Human Capital Human capital corresponds to any stock of knowledge or characteristics the worker has (either innate or acquired) that contributes to his or her productivity OECD: the knowledge, skills, competencies embodied in individuals that facilitate the creation of personal, social and economic well-being

How is Human Capital accumulated Learning within family and early childcare settings Families contribute to the development of human capital in their children through direct expenditures on educational materials etc and through time spent fostering learning habits and attitudes Formal education and training This includes activities ranging from early childhood education, school-based compulsory education, post-compulsory vocational or general education, tertiary education, public labour market education, adult education etc Workplace training Firms and organisations invest in human capital to develop those skills and competencies with economic value Informal learning This is a wider concept taking place through ‘on-the-job’ learning, in daily living and through civic participation

Strong Human Capital Benefits of stronger human capital Faster economic growth More skilled/productive etc Lower structural unemployment Transferable skills (nb this includes moving from agriculture to industry) Higher wages As long as the increased productivity and output is paid to labour Innovation Higher education and increased knowledge means more innovation/research and development. Link to STEM Reduction in poverty More people have the skills to take advantage of development (can move into industry/services etc) There ought to be positive spillover effects on labour productivity which contributes to higher trend economic growth . A higher skilled and more flexible labour force will be better able to adjust to changing technologies and changing patterns of demand and higher expected lifetime earnings and improved incentives to find work and reduced dependence on the welfare system. Stronger knowledge and skills will promote invention and innovation - two further ingredients of long-term growth. and social exclusion if more people have the skills, qualifications and competencies to remain active in an ever-changing economy

Importance for development The concept of human capital has relatively more importance in labour-surplus countries. The surplus labour in these countries is the human resource available in more abundance than the tangible capital resource. This human resource can be transformed into Human capital with effective inputs of education, health and moral values. The transformation of raw human resource into highly productive human resource with these inputs is the process of human capital formation. The problem of scarcity of tangible capital in the labour surplus countries can be resolved by accelerating the rate of human capital formation with both private and public investment in education and health sectors of their National economies The concept of human capital has relatively more importance in labour-surplus countries. The surplus labour in these countries is the human resource available in more abundance than the tangible capital resource. This human resource can be transformed into Human capital with effective inputs of education, health and moral values. The transformation of raw human resource into highly productive human resource with these inputs is the process of human capital formation. The problem of scarcity of tangible capital in the labour surplus countries can be resolved by accelerating the rate of human capital formation with both private and public investment in education and health sectors of their National economies.

Measuring Human Capital Educational attainment Difficult to measure so mostly years in school (used in HDI), literacy etc. Yet these have problems, eg years in school assumes all years are worth the same The value of the inputs that enter the production of human capital (input or cost-based approach) Spending on education Output (typically measured by labour market income) that stems from human capital (output or income based approach) ONS used this approach, using (discounted) lifetime earnings In the UK they calculated the value of human capital at £17.12 trillion in 2010, or more than 2.5 times the estimated value of physical capital In practice measures such as literacy (but not so useful in developed countries), years in school (used in HDI) A proxy only (difficult to measure and investment in 1 person may not yield the same returns as investment in another) The value of all future income streams, or perhaps the additional income from education ONS estimates human capital at £17.2 trillion in 2010 in the UK based on the output measure This is 2.5 times the value of the physical capital stock But note the importance of health and nutrition Note also Millenium Development Goals including universal primary education by 2015

Some results – UK only Human capital per capita Distribution of human capital 35.9 per cent of the human capital stock in 2010 was embodied in the 22.6 per cent of the working age population whose highest educational attainment is a degree or equivalent. In contrast only 5.4 per cent of the human capital stock is embodied in the 22.6 per cent of the working age population who have no formal qualifications

More results Highest and lowest qualification over time Average earnings by highest qualification

From HDI report Average years of schooling among adults over 25 are nearly three times greater in very high HDI countries than in low HDI countries. However, expected years of schooling, which better reflect changing education opportunities in developing countries, present a much more hopeful picture: the average incoming elementary school student in a low HDI country is expected to complete 8.5 years of school, about equal to the current years of schooling among adults in high HDI countries (8.8 years). Overall, most low HDI countries have achieved or are advancing towards full enrolment in elementary school and more than 50% enrolment in secondary school.

Current HDI HDI Life expectancy Mean years school Expected years school GNI per capita Arab States 0.652 71 6 10.6 8,317 East Asia and the Pacific 0.683 72.7 7.2 11.8 6,874 Europe and Central Asia 0.771 71.5 10.4 13.7 12,243 Latin America and the Caribbean 0.741 74.7 7.8 10,300 South Asia 0.558 66.2 4.7 10.2 3,343 Sub-Saharan Africa 0.475 54.9 9.3 2,010 Very high human development 0.905 80.1 11.5 16.3 33,391 High human development 0.758 73.4 8.8 13.9 11,501 Medium human development 0.64 69.9 6.3 11.4 5,428 Low human development 0.466 59.1 4.2 8.5 1,633 World 0.694 70.1 7.5 11.6 10,184