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College: To Go or Not To Go - That is the Question
Subject Investment in human capital
Topic Labor markets
Key Words Skilled trades workers, unskilled workers, labor market, labor unions, trade associations, apprenticeships, debt
News Story

Tampa Bay area businesses that employ skilled trades workers, such as most of the construction industry, have been relatively unaffected by the recession and September 11. That has translated into a strong job market. For example, Construction Contractor Services (CCS), a placement company, has openings for skilled workers, but will also consider unskilled workers who want to learn a trade. Similarly, Acclaim Cabinets, which manufactures and distributes cabinets, is prepared to reassign unskilled workers, such as in the warehouse, to learn skilled jobs on slower days.

Trades can also be learned during high school, such as at the Tampa Bay Technical Institute, or in college, such as at Hillsborough Community College. Labor unions and trade associations often offer apprenticeships.

While CCS pays $7 an hour and Acclaim pays $12 for unskilled laborers, skilled workers earn $20-22 an hour at CCS and $15-16 at Acclaim. Joseph Narkiewicz, the executive vice president of the Builders Association of Greater Tampa states, " In three or four years, someone coming out of high school could easily be earning as much as a college graduate. And they wouldn't have the debt and the expenses of going to college. In fact, they could be earning money instead of spending it for those four years.

(Updated October 10, 2002)

Questions
1.

a) What factors enter the calculation of the net present value of an investment in education or training?
b) What is the formula? Explain what it means in words.

2. Mr. Narkiewicz is skeptical of the value of a college education compared to learning a trade on the job.
a) With reference to the factors in the investment formula, explain why he sees the net present value
of on-the-job training for a skilled trade to be greater than for a college education.
b) Why is Mr. Narkiewicz's view shortsighted? Again, refer to the factors in the formula.
3. a) To the extent that the labor market for skilled tradespeople is stronger than the market for college-educated workers, what will happen to the wage differential between the two groups on average? Draw a labor market diagram of the supply and demand for each type of worker to illustrate.
b) What will happen to the amount of investment in a college education on average?
Source Marty Clear, "Work has been steady for skilled tradespeople, unskilled laborers," Tampa Tribune, June 16, 2002..

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