Abstract:
Theoretically, a positive relationship is expected between human capital investment
and labour market outcomes. It is anticipated that a greater possession of human
capital will increase Labour Force Participation (LFP) and Employment probability
(E). Using the Quarterly Labour Force Survey Data for 2004, this study examines the
relationship between two types of human capital investments (formal education and
vocational training) on LFP decisions and the classification of the labour force
between Employment (E) and Unemployment (U). Vocational training data for all
eligible aged people have not been collected after this year. The empirical findings of
this study support the hypothesis that both the LFP decision and Employment
probability increase with formal education. This is interpreted in terms of increased
opportunity of not working with increased volume of human capital. The time cost of
persons possessing a greater volume of human capital is higher. However, the
employment probability is negatively related with formal education and the effect of
vocational training on employment is negative but statistically insignificant. This is
interpreted in terms of increasing job expectations and higher reservation wage with
increasing human capital investment. People with a higher volume of human capital
have higher job expectations, and, therefore, they stay unemployed voluntarily until
they find a desirable job. The LFP decision and Employment probability are found to
be correlated with gender, ethnicity, and location. LFPR and employment probability
are higher among males and respondents of the plantation sector. Vocational training
helps in reducing the LFPR and employment gaps by gender, ethnicity, and location.
