Human Capital

If you’ve ever held a job and gotten paid for it, you were flexing your human capital muscles.

Human capital is the knowledge and skills that people bring to the economic table. Anything that contributes to creating economic value that comes from workers counts as human capital.

Things that you learn in school, like technical skills and business skills, aren’t the only things that count as human capital. People-skills, creativity, and knowledge work (think: marketing, research, etc.) are also things that fall under the human capital umbrella.

The more people who gain work experience and build their skills via education, the more human capital is being built up. However, just because you have human capital doesn’t mean you’re using it. For instance, a doctor who used to work an office job may not be using all of their office job skills, but they are using their doctor skills, which provide value to the economy.

For firms, capital is the material “stuff” capitalists use in the long-run (called "factors of production") in order to make money. Everything from property and factories to equipment and patents are all types of capital.

The missing ingredient to this capital-pie? Yeah: human capital. Somebody's gotta tell those machines what to do. For now, at least.

Human capital is the value that workers can bring to their employers. It's the economic value potential a worker has, given all of their knowledge, their experience, and their particular skill set.

Different jobs require different kinds of human capital. Restaurant servers need to be able to hold inordinate amounts of plates on their arms while putting on a smile. Data analysts need to know lots of math, and how to use spreadsheets. Construction workers need to know how to work the equipment, pour concrete, and whistle crudely at women passing by the site. Middle school teachers need to be part-teachers, part-babysitters, and part-disciplinarians. Depending on which ones you ask.

Everyone who has a job is in some way using their human capital, which contributes to their employer and to the economy as a whole.

Human capital isn’t fixed. With more education comes more human capital. Yet, if people are underemployed (meaning they're overqualified for their job), it means there's human capital being left on the table.

For instance, a trained neuroscientist working as a Sandwich Artist at Subway has a lot of human capital that's not being utilized, resulting in a loss of value for the economy...albeit some expertly assembled tuna wraps.

The interesting thing about human capital is how it relates to technology. As our human capital has grown as a society, so too has our technology. Advanced human capital has allowed us to create all kinds of crazy-advanced tech. And yet, now technology is beginning to replace the need for human capital. From flipping burgers and driving cars to creating music and writing news articles, it's increasingly common that the robots we've made are replacing the need for us, their makers. Human capital is being replaced by capitalists with technological capital.

Which makes sense if they can do the job, right? Robots aren’t late to work, they don’t hate their bosses, and they don’t shed hair and skin. It makes sense for the trend of technological capital to continue replacing human capital if the pros outweigh the costs.

Which is a problem, since workers need human capital in order to work; otherwise, they’ve got nothing to offer the economy, and can't get a job. And if a lot of people can't get jobs, a lot of people won't be spending money...which would kind of put a damper on the economy.

Well, if all else fails, maybe the robots will just take care of the problem for us...one way or another.