted by women’s. Work unpaid performed by females most of them because following the tradition of division of labour within nature of employment on family farms . Although it attracts pay, men’s work is valued more than women’s. Earnings of women is normally average around 2/3rd of men’s . In general, simply 1/5th of world’s wages accrue to women partly because they are engaged usually in low paying-jobs.

Still in these jobs, payment is less usually to women compare to men instead doing comparable work (Bergmann, 1971), the result of discrimination and exclusion of women are solely the gender differences in labour market, to evaluate a method the output and wage are affected under conditions of discrimination it has been projected in the context of racial segregation, According to (Tzannatos, 1988) this method can be extended to apply in context of gender on the basis of assumption that men and women have same human capital and preference.

This exercise is preceded in two steps, in beginning it estimate the output in present conditions, namely, when differences occupational and wage within industries. Secondly, output is re-estimated assuming within industries are eliminated due to occupational differences, Therefore differences between two estimates of output provided when there is maximum welfare gains indicated it can be achieved, but characteristic and preferences are same of women as compare to men and equally treated in labour market.

For Example: UNESCO 1999 In India , women around 88 % in higher education opted to majors in arts and commerce but 1 % of women choose occupations like engineering . low paying jobs are choose by majority of women in Kerala like nurses , clerks , school teachers and typists. Kerala which ranks first within states of India in Gender development and Human development Index, In fact female in Kerala enjoyed a better status in society than other females in rest of the part of India and although a male child is considered to be more valuable compare to female in India but in Kerala it is different case, women exceeds 1000 to males Except districts such as Wayanad and Idukki. According to census conducted in India, Kerala outnumbered men, the independence and pride among the women in Kerala has instilled in them (Jeffrey, 1987).

In Some countries, women who are married are prevented from working due to law or by strong social customs, in late 1970s and early 1980s it was true in Korea and Japan in which women had to left their jobs due to marriage (Horton, 1994), although in Korea it is no longer to discriminate against women married in dismissal and promotion, hiring in discrimination is still un punishable due to law and remained sex stereotyped in Japan ,Discrimination against married women is still carried and permitted in Indonesia and due to the law husband is identified as the household head.

Provisions such as results in working women or women workers being left with the last option that is into dead-end jobs, although first to lay off but still paid low wages, This overcome women’s incentive to remain in labour force to human capital. Treatment for the married workers in the family can be strengthen the traditional specialization of labour with in the statistical discrimination and household .

From the perspective of Cigno (1994) there is existence of gender biases in various forms, more often in family treatment as a tax creates disincentives to work for women and taxation due to joint tends women to stay at home rather than separate taxation due to the higher marginal taxes that the earnings of worker which is considered secondary or usually, the wife attract if separated may increase incentives of women while working and might result in greater participation as compare to the husband in domestic activities. Apart from this area Gustaffson (1995) believed that divorce laws not to oblige fathers to support their children. Additionally, the financial ability was lacked by women to access the courts enabled legal provisions that equal sharing of responsibilities and child care among parents, on work constraints women’s are relaxed and eased so poverty declined among mothers for an example authorities in Sweden serious attempts are made to identify the fathers to make them share the cost of finance for the child rearing die to this there is increase in price of children to men and indirectly there is reduction in the fertility which results in beneficial effects to welfare of women and work maternity leave deals with which is physically demanded by new mothers and pregnant mothers and there is variation in the provisions maternity legislation among the developed countries for example in Canada there is 15 weeks leave where as in U. S. A only 6 weeks and provisions of maternity also differs such as private one or national system . here as in Philippines and Thailand the family extended has enables women to work after the family formation by giving the day care facility and in some South Asian countries and African Countries children are not constituted as a major barrier for female in labour force participation and neither there is reduction of potential duration of working life compare to men .

There are two types of legislations:

  1. Equity promoting legislations It is known as the requirement that women and men are paid equal wages or have equal opportunities.
  2.  Protective legislations

In short it consist of maternity , hazardous and night work it is seen that this legislation is more valuable to women than was legislation to ensure the conditions exploited women faced during the industrialization. (Goldin, 1990) According Mason (1988) Protective legislation to women can lead to discrimination statistical against the group deem to benefit such kind of regulation usually helps out who are already working but hampers which are seeking for a job in the protected sector or it can create blockage between both covered and un covered sectors .

For example restriction on night work from specific work can excessively reduce ability of women to compete effectively in the labour market. In countries like Britain, New Zealand, Canada and Greece female pay used to be prescribed as reference to male pay underpayment of women was depended in two things and first thing is man was considered usually to look after and support a family and be paid family wage by which he can support him and his family, secondly it was considered women working for her own as single and married for additional family income. MacDonald, 1994) Wage setting of this kind refection of existing norms. This type of wage setting was suitable for employers on the basis of short run-minimization of cost considerations. while the differential pay rates for men and women workers was removed from law and single wage rate was added in the law due to this gender pay gap was reduced in some of the cases. Previously female and male wage rates were replaced by rates for light and heavy work .

According Ehrenberg and Smith, (1987) in the case of gender differences of pay by employment segregation instead of unequal pay in the same job or employment and overt wage is illegal and discriminative, Schemes such as job evaluation can be undertaken to check a cook or carpenter is worth in comparison, although it is true that both work requires same level of training , esponsibility and effort, possibly cook are mostly women’s and carpenter are men’s in this case labour market will first assign lower wage to cook than carpenter . It is not fair as two comparable workers in terms of human capital characteristics will be awarded differently and it has been proved by having a glance at evidence in U. S. A that it has adverse effects on employment by following the comparable worth principle.


This concludes that a labour market perspective, and most important recommendations of this is that policies should treat reproduction and unpaid work as recognized economic activities, secondly the legislations are important timely but not be over designed and case of economies indicates that women workers faces risk of poverty that were traditionally borne by enterprises are now lost such family leave, day care, child allowances.

It also explains the discrimination faced by women and inequality done in labour market segmentation tied to gender and race and also due to the unfair law followed in earlier times by many countries but in these some legislations proved to be successful such as equal payment to men and women in developed countries and facts such as comparison of labour resulted in unfair wage distribution found by evidence from U. S. A

We also know that how women are considered less valuable in some countries in comparison to men and how it affects the women society and indirectly the human capital of women workers and moreover it can be seen that it is male dominated, certain action plan worked in developed countries but not in other countries and from example of India we can see the selection of work of women that is the low wage work selection due to this women are lacking behind because of decision-making ability compare to men ,Thus from the above essay we can see the inequalities and problems faced by women while surviving in the human capital labour market .


  1. Becker, G. S. (1964). Investment in human capital: A theoretical analysis. Journal of Political Economy, 70, 9-49
  2. Bergmann, B. (1971) The effect on white incomes of discrimination in employment. Journal of Political Economy 79(2), 294–313
  3. Tzannatos, Z. (1988) The long run effects of the sex integration of the British labour market. Journal of Economic Studies. 15(1), 1–18
  4. Judge, T. A. and R. D. Bretz (1994) ‘Political Influence Behavior and Career Success’, Journal of Management 20(1): 43–65 .
  5. Judge, T. A. , D. M. Cable, J. W. Boudreau and R. D. Bretz (1995) ‘An Empirical Inves- tigation of the Predictors of Executive Career Success’, Personnel Psychology 48(3): 485–519
  6. UNESCO. Report of Expert Group Meeting on Training of Women Graduates in the Development Process, Thailand, February 1999
  7. Dreze, Jean, and Amartya Sen. India: Economic Development and Social Opportunity. Delhi: Oxford University Press, 1996
  8. effrey, Robin. “Governments and Culture: How Women Made Kerala Literate. ” Pacific Affairs 60 (Autumn 1987): 447–472
  9. Cigno, A. (1994) Social security, the tax treatment of couples and the position of women. Paper presented at the Gender Symposium, World Bank, Poverty and Social Policy Department, World Bank, Washington, DC
  10. Horton, S. (1994) Women and Industrialization in Asia, Routledge, London
  11. Gustaffson, R. (1995) Single mothers in Sweden: Why is poverty less severe.
  12. n: Katherine McFate, Roger Lawson and William Julius Wilson (Eds. ), Poverty, Inequality and the Future of Social Policy: Western States in the New World Order, Russell Sage Foundation, New York
  13. Trzcinski, E. , Alpert, W. T. (1994) Pregnancy and parental leave benefits in the United States and Canada: Judicial decisions and legislation. Journal of Human Resources. 29(2), 535–555
  14. Mason, M. A. (1988) The Equality Trap: Why Working Women Should Not be Treated Like Men. New York
  15. MacDonald, M. (1994) Social security policy and gender, Paper presented at the Gender Symposium, World Bank, Poverty and Social Policy Department, Washington DC
  16. Goldin, C. (1990) Understanding the Gender Gap: An Economic History of American Women. Cambridge University Press, Cambridge
  17. Ehrenberg, R. , Smith, R. (1987) Comparable worth wage adjustments and female employment in the state and local sector. Journal of Labor Economics 5(1), 43–62

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