Theory of human capital

In the seventeenth-century Florentine textile industry, women were employed primarily in low-paying, low-skill jobs. To explain this segregation of labor by gender, economists have relied on the useful theory of human capital. According to this theory, investment in human capital – the acquisition of difficult job-related skills – generally benefits individuals by making them eligible to engage in well-paid occupations. Women’s role as child bearers, however, results in interruptions in their participation in the job market (as compared with men’s) and thus reduces their opportunities to acquire training for highly skilled work. In addition, the human capital theory explains why there was a high concentration of women workers in certain low-skill jobs, such as weaving, but not in others, such as combing or carding, by positing that because of their primary responsibility in child rearing women took occupations that could be carried out in the home.
There were, however, differences in pay scales that cannot be explained by the human capital theory. For example, male construction workers were paid significantly higher wages than female taffeta weavers. The wage difference between these two low-skill occupations stems from the segregation of labor by gender: because a limited number of occupations were open to women, there was a large supply of workers in their fields, and this “overcrowding” resulted in women receiving lower wages and men receiving higher wages.

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Theory of human capital