Conclusion

This concluding chapter provides arguments based on mounting research evidence showing that, for many, learning is not earning. It also rests on the contention that historical possibilities exist to improve the quality of individual and social life through the transformation of economic means—in other words, by developing a new way of thinking about human capital. The chapter goes on to confront future prospects for the new human capital, even as these prospects depend on rebalancing the power relations between capital and labor. To conclude, the chapter calls for a different narrative that connects with the disconnections in people’s lives—their sense of disappointment, alienation, and unfairness. However, the distributional conflict revealed at the very heart of capitalism, which is central to the crisis of human capital, remains to be resolved.

Rethinking Labor Demand

This chapter turns to questions of labor demand at the heart of the new human capital. It rejects Gary Becker’s claim that orthodox theory offered an entirely new way of looking at labor markets, where the main focus is on labor scarcity and a skills competition, in which individuals, firms, and nations compete on differential investments in education and training. It also rejects David Autor’s claim that the issue is not that middle-class workers are doomed by automation and technology, but instead that human capital investment must be at the heart of any long-term strategy for producing skills that are complemented by rather than substituted for by technological change. The chapter argues that the new human capital rejects the view that demand issues can be resolved through a combination of technological and educational solutions. Rather a jobs lens is required to shed new light on changes in the occupational structure, transforming the way people capitalize on their education, along with the distribution of individual life chances.

Rethinking Labor Supply

This chapter redefines labor supply within the context of the new human capital. It seeks to recapture a wider understanding of education and human capabilities, given long-standing objections to treating individuals as passive consumers of knowledge. Labor supply is thus understood as a way of developing individual freedom and rebuilding social cohesion at a time of profound social and economic change. The chapter points out that the relationship between individuals, education, and employment in an era of twentieth-century industrialism is no longer appropriate in an age of machine intelligence. What it means to be educated, along with what it means to be employable, changes in different economic and spatial contexts and in relation to different models of employment.

The Mirage of Opportunity

This chapter shows how orthodox theory has contributed to the destruction of the neoliberal opportunity bargain, and how it has become part of the problem rather than a policy solution. Beyond stagnant, if not declining incomes, there are three further symptoms, namely, credential inflation, elite closure, and a narrowing of academic purpose to “education as employability.” Credential inflation is at the heart of a human capital currency crisis given a decline in the exchange value of credentials. The goal posts move with almost every graduation ceremony, and the rules of the game change as employers look beyond credentials in making their hiring decisions. Many people are being priced out of the market not because they are stupid or lack ambition but because they do not have the resources to stay in an extended competition; at the same time, elites are using their social advantage to win a competitive advantage by monopolizing elite institutions and accessing international networks.

The High Tide

This chapter examines the enduring appeal of orthodox human capital theory. It looks at the reasons why, in the life cycles of theories, it reached its high tide before the global financial crisis in 2007 but continues to enjoy widespread policy appeal. The chapter illustrates two closely related themes brought together in the 1980s which gave some credence to Becker’s claim that the world had entered an “age of human capital.” The first describes the political ascendency of neoliberalism, which shares common ground with Becker’s economic approach. The second shows that what made neoliberalism a viable, if inherently flawed approach to public policy was the idea of a fundamental transformation in economic organization, wherein human capital is viewed as the most important driver of economic development. This chapter also considers how these themes were taken up and developed into an international framework of human capital development, perpetuating the view that education and the skills upgrading of the workforce remain the key to individual prosperity, improved productivity, and economic growth.

Origins

This chapter discusses the history of human capital theory. Before the mid-twentieth century the idea of human capital had a checkered history. Ideas linking the role of human labor to wealth creation can be traced to the works of Aristotle, Ibn Khaldun, and Thomas Aquinas. The chapter examines the ideas posed by notable economic theorists and thinkers such as Adam Smith, Alfred Marshall, Theodore Schultz, and Gary Becker. It shows how the ideas developed by these thinkers extended to a wide range of issues concerning the relationship between education and the labor market. In turn, they were able to influence policy in such powerful ways that their legacy remains. Above all, their influence shaped the way education is viewed in many countries: as an investment in the economic fortunes of the individual and the nation. This view gradually emerged as the dominant one, but was triumphantly sealed by the advent of neoliberalism in the 1980s.

Introduction

This introductory chapter outlines an alternative theory of human capital based on job scarcity rather than labor scarcity. This is done in the context of a changing economy, wherein orthodox human capital theory has resulted in credential hyperinflation. The new human capital proposes to address challenges presented by global competition, new technologies, and economic inequalities. To develop an alternative theory, the chapter reexamines the role of human beings and their relationship to capital. It argues that the story of human capital represents a conflict at the very heart of capitalism, where the outcome is yet to be decided. The new human capital involves rethinking supply, demand, and return, and in doing so highlights a fundamental change in the relationship between them.

Rethinking Economic Returns

This chapter argues for a fundamental revaluation of how the productive dividend is to be shared. If there is little prospect of narrowing income inequalities or upgrading the quality of life for all through existing supply-side policies, new human capital requires a wide-ranging policy response to address inequalities of condition alongside inequalities of opportunity. This is why the question of returns (economic prizes) is so important, because there is the need for a new narrative and public policy agenda aimed at spreading the benefits of economic activity to enable human flourishing across society. It requires a redefinition of economic purpose linked to reimagining both earning and learning and the relationship between them. A key insight of the chapter is that what is capitalized by individuals and firms rests on a social dividend that needs to be built into the distributional foundations of the new human capital. It shares the widely held view that the competition for economic prizes should be constructed so that every individual has an equal chance to win.

The Failed Promise of Development

This chapter examines the promise of human capital investment on economic growth and its consequences for developing countries. Education investment as a way of increasing the stock of human capital remains a key part of the World Bank’s approach to policy reform for so-called developing countries. The chapter argues that such accounts fail to understand the changing relationship between education, employment, and economic growth. Notwithstanding the rapid economic advances made by some emerging economies, most notably China and India, the experience of development has left many people within these countries stranded in the rubble of modernization, while others, including those with a tertiary education, struggle to find meaningful and sustainable employment. Despite continuous national investment in education and economic liberalization, many developing countries are falling further behind. The chapter describes some of the tensions and contradictions of development in emerging economies and how they are fueled by the failed promise of orthodox theory.

Winners and Losers

This chapter asks who wins and who loses in the distribution of credentials, jobs, and wages. Orthodox theorists argue that human capital is the most important form of capital in modern economies, so by investing in education individuals can earn the returns on their rising productivity. This led to the view that knowledge workers would be the key beneficiaries of today’s economy, as they would supersede traditional capitalists as wealth creators. This chapter presents evidence of who have been the real winners and losers in Becker’s “age of human capital.” It shows how rates of return reflect social inequalities in class, gender, and ethnicity. This analysis challenges three key tenets of orthodox theory.