Mobility and Formal Education in the Human Capital Accumulation Process: The Case of Israel

Abstract

Ever since the pioneering analysis by Becker (1964) of the concept of human capital, a distinction has been made between general and specific investment in human capital. This distinction is of particular interest when analysing the effect of mobility on wages. On one hand as a response to expected gains in wages, mobility has a positive effect on individual wage growth. On the other hand, since on-the-job training often corresponds to specific investment in human capital, mobility will be a deterrent to wage growth. Mobility however may be of several types: there is occupational, geographic and inter-firm mobility and a change of job may involve several of these changes. It is therefore important to find out whether there are differences in the effect on earnings of each of these types of mobility. But mobility is only one aspect of the human capital accumulation process. Formal education is an alternative route and corresponds more to what is called general investment in human capital. One may therefore wonder whether the human capital accumulation process occurs more via mobility or via the formal educational system. This question may be of particular interest when looking at Israeli data because the large waves of immigration of the 1950s as well as the existence of a long military service (three years for males) may have created in this country a situation where on-the-job training might not have been favoured by employers. The purpose of this study is precisely to take a look at these trade-offs, analyse the level and types of mobility in the Israeli labour market and compare the impact on earnings of the various types of mobility with that of the level as well as the kind of education received. The study focuses on high school and university graduates in the Israeli labour market. A first section presents some background data on the labour force in Israel from the creation of the state until the mid-1970s. The second section attempts to find out who is mobile and what kind of mobility is involved, while the final section looks at the impact of mobility and education on earnings.