Beyond a human capital approach to education and the labour market: the case for industrial policy

This chapter argues that human capital theory cannot provide the policy guidance required to address the problems of graduate underemployment and the dispersion of graduate incomes. These problems should not be seen as arising from the Great Recession and hence, as human capital theory would predict, are temporary. Rather, they have been caused by structural changes to the global labour market. The chapter argues that globalization has led to a ‘global auction for jobs’, not only in low-skill employment but also in high-skill employment, which is beginning to ‘squeeze’ (graduate) job opportunities and incomes, particularly in Western economies. This is combined with a restratification of knowledge-based (graduate) work, which is generating wider income dispersions between new (chosen) elites and other graduates (many of whom are employed in ‘non-graduate’ work). In this regard, the challenge is to move away from a traditional (neoclassical) human capital approach and for industrial policy to help facilitate a greater supply of graduate-type jobs