Economics

Money spent on education and training can be described as investment in human capital similar to investment in physical capital. Just like physical capital, human capital produces a rate of return inform of higher earning. In America, the rate of enrolment in school has been increasing continuously such that in 1970, the percentage of high school dropout in the labor force was 36 while in 2006, the rate reduced to 12. College attendance increased during the 1980s as the premium in the college-high increased. The society reaps the social benefits that emanates from education. Research has shown that educated people are less likely to be unemployed while education improves the quality of involvement in political activities

Capital is mostly viewed as an asset that is invested with the view of making profit over a given period of time. However, this is just an example of tangible capital that yields income. Scholars say that expenditures that relate to education, health care, and training is a form of investment in human capital. The reason they are referred to as human capital is because its impossible to separate a person from his skills, abilities, health, knowledge, or values just like you can distinguish him from his finances and physical assets. In addition, human capital can be compared to a means of production whereby additional investment in that sector leads to increased output.

Theodore W. Schultz, a Nobel Laureate, introduced the concept of human capital, arguing that people acquire knowledge and learn new skills in order to raise their value and competitiveness in labor markets. Major ways of acquiring human capital is through education, training and experience, whereby education is viewed as the primary level to many people. Education acts as a stepping stone of acquiring skills that increase productivity which in turn lead to creation of modern technologies, wealth and new businesses. Moreover, it eventually leads to high economic growth (Joel, 2005). Education is thus a public good whereby both the society and the individual benefit from increased education.
Research has found that in America, college and high school education increases individuals earnings with a big margin even after removing both direct and indirect costs of education. Educated people have a higher level of IQ and tend to earn more income than the less educated. Studies in 1960 concluded that college graduates were paid forty five percent more, compared to their high school counterparts. Analyzing education as a form of human capital investment enables us to know the reason why the percentage of graduates going through college fluctuates every now and then. The benefits of going to college as well as the cost of schooling increased between 1980 and 1990. Tuition fees rose by close to 39, a figure calculated by considering the effects of inflation (Joel, 2005).
However, tuition fess is not the major cost that students face while in college. Three fourths of the cost parents incur when paying college fees is the income that students forego for not working. The concept of opportunity cost comes into play since we are able to measure the income a college graduate could earn by entering full time employment. Formal education has to be supplemented with training so that a college student can fit into the job market.

The continuous increase in per capita income in several countries between the nineteenth and the twentieth centuries can be attributed to the spread of scientific knowledge and technical expertise. This increased the productivity of labor and other factors of production. Industries have continued to rely on sophisticated knowledge which in turn raises the value and importance of formal education, technical abilities, job training, and other forms of human capital. Economic growth is highly dependent on the relationship between the quantity of new information and human capital and is the reason why increase in education and modern technology stimulates economic growth (Joel, 2005). In conclusion, chinas economy has developed rapidly by depending on its abundant, well trained and ambitious population.