The human capital and screening models of education are economic models meant to help explain how people make decisions regarding education.

The major difference between the human capital model and the screening model is the perception of the effect of education on productivity. The human capital model holds that education makes workers more productive and therefore deserving of higher wages. In this view, education confers both an absolute and a relative advantage, since it helps workers to become both more productive relative to their past performance and more productive relative to their peers with less education. The screening model largely rejects the idea that education (or education beyond a certain point) leads to higher productivity. Under this model, there are people who are productive and capable and there are those who are not. Those who are able to succeed at higher education signal the fact that they are part of the productive group, even if that education has not given them any skills particularly useful in the workforce. In this view, education is a way of improving how good a prospect you appear to be when evaluated by a firm.

If the screening model is more accurate, increasing the number of people in higher education is not a good mechanism for increasing productivity or equity. Since the same fraction of the population will exist at the same levels of productivity, having more people educated will simply lead to lower standards and a reduced usefulness of academic achievement in identifying those workers who are productive and committed. If the human capital model is more correct, increasing the overall level of education should increase the productivity of the workforce, as well as helping those who would not otherwise receive the education to receive higher wages. It could therefore be good for both economic growth and income equality.

Promoting further education among the poorest members of society could actually be justified under either view. A human capital model would simply hold it as making them more productive. Under a screening model, it would diminish their disadvantage against those whose wealth and birth would make it easier to get a good education. Also, helping those who could not otherwise afford school to go could lead to an improvement in the overall quality of graduates as those with the intelligence and will to succeed replace (or at least join) those who have the money to go to university, but not necessarily the persistence and the skill. The uneducated often exist at the margins of society, unable to use the institutions of society (the legal system, for example) as well as those with more education. Lack of education also contributes to cycles of poverty. These sorts of considerations are valid regardless of which theory of education is accepted.

It should be noted that the benefits of education are not entirely, or even largely, financial in nature. Knowing Shakespeare or quantum physics may contribute nothing to your earning power, but it does increase the quality of your life, the degree to which you can participate intelligently in society, and the degree to which you can be part of a functioning democracy. As Rousseau said: “We are born weak, we need strength; helpless, we need aid; foolish, we need reason. All that we lack at birth, all that we need when we come to man's estate, is the gift of education.” The benefits of education are in living a good life: one with enlightenment rather than ignorance and one with meaning rather than silent desperation. These benefits exist irrespective of whether education serves mostly as a signaling or productivity development mechanism within the workforce.

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