Alternative to flawed “human capital theory” in the VET System


Policies designed to increase our investment in human capital without the benefit of the insights derived from a sociological theory may actually lead only to an increase in instrumental credentialism which we have already suggested does nothing to improve our chances of developing a high-skill, high-wage economy.

Instrumental credential orientations may not be so common in some other countries (although this obviously excludes the US) and now we understand that, if instrumental credentialism is not so common in Germany or Japan, this may be an asset to those countries, and policies which have the effect of increasing the prevalence of instrumental credentialism in the UK may be ill-advised.

Human capital theory is an impoverished notion of capital.

Human capital theory is an impoverished notion of capital. It is unable to understand human activity other than as the exchange of commodities and the notion of capital employed is purely a quantitative one.

Human capital refers to knowledge, attitudes, and skills that are developed and valued primarily for their economically productive potential. It argues that a person’s formal education determines his or her earning power.

When explaining patterns of participation in education and training, and when designing education and training policy, it has become customary to rely on the theory of investment in human capital derived from welfare economics.

In human capital research, researchers cannot simply take correlations found between earnings and education as a causal relationship without adequate knowledge of the full implications, nor without examination of all other alternatives.

There are significant discrepancies with the notion that education should be construed as a direct form of investment in one’s financial future.

Social theory 

Mark Murphy, (, a Reader in Education & Public Policy at the University of Glasgow explains that, broadly speaking, social theories are analytical frameworks or paradigms used to examine social phenomena.

The term ‘social theory’ encompasses ideas about ‘how societies change and develop, about methods of explaining social behaviour, about power and social structure, gender and ethnicity, modernity and ‘civilisation’, revolutions and utopias’ (Harrington 2005, 1). In contemporary social theory, certain core themes take precedence over others, themes such as the nature of social life, the relationship between self and society, the structure of social institutions, the role and possibility of social transformation, as well as themes such as gender, race and class.  (Elliot 2008).

It is not surprising, then, that a common thread in much contemporary social theory is a fascination, even obsession, with how the dynamics and forms of power play themselves out via institutions, linguistic traditions, texts, cultures and forms of self-hood.

Social policy alternatives to Human Capital Theory

[Guided reading and extracts: Fevre, Rees and Gorard, Some Sociological Alternatives to Human Capital Theory and their Implications for Research on Post‐compulsory Education and Training, Journal of Education and Work, Volume 12, Issue 2, 1999]

Fevre, Rees and Gorard argue for a more sociological theory of patterns of participation and non-participation. [They] consider that a sociological theory of participation in education and training should not be bound by such an inflexible premise that [Human Capital Theory promotes] and should be open to all the social and cultural factors that affect people’s decisions about education and training  in the real world.

Challenging Human Capital Theory’s assumption

The present paper therefore seeks to challenge human capital theory’s assumption that when individuals find no utility in education and training  (they do not see how it can bring them benefits of any kind) they will simply not undertake any. We will show that, even where education and training  is not compulsory, the fact that people see no utility in education and training  actually has a profound effect on the sort of education and training they do indeed receive.

… the overwhelming emphasis is upon training programs which are firm-specific. This is true not only of the ‘routine’ provision of induction and training directly related to the management of production, quality assurance and so forth, but also of those programs which are aimed at enabling an employee to move upwards within the Industry Labour Market.

In part, this reflects the objective of socializing employees into an appropriate ‘employment culture’

Equally, this form of training is intended to attach employees ineluctably to the firm, minimising as far as possible labour tum-over and thereby maximising returns on the employer’s investment.

Indeed, it is increasingly the case that even where training programs are formally certificated, larger employers are going to considerable lengths to ensure that the institutions providing the training, most frequently the colleges of further education, are laying on what amounts to ‘bespoke’ course, not infrequently, for instance, installing their own machinery for the use of their trainees in college-based provision. (Rees, 1992, p. 7, see also Recs ez al., 1992b) (original emphasis)….

A sociological theory of education and training participation

With the exception of accounts of resistance to the raising of the school-leaving
age, the evidence we have used to develop a sociological theory of patterns of
participation in education and training  has been derived from studies of post-compulsory education and training.

Nevertheless, we feel that this theory is capable of a much more general application. Ideal types of orientations like those which we have discussed hcrc can also be developed
to help us to understand the decisions made by parents and children which affect participation and achievement within the constraints of formal, compulsory provision.

There are, after all, some constraints on the availability of post-compulsory provision and we are only able to theorise how orientations condition behaviour within these limitations (Hodkinson ez al., 1996, pp. l49—l 50). The contribution of our sociological theory of participation may be easier to grasp, at least initially, where we are theorising participation decisions which involve less compulsion than occurs during compulsory schooling. Nevertheless our theory can be extended to explain the differences in attendance, classroom behaviour, educational achievement and so on which feature in studies of school pupils (see, for example, Brown, 1987).

A sociological theory of education and training participation illuminates differences between societies and so one of its interesting products is a contribution to our understanding of any
variations in economic performance that might be related to these differences. It is
now commonplace for relatively poor rates of education and training in the UK, and widening education and training gaps between the UK and competitor economies (Hugill & Narayan, 1995; Pyke, 1996), to be judged important causes of relative economic failure (Sanderson, 1972, 1988; Roderick & Stephens, 1981; Steedman er al., 1991).

Low absolute rates and declining relative performance in education and training are especially marked in patterns of participation in post-compulsory education and training and here the link to relative economic failure is thought to be particularly strong, especially when economic success is defined in terms of a high-skill and high-wage equilibrium (Finegold & Soskicc, 1988; also see Smithers & Robinson, 1991; Cutler, 1992; Green & Ashton, 1992; Keep, 1993, 1998; Istance & Rees, 1994; McNabb & Whitheld, 1994; NIESR, 1994).

Human capital theory is seriously flawed

To the extent that the approaches taken by policy-makers to such issues are
under-pinned by human capital theory, we believe they are seriously flawed (Rees et
al., 1997) but a sociological theory allows us to differentiate one type of orientation from another and isolate the type, for example vocational transformative, which underlies the sort of education and training that is required for high—skills.

Evidence can be found in all the industrialised countries of all of the ideal types of orientation to education and training …..but it is our contention that less evidence could be found in the UK of the vocational transformative type (Bynner, 1989) than in more successful competitors like Germany (and perhaps less instrumental credentialism than the US).

The prevalence of this orientation in the cultures of competitor countries goes a long way towards explaining the superiority of education and training in those countries and so also helps to explain their success, and the UK’s relative failure, in creating high-wage, high-skills jobs.

Desired sort of effect on economic performance

The state and employers must depend (they have no alternative) on finding the right sort of orientation amongst the population in order to make education and training have the desired sort of effect on economic performance (Keep, 1997, 1998). We know how little training UK employers undertake and so the ET that goes on in the UK is largely determined by the initiatives taken by the state. The problem with much of this state-sponsored activity lies in the well-recognised weak relationship between such provision and the requirements of employers.

Thus the state may have expanded educational provision at all levels but the same could not be said of training provision. This imbalance has been recognised (but hardly redressed) in a number of initiatives including, more recently, National Vocational Qualifications (NVQ) and Training and Enterprise Councils (TECs).

These initiatives help to contribute to the impression that the UK’s post-16 education and training provision is increasing (from its very low base) but there seems to be a serious risk that the UK will veer towards the US model of higher participation rates but with much education and training being of dubious value (Prais, 1993). We have already pointed to the evidence for a vibrant instrumental credentialism in the US (hence the attention paid to it by Berg, 1971; Collins, 1979 as well as by Dore, 1976 and Bourdieu, 1988) where education
provision has expanded in this way.

The actions of the state can be more effective in societies where the workforce are seen by all as the users of education and training (hence the importance of challenging human capital theory’s assumptions about who attaches utility to education and training—see below). For instance, Rees et al. (199221, p. 8) note that in South Wales ‘in marked contrast with the situation in other European countries, training opportunities feature on the agenda of collective bargaining in only a most limited way’ [9].

In societies which have more competitive economies than the UK the crucial connection between state provision and the needs of the economy is made by the people who are being educated and trained and the proof of this lies not just in the level of education and training but also in the content of the education and training they receive.

Where this vital connection is not made much education and training is limited (‘non-transformativc’, ‘mimetic’) and perhaps practically useless as far as the economy is concerned but, to repeat, the connection can only be made by the people using education and training and it will only be made by them if they have the right sort of understanding of education and training.

For example, they make this connection when they choose education and training to help them work better, when they choose education and training with generic vocational content, and in how they approach and value the education and training they receive. The connection between state education and training and employment is very weak (anywhere) unless it is made by the people being educated and trained.

The vocational transformative orientation which makes this connection, for example, can only develop in the UK if cultural change occurs. In order to find out what sort of change might be required we need to look both to Germany and other countries with similar orientations to education and training and to our own history.
Employers everywhere rely for innovation and competitiveness on an extra ingredient which is always (and can only be) provided by the workforce. This ingredient is, however, absent where people hold to functional avoidance and do not see themselves as the consumers of education and training. Such workers will only undertake the minimum, non-transformative and mimetic, education and training that their employers will insist on, and there is nothing in this to help the development of a high-wage, high-skill economy.

The same can be said of instrumental credentialism which simply produces credentials with no guarantees of useful content.

In so far as they concern themselves with orientations towards education and training, the working assumptions of policy-makers in the UK for a decade or more appear to have been
derived from human capital theory.

Where policies do take account of orientations people are simply encouraged to invest in their human capital (and existing investors are encouraged to make more of an investment). Most often this encouragement takes the form of exhortation but education markets, vouchers and credits can also be seen as attempts to make people behave in this way (Keep, 1997). Since such policies were first advanced by right-wing thinkers who claim an intellectual kinship with classical Utilitarians like Adam Smith this faith in human capital theory is hardly a surprise, but since they take no account of the real orientations people have
to education and training they are doomed to fail.

They fail because of the way human capital theory falsely assumes that people recognise utility in education and training and because of the way it falsely assumes that investment in human capital will occur when people behave as rational egoists (whereas we find that when they do behave in such a manner the education and training that arises looks very unlike investment in human capital).

Both mistakes are corrected by a sociological theory of education and training participation.

Policies designed to increase our investment in human capital without the benefit
of the insights derived from a sociological theory may actually lead only to an increase in instrumental credentialism which we have already suggested does nothing to improve our chances of developing a high-skill, high-wage economy.

Instrumental credentialist orientations may not be so common in some other countries (although this obviously excludes the US) and now we understand that, if instrumental
credentialism is not so common in Germany or japan, this may be an asset to those
countries, and policies which have the effect of increasing the prevalence of instrumental credentialism in the UK may be ill-advised.



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