- Conditions for investing in employee training
Employers engage in employee training under certain circumstances. When there is technological change as well as a new product to be launched in an organization, the employer has to ensure that the employees are familiarized with the new technology. It calls for training to ensure there is maximum operational efficiency. Also, in the event that the business is making constant losses, adequate training is mandatory to ensure that various costs are reduced thereby increasing the profit margins of the company.
In the event that new employees are hired or promoted to other senior positions, their knowledge of operational procedures in the organization are frequently limited. Training ensures that they are familiarized with various methods that exist in the business. The need to increase the general talent pool of the organization also calls for adequate training as more employees will have knowledge of the general procedures for operation.
- Investment in general training of employees
An employer will invest in general training of the employees, and this is for the purpose of reducing long run costs. Time loss in the organization as trained workers will can operate efficiently following the general guidelines available for operation. The need for supervision will also reduce as they will have an incentive to work under minimal supervision.
Also, general training will enhance safety of the employees and reduce work related injuries as well as well as improve the productivity of individuals. The quote means that in the event that the wage rate changes say an increase, the amount of the same goods that one can obtain increases and vice versa. This explains the income effect. On the other hand, the change in wage rate can make one change commodity preference and consume other commodities altogether. It means that with an increase in the wage rate people will change their consumption patterns to relatively more expensive goods. In the event that the wage rate reduces, the individual will consume cheaper goods and this explains the substitution effect.
- Internal rate of return
The internal rate of return denotes the rate of discount equating the net income stream with investment and on the other hand without investment in human capital. In the case of Kate and William, Kate will undertake the investment since the internal rate of return surpasses her discounting rate. She will have more returns from the investment than William, who will Invest at a higher rate and receive lower returns from the investment in human capital.
- Costs and benefits of college education
The costs involved in obtaining a college education includes both time consumed in college and the amount of money used to pay the college fees. Also, the foregone earnings when one undertakes college education forms part of the costs. On the other hand, the benefits include a long run better pay as compared to individuals who do not attend college education.
Comparison of the total dollar value of benefits and costs is not appropriate since one cannot accurately make a decisive move because the returns are not constant. The valuation of salaries is uncertain and depends on the economic situation prevailing. The time to be taken in studying cannot be accurately interpreted i.e. one cannot determine if, while the time spent in college, one could have made more money out of college.
- Present orientation
It refers to an individual discounting the present heavily as compared to the future that is, the person sees less returns to investing in the human capital and values the current situation as better than after the one after making the investment in human capital. The likelihood of a present-oriented person to invest in human capital is low since he/she regards the present value to be higher than the future value of an investment in human capital.
- Research explanation
The finding means that as the labor force continues to work in an institution, the earnings tend to increase with more rewards given to the longer working employees. It is an indication that employees’ compensation rises with time in the organization and seniority is paid highly than juniors in organizations.
