Myth or realities of human capital theory: evidence from higher education and labour markets in Malaysia

Abstract

Investment in higher education is promoted by reference to the human capital theory developed by Mincer (1958, 197 4 ). Malaysia is no exception. However, little critical appraisal has been made of the underlying theory despite the fact that the applied studies have yielded contradictory results on the impacts of (higher) education on economic growth. This paper situates itself as a critical attempt of the neglected aspect and exposes myth and realities of the human capital theory in the context of Malaysia. It argues that it entails the intrinsic limitations of analysing reality due to the unrealistic theoretical foundations. Evidence from higher education and labour markets in Malaysia clearly show that a number of phenomena inconsistent with it abound in the multiethnic country, thereby invalidating the theory itself. This means that any analytical schema and policy results derived out of it are not relevant in the Malaysian context. Hence, the human capital theory must be refuted in the Malaysian context as a theory, as an analytical tool and as a policy guide.