The statement below is from the blue box question page 446 of the Volume 2. Why the HC is higher with two teachers while the accumulative wages of them are lower?
"the human capital value of the couple consisting of the petroleum engineer and the non-working spouse is likely lower than the combined human capital value of the high school teachers, although the combined lifetime cumulative wages of the teachers is likely lower than those of the engineer and the spouse.
Human capital is not the sum of cumulative future wages, but rather the value of those wages discounted back to the present. The discount rate is the risk free rate plus a risk adjustment based on income volatility. The engineer’s future wages are subject to more risk than the teachers, thus the engineer’s HC discount rate is higher. Higher discount rate = lower present value of HC.
Otherwise, you may use yield on corporate bonds as a discount factor for HC. Especially issued by company in sector where is particular person employed. Such discount factor contain acceptable risk premium.
Great to know! Thank you both for the help!