HUMAN CAPITAL AND HUMAN CAPABILITIES IN ESTIMATING OUTCOMES FROM EDUCATION: TOWARDS AN EMPIRICAL INTEGRATION

The mechanism of personal employment path has been intensively studied through various models in the human capital framework. Nonetheless, a deeper insight, which allows a thorough inquiry into the multifaceted space of the outcomes other than income and employment, will consent to shed light on the personal well-being and social functioning using a broader perspective.
All measurement techniques used in the classical human capital (HC) framework share common weaknesses: a monetary aggregation of heterogeneous components of human development and a measurement error. This paper is addressing the former weakness by extending the classical evaluative framework to integrate the elements of capabilities approach (CA).
According to the classical HC theory, individual's HC is determined by skills and abilities, which s/he uses to contribute to production and which can be sold on the labor market for wage. As noticed by many researchers, it can be problematic to aggregate and measure HC components embodied in individuals because the vector of person's capabilities comprises many intrinsic characteristics, which need to be measured and priced before they can be aggregated. These measurement issues were recently faced by the proponents of the CA, who measured individual well-being, as well as skills and abilities used to achieve it, in a common unit of account at a point in time. This paper develops these ideas by bringing the discussion into empirical dimension.
The study undertakes the first step towards an ambitious objective to integrate HC and CA in one empirically testable model. It presents a few speculations, which allow making preliminary hypothesis about empirical comparability and complementarity of HC theory and CA in measuring the outcomes derived from education.
Higher investment into HC, and more specifically – higher level of education and experience, do not always directly lead to better chances in finding employment or to higher wages. Moreover, as have been shown in the present empirical exercise, level of education can provide an impact on the job satisfaction, which is completely different from the impact of earnings. Besides, personal characteristics (such as gender and ethnicity) and personal life circumstances and life choices (such as family status and family composition) can go a substantial way in explaining both earnings and one’s subjective assessment of employment-derived outcomes. These considerations lead to an intuitive conclusion of the necessity to study a broader impact that education can have on one’s life choices. Even leaving aside the question of endogeneity of educational choices and achievements, one discovers a broad and complex stream of outcomes derived from the level of schooling.
An important result of this empirical study is the evidence that the conventional HC theory approach needs to be enriched by enlarging the measuring base to non-marketable benefits derived from employment success. Extended estimation framework provides plenty of additional information compared to the pure human capital approach. This information needs to be carefully assessed and used on the next stage of research with an ambitious objective to create a testable model, which reflects the quantitative and qualitative aspects of the individuals’ capabilities to shape their personal well-being in its full spectre of dimensions.