Economists have long regarded human capital—basically the level of skill and education across a population—as a key factor, if not the key factor, driving economic prosperity and rising living standards.
Recently, I looked at how the nations of the world stack up on technology and innovation. Despite predictions of U.S. technological decline and the rapid rise of the BRIC countries, America and other advanced nations continue to hold an overwhelming lead in technology and innovation. Today, I turn to another key dimension of economic progress: human capital.
Economists have long regarded human capital—basically the level of skill and education across a population—as a key factor, if not the key factor, driving economic prosperity and rising living standards. Many have noted that America’s declining educational performance and dependence on foreign talent pose substantial threats to its long run of economic competitiveness.
While most economists measure human capital by levels of educational attainment, my colleagues and I utilize a different measure: the share of a country’s workforce in high-skill, high wage Creative Class jobs spanning the fields of science, technology, and engineering; business, management and finance; design and architecture; arts, culture, entertainment, and media; law, healthcare, and education. A series of studies have found that these occupations, rather than college degrees, provide a more accurate measure of the key skills that comprise human capital. For one, occupations measure the work people actually do, as opposed to just the level of education they have. A college degree adds substantially to wages but it is not the only route to a high wage job and many of our greatest entrepreneurs, like Bill Gates and Steve Jobs, were college dropouts. In the U.S., for example, nearly three-quarters of adults with college degrees are members of the Creative Class, but less than 60 percent of the members of the Creative Class have college degrees: In other words, 4 in 10 members of the Creative Class – 16.6 million workers – do not have college degrees. Creative Class membership adds significantly to wages, carrying with it a 16 percent wage premium even after controlling for level of education and other factors, equivalent to another 1.5 years of additional education, according to research by economist Todd Gabe. Our estimates for Creative Class occupations are based on data from the International Labour Organization.
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Source: Richard Florida | The Atlantic
Image: International Labour Organization | The Atlantic