Phillip Brown - The Death of Human Capital?

Oxford University Press is a department of the University of Oxford. It furthers the Universitys objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and certain other countries.

Published in the United States of America by Oxford University Press

198 Madison Avenue, New York, NY 10016, United States of America.

Oxford University Press 2020

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by license, or under terms agreed with the appropriate reproduction rights organization. Inquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above.

You must not circulate this work in any other form and you must impose this same condition on any acquirer.

Library of Congress Cataloging-in-Publication Data

Names: Brown, Phillip, 1957 author. | Lauder, Hugh, 1948 author. |

Cheung, Sin Yi, author.

Title: The death of human capital? | its failed promise and how to renew it in an age of disruption

/ Phillip Brown, Hugh Lauder and Sin Yi Cheung.

Description: New York : Oxford University Press, 2020. |

Includes bibliographical references and index.

Identifiers: LCCN 2019055840 (print) | LCCN 2019055841 (ebook) |

ISBN 9780190644307 (hardback) | ISBN 9780190644314 (paperback) |

ISBN 9780190644321 | ISBN 9780190644338 (epub)

Subjects: LCSH: Human capital. | Labor market. | Competition.

Classification: LCC HD4904.7 .B74 2020 (print) | LCC HD4904.7 (ebook) |

DDC 331dc23

LC record available at https://lccn.loc.gov/2019055840

LC ebook record available at https://lccn.loc.gov/2019055841

We would like to thank James Cook, from OUP, who has shared a vision of our intellectual aspirations for over ten years. We first talked about this book with him after The Global Auction (2011), and he has continued to offer invaluable support. Our thinking has also been informed by friends and colleagues across the globe, including Tien-Hui Chiang, Greg J. Duncan, Brian Easton, Soon Joo Gog, Craig Holmes, Ewart Keep, Antonia Kupfer, Henry (Hank) Levin, Caroline Lloyd, Ken Mayhew, Richard J. Murnane, Chris Martin, Nick Pearce, Robert B. Schwartz, Ivan Snook, Heike Solga, Manuel Souto-Otero, Johnny Sung, and Gerbrand Tholen.

Such views sat comfortably with the idea of the American Dream, whereby individual rewards should reflect differences in ability, skills, and economic contribution. It was an open invitation for all those with ability and desire to succeedregardless of social background, gender, or raceby investing in their human capital. An invitation that governments around the world have accepted: schools, colleges, and universities have been transformed into the drivers of capital accumulation in a new form of exchange where learning equals earning. It is estimated that close to a third of Americans are involved in education as students, teachers, college professors, or trainers. Globally, trillions of dollars are spent by governments, companies, families, and students in the hope that these investments will deliver economic growth, higher productivity, or a larger paycheck.

But as more people are encouraged to get a bachelors degree, the competition for credentials and the scramble for decent jobs have intensified.

Young people in many countries have protested in the streets or on campuses against economic austerity and broken promises as national governments struggle to fund increasing student numbers and provide decent job opportunities. A report on intergenerational trends found that pessimism about the living standards of younger generations is

Paradoxically, orthodox human capital theory has become a victim of its own success in getting individuals, families, and governments to believe that investments in education and training remain the route to better jobs, higher incomes, and economic growth. The massive growth in college diplomas and degrees that national governments believed were needed to meet the rising demand for high skills has instead resulted in credential hyperinflation.

It may seem surprising to talk about the death of human capital at a time when record numbers of people are in higher education and employers continue to complain about a shortage of skilled workers. This book does not argue that skilled labor is becoming less important or that we are approaching the end of work in a world in which robots will take over. But we are arguing that the orthodox theory of human capital, which has guided public and economic policy, is no longer fit for purpose in the twenty-first century.

Our argument is that a new theory of human capital is required to address todays challenges presented by global competition, new technologies, and economic inequalities. have a much wider understanding of contributions to society than is assumed by orthodox economics.

The new human capital is based on the idea of job scarcity as distinct from labor scarcity. Despite various attempts to update orthodox theory in light of the growing evidence calling into question the efficacy of educational investment to deliver economic growth and higher wages, many economists They take this view because orthodox theory assumes that the more skilled a worker becomes, the greater their individual productivity and the more they will be paid.

David Autor, an MIT economist, writes, The primary system of income distribution in market economies is rooted in labor scarcity; citizens possess value, as people will be paid what they are worth, reflected in differences in individual productivity.

Our alternative theory is premised on job scarcity due to a capacity problem at the heart of market economies. We reject the view that new technologies invariably increase the demand for higher-level skills, or that the supply of more educated workers will energize employers to invest in new to win a competitive advantage.

Redefining human capital in the context of job scarcity leads to the study of how people seek to capitalize on their knowledge and skills in fundamentally different economic and social contexts. It rejects the idea of humans as capital because people cant be reduced to what they earn from learning or from the stock of their knowledge. It recognizes differences in how people understand, utilize, and seek to make a life from their knowledge and skills. It also recognizes differences in social and historical contexts, rejecting claims to a universal relationship between learning and earning.

Human societies are the foundations for capital accumulation (and translation) that have never been flattened in the shape of perfect competition or stable preferences. We cannot deduce from first principles the processes by which people capitalize and translate their resources into productive contributions. This requires a contextual understanding of how processes of capitalization and translation are turned into human capital.

This highlights the translation work required of individuals, employers, and nations typically ignored by orthodox theorists. When

We do not underestimate the scale of our task as orthodox human capital theory is so deeply ingrained in our societies and the way people have come to think about education, work, contribution, and income inequalities. There is a major challenge in showing how the economy does not start and finish with what commands a wage or that education is little more than an economic investment.