The Labor Supply Effect Of Human Capital Accumulation:a Research From Structure Perspective

Labor supply issue is a core issue of labor economics, the research around labor supply throughout the whole process of economic development and related in nearly every fields of economics. While in China, the labor supply issue is a really new-born phenomenon, just be observed and concerned in recent years. Over the past30-years. the demographic bonus delivered by changes of the population structure played a key role in economic growth, been taken as one of the most important engine of economic growth in China... While time changes everything, when steady strong labor demand driven by growth of economic meets the shrinking labor supply, the labor supply issue comes unexpected. Accompanied the universalization of "labor shortage" and migrant workers’wages keep rising, the discussion around "Demographic dividend disappear and "Lewis turning point coming soon" become more and more heated. Despite the labor shortages have not yet come true, generally, the scholars believe that the total labor force and the number of employees is still very rich in the next10-15years, but the sixth census shows that the national working-age population growth rate to decline further. Especially the statistical bulletin released by the Bureau of Statistics shows till the end of2012, the absolute number of the country’s15-59year-old working-age population has decline over345million, which shows that the process of labor force resource shift from the unlimited supply to limited remaining is occurring. In recent years, despite the government, employer and economist gave a great effort to solve this issue, but the shortage of labor force became more severely rather than fixed. Consider the increasingly tight constrain of labor resource, academia formed a consensus that human capital accumulation should be the main way to solve the labor supply issue in future.In this paper, we define the labor supply issue with three aspects:labor participation rate, production capacity and the effectiveness of labor supply. The labor participation rate decides the quantity of labor supply in whole, no matter employed or unemployed, so it plays the role like the pool of labor supply; the production capacity of labor decides the maximum output can be achieved in the given labor supply; the effectiveness of labor supply decides the percentage of the quantity and quality of labor supply can be used in real production process and economic growth.Given the restriction of labor resource and the distribution of gap between labor demand and supply, seeking increase in the number of labor force participation to solve the problem of labor supply under the current situation in China is unsustainable. To solve the issue we faced now has to change minds to human capital, evoke the labor force participation rate, promote the labor productivity and improve the effectiveness of labor supply by enhanced the investment of human capital, improve the stock of human capital and lead the restructure of human capital.From the human capital aspect, the structure of human capital accumulation affects the labor supply as its stock. Firstly, the individual distribution structure of the human capital affects the participation rate of labor through the male and female, the person with residence of urban and rural have different labor supply elasticity of human capital accumulation, so given the stock of human capital investment, adjustment the investment structure and fill the human capital accumulation gap between male and female, urban and rural residence can get the optimal growth in labor participant.Secondly, the Internal hierarchy of human capital affect the labor productivity through the homogeneous and idiosyncratic human capital effect the labor productivity in totally different way and get different result. So given the quantity of labor supply, enhanced the investment of human capital will promote the productivity of labor; especially, the idiosyncratic human capital can extrapolation the production possibility frontier and release rely on the quantity of labor input.Finally, the external structure of the human capital matched with physical capital affect the effectiveness of labor supply. The participation rate of labor and the productivity of labor supply are just the potential of labor supply unless the labor become employed and matched with the physical capital well. From this article’s point of view, whether the labor’s productivity can be exerted is depends on the degree of matching of human capital he or she accumulated and the physical capital the job offers.In short, the participation rate set the potential of labor can be employed:the productivity of labor set the maximum output can achieve:and the effectiveness of labor supply decide how much labor supply are the "real" labor supply and promote the output and economic growth.In this paper, we try to find the solution for the labor supply issue in China from the view of human capital structure. Thus, the key questions we have to answer are: Does the structure of human capital have impaction on labor supply? How to measure the labor supply effective of human capital structure?In order to answer these questions clearly and systemically, we divide it into three sub-questions:(1) whether the individual distribution of human capital affects the participation rate of labor? Can we figure out the path of this affection? Can we estimate it?(2) Does the internal hierarchy of human capital affect the productivity of labor supply? How does such affect come true and how much does it affect the capacity of output?(3) What is efficiency of labor supply? How does the efficiency of labor supply affect the output and economic growth? Does the external structure of the human capital matched with physical capital have impact on the efficiency of labor supply?For the first question, we tried to analysis and figure out the path of individual distribution affect the participation rate of labor supply. Based on the theory of labor supply decision, we analyzed the influencing factors of labor supply decision of people of different individual characteristics. We found that for people of different individual characteristics, the labor supply curve and influencing are all different because the budget constraints and time constrains them faced are different, so, the utility function and elasticity of labor supply are all different. Use the micro-individual-data from UHS data base; we did empirical research to see the difference effectiveness of human capital accumulate on labor supply decision between people of different individual characteristics. Based on Probit model, with Stata10.0, we found that given the same accumulation of human capital, females incremental on labor supply are much greater than male, also the people with residence of rural labor supply incremental are much greater than the urban.It means given the investment of human capital, by adjust the investment structure be tilted to the female and rural, can obtain the greatest incremental of labor supply, by build a counterfactual distribution, we did an estimation about how much labor supply incremental will occur if the females’stock and distribution of human capital are growth to equal with male; and the rural’ stock and distribution of human capital are growth to equal with the urban. We found by adjust the structure of individual distribution of human capital can evoke the females’ participation rates growth about2.6%, and the rural’participation rates growth about2.8%.While both the accumulation and structure of individual distribution of human capital have an effect on labor supply and will promote the labor participation rate, but the increase is not such attractive, the potentials of incremental are only2.6%and2.8%for woman and rural residences.For the second question, we analyzed how does the internal hierarchy of human capital affects the productivity of labor supply. Based on the endogenous growth theory, we analyzed the way how homogeneous and idiosyncratic human capital affect the labor productivity, we found that, the homogeneous human capital promote the labor productivity directly, while the idiosyncratic human capital not only promote the labor productivity directly, but promote technological innovation and improve the economic efficiency at the same time, In the empirical research, we use the panel data of31provinces; use the random effects model for panel data do the regression of the internal hierarchy of human capital and the productivity of labor supply, the result of empirical research confirmed our assume:the homogeneous human capital promote the labor productivity and output directly, but do not have an significant impact on the efficiency and innovation; on the contract, the idiosyncratic human capital car, promote the output and labor productivity directly, but the affection is not very strong, but at the same time. It can promote the efficiency and innovation strongly.For the third question, we defined the conception of "Effective Labor Supply’ and propose a method to estimate the effectiveness of labor supply. Based on the endogenous growth theory and MRW model, we proved that on the Balanced Growth Path, there is an optimal ratio of human capital/physical capital on stock in comparative static and on accumulative in dynamic. With the industry data, we calculate the coordinate of human and physical capital in China, found that the coordination between human and physical capital is quite well, that is why China has achieved high-speed, stable economic growth with quite low stock of human and physical capital---the high coordination between human and physical capital ensure the capacity can be exert perfection, which will enhance the return to human and physical capital, encourage the investment of these two capital.In summary, the structure of human capital have a great affection on labor supply, the individual distribution of human capital affect the participation rate; the internal hierarchy of human capital affect the production capacity; and the external matching structure affect the efficiency of labor supply.Given the restriction and circumstance of labor resource in China, we suggest the best way to resolve the labor supply issue is to enhance the accumulation of idiosyncratic Human Capital and improve the coordination, evoke the innovation and promote the efficient of economic, optimize the efficiency of labor supply to reduce the dependent on the quantity of labor supply.