I have been reading the ONS report on Human Capital Estimates by Richard Jones and Valerie Fender which I missed when it came out in December.
The very phrase ’human capital’ can cause uneasiness in anyone who has ever seen the records of the Slave Compensation Commission which put a value on each slave – sometimes in chilling language – as part of the reckoning of reparation due to the plantation owners for their loss of assets following Emancipation, or read William Gladstone’s maiden speech to Parliament in 1833 arguing for better terms for the ‘West India interest’ of which his own father was a prominent member. So it comes as something of a relief to find that the United Nations System of Accounts makes it perfectly clear that expenditure on human capital investments should not be treated as fixed assets because, “they are embodied in the individuals as persons” and “cannot be transferred to others and cannot be shown in the balance sheets of the enterprises in which the individuals work” ...
The work extends a meaty intellectual challenge & the authors present a useful summary of recent thinking , with references going back to Petty & Farr, settling in the end for an approach based essentially on discounted future income streams.
On this basis the UK's human capital stock in 2010 was £17.12 trillion, more than two-and-a-half times the estimated value of the UK's tangible assets, (buildings, vehicles, plant and machinery etc) for the beginning of 2010, but £130 billion lower than the estimate for the human capital stock in 2009.
That this could happen, despite improvements in educational attainments and increased longevity, is entirely down to the fall in real wages caused by the recession.
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