THE DANGER OF DEGRADATION OF EDUCATION SYSTEM AND LABOR MARKET INTHE CASE OF MISALIGNED MOTIVATIONS

Abstract

The positive correlation between expected wages of workers  and  additional steps  of  education  attainment has been studied extensively, as well as inverse relation between education level in the country and unemployment rate. Thus, it is important to analyze education and labor markets in relation, more so with the presence of imperfections in these markers. Coordination may fail on markets of asymmetric information when there are high and low quality products, which are indistinguishable. This can cause degradation of the market. In order to avoid it, motivations of each side should be aligned correctly on education and labor markets. This can only be achieved if the education system is constructed with right motivators for both sides right from the base. Education cannot be a useful signal to employers if educational attainment cannot be used as a way of distinguishing employee’s skills from others’.