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Developing US Human Capital Maj Ryan Messer NS 3041.

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Presentation on theme: "Developing US Human Capital Maj Ryan Messer NS 3041."— Presentation transcript:

1 Developing US Human Capital Maj Ryan Messer NS 3041

2 Overview Defining Human Capital The Importance of Human Capital Rates of Return for Various Education Levels The Effects of Human Capital on the Economy Measuring Human Capital Policies for Enhancing Human Capital Implications for US policy

3 Defining Human Capital (HC) Human Capital = the sum total of skills within an individual Not just natural skills, but those acquired through specialized training and education

4 The Importance of Developing Human Capital Productivity is the efficiency with which we convert inputs into outputs – technology, skills Globalization and Structural Changes have increased pressure on low-skilled workers Options are: – Ignore globalization – Cut wages – Accept higher unemployment – Invest in Human Capital

5 Rates of Return for Various Education Levels Poverty rate is twelve times higher for high school dropouts than for college graduates In 1980s, college grad made 40% more than a high school grad, today its 80% more For every additional year of education beyond HS, income increases by ~10%

6 The Effects of HC on the Economy Increase the rate of growth of Human Capital – Increased GDP

7 The Effects of HC on the Economy Increase the rate of growth of Human Capital – Increased GDP – Increased Freedom

8 The Effects of HC on the Economy Increase the rate of growth of Human Capital – Increased GDP – Increased Freedom – Increased Research and Development = Increased Innovation How do you Measure HC Development?

9 Measuring Human Capital Years of Education – Avg. years of education; – Assumes same quality in each country – Treats all degrees the same 10% increase in HC = 9% increase in GDP per capita In US, 9% increase in GDP per 1.3 years

10 Measuring Human Capital Attainment Rates – Compares the Present with the Past

11 Measuring Human Capital Enrolment Rates – A View of Future Human Capital Quality of Investment High Quality and High Enrolment Requires a Significant Investment

12 Policies for Enhancing HC Developing Human Capital starts at the youngest age possible – Spending should focus on Kindergarten – HS Improve aid, grants and tax codes to make higher education affordable Adam Smith saw two roles for the government – Support institutions facilitating commerce – Support educational institutions Equal educational opportunities is more sustainable than transferring money from the rich to the poor

13 Implications for US Policy This a long term investment, beyond two terms in office In times like these, it is an expense America can get behind

14 Final Thoughts Investment in education pays the best interest - Benjamin Franklin The most valuable of all capital is that invested in human beings – Alfred Marshall

15 Summary Defining Human Capital The Importance of Human Capital Rates of Return for Various Education Levels The Effects of Human Capital on the Economy Measuring Human Capital Policies for Enhancing Human Capital Implications for US policy

16 Questions?

17 References Bergheim, Stefen (2005). Human Capital is the Key to Growth, Deutsche Bank Research Bergheim, Stefen (2005). Global Growth Centres 2020, Deutsche Bank Research OECD (2004). Education at a Glance, Paris Smith, Adam (1776). The Wealth of Nations Wheelan, Charles (2002). Naked Economics: Undressing the Dismal Science, New York


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