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Developments in the estimation of the Value of Human Capital

Overview
What

is human capital and its measurement scope?

Key

Challenges
Methodology

Research

Key

experimental statistics and major findings so far


to policy analyses

Relevance Possible

future directions

What Is Human Capital and Key Definitions

Human

capital can be broadly defined as productive capacity embodied in

individuals
Input

view of human capital: innate ability, education, training, experience,

health care, etc.


Output

view of human capital: enhanced earnings, better health, informed

political participation, better parenting, etc.


Human

capital theory focuses on relationship between education and wages

How to Measure Human Capital


Any

measure of an asset has quantity and valuation dimensions dimension: educational attainment, work experience, skill level, test

Quantity

scores and other indicators of cognitive and non cognitive abilities


Valuation

Cost - the value of resources devoted to human capital formation Yield methods - the value of output created in the production of human capital Two methods are same in theory but vastly different in practice

Key Challenges
Capital

theory is one of the most difficult and contentious topics in

economic theory
The

measurement of capital is one of the most complex dimensions in the

official national accounting system


More

challenging for human capital

Many unknown factors that serve as inputs in the production of human capital

Data available does not directly measure the theoretical concept of human
capital The value of human capital has to be imputed

List of Some Companies


Standard Chartered Bank Unilever

Kingfisher
Co-operative Group ltd Barclays Home Retail Group Vodafone Group

Research methodology
These organisations were selected randomly Large enough sample to gain an idea of the standard of the HCM reporting The criteria used in the research were using various existing reporting criteria and in-house expertise The criteria were split into three key groups
Strategic intent Governance and assurance Policy and performance

Research methodology
The percentage score in each group of criteria was worked out by calculating the percentage of the total possible number of points for that group

This technique was also used to calculate the overall percentage scores

Groups of Criteria
Strategic Intent - This group of criteria was concerned with disclosures on HCM strategy setting; key and material HCM issues for the business; evidence of engagement with employees on material issues Governance and assurance- This group of criteria related to evidence in the organisations report as to whether there was a robust governance structure in place to manage HCM and sustainability issues and a whistleblowing process for grievances to be aired Policy and performance - This group of criteria related to evidence that performance in material HCM areas was both managed and measured in terms of key performance indicators and narrative disclosures.

Overview of Groups of Criteria

Key Findings from Measures of Per Capita Human Capital

Average

human capital for men grew at 0.6% annually Average human capital for women grew at about 2.8% annually Overall average human capital grows at 1.3 % annually Narrowing gaps may be mainly due to Increasing labor force participation rate for women and decreasing labor force participation rate for men Narrowing gaps between male and female earnings

Key Findings from Measures of Per Capita Human Capital

Significantly increased proportions of more-educated workers, in particular for women Annual growth rate of human capital stock for men is 2.0% between 1981-2001 Annual growth rate of human capital stock for women is a massive 4.2% between 1981-2001 Overall growth rate is 2.8% between 1981-2001

Possible Future Directions

Construction

of database linking Census data, labour force statistics, data on

labor earnings and hours of work, education and migration statistics


Refining

estimates by relaxing some assumptions and incorporating latest

developments in relevant fields


Measuring

the contribution of human capital to social well-being

Construction

of education and health satellite accounts using human capital

approach

Questions/Comments

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