One of the important factors of economic growth is human capital, which includes the workforce’s skills, education, and experiences. And research has shown improvements in the human capital of about 20-30% in U.S. productivity from 1950 to the early 2000s. This estimate is primarily based on the importance of skills and education along with the workforce experience during this period that has improved economic productivity.
And while productivity in the U.S. has significantly surpassed other regions like the U.S. in the last two decades. Like we can see just how much the difference has been in the last 15 years or so when we compare the U.S. output per hour or productivity to the U.K. and Eurozone.
Eurozone 🇪🇺 productivity growth has significantly lagged that in the US 🇺🇸 https://t.co/b6TPuZs51q pic.twitter.com/arqDJCMXfe
— Science Is Strategic (@scienceisstrat1) June 17, 2024
But during the 1950’s to 2000’s – How much has Human Capital Contributed to Productivity?
Human capital is the term used for the credits that are contributed to the country’s economic growth with the works of individuals through training, education, and experience.
For education, we look at formal schooling and higher education levels that contribute to increased literacy rates. Training is used for defining the job-based skills of workers that they have gained through training programs and experience that has been earned with years of working with specific skills.
Contribution of Human Capital in US Economic Growth From 1950’s to 2000’s
The growth of human capital is one of the primary reasons for the 20-30% growth in US productivity from 1950 to the early 2000s. These improvements were solely based on people’s education, skills, and work experience. Like if we take a look at the real output per hour in the non farm business sector in the U.S. from 1947-1973, we see a near 2.7% average copared to just 1.5% from 2007 to 2024.
US nonfarm business sector real output per hour grew at a 1.5% annual rate from Q4 2019 to Q1 2024, well under the 2.1% average from 1947-2024. @JimPethokoukis recommends that politicians “substantially step up investments in human capital.”https://t.co/JrlmssP9Rn pic.twitter.com/XMKoYt0jn4
— Edward Conard (@EdwardConard) June 20, 2024
So, what are the main factors that contributed to the economic growth of the U.S.?
1. Education
Increased graduation rates drastically improved the skills of the workers in every field. Higher education is incredibly crucial as it allows an individual to enhance their skills and be more effective in utilizing new technological resources. It helps you become a critical thinker because of your college education, improve your social network and communication skills – and as a result, contribute more. This is why higher education helps increase ‘productivity’. Additionally, the demand for cognitically demanding and mathematical skills have increased in the last four to five decades.
In the U.S., over the last several decades, we have seen people with higher education getting to earn more on average than those who do not. In fact, even if the world’s population declines, we still will see increase in productivity, given education gains, according to a study by International Institute of Applied Science Analysis.
The world's population may decline, but human capital will keep rising thanks to education gains. Our Human Capital Weighted Population metric shows productive capacity outpacing population growth. Read more: https://t.co/jQsNd9s3oD@IIASAVienna@ADRIshanghai@WiCVienna pic.twitter.com/C9irD2ZW40
— Guillaume Marois (@MaroisG) June 18, 2024
2. Training
How skilled are you in the work you’re doing? That’s what will probably effect your output as well. Skills training and undertaking programs in the same career path as yours will help increase productivity, just as it has done for the U.S. from the 1950’s to 2000’s.
It's easy to get caught up in the latest technological advancements and assume that productivity depends solely on the tools we use.
— votex24 (@votex24usa) August 29, 2023
However, it's important to remember that human capital, education, and skills training are just as crucial to achieving our goals.
Most…
3. Experience
The more you work, the more you’ll be experienced. Experience cannot be earned overnight, it takes years of working in the same field to learn and explore everything about it in depth. However, experience is the key to being a role model for your juniors who inspire them to learn and grow more every day.
Think of it this way – Boeing’s problems today have a lot to do with them letting go of experienced people. They thought it will help improve the cash balances, but led to fall in productivity and quality. Many suggest that this is what led to Boeing’s crashes.
Newsflash: experience is undervalued. A Boeing mgr actually proved this in a 67-page 1997 analysis of unprofitable programs. As it turned out, the ability of a workforce to move efficiently enough to profitably build planes was almost entirely a product of the worker seniority pic.twitter.com/uIoE5DPYkJ
— moe tkacik (@moetkacik) March 28, 2024
4. Innovation and Technology
Education and skills allow individuals to work efficiently and it helps them better to adapt to the new technologies and innovations that can help their company grow in the future. It’s one of the main parts of human capital that drives productivity.
Think about this – classical enlightment writers believe that technology is always driven forward by competent people, who are intellectuals, phsyicians, or top-rated artisians, mechanics and engineers. And in the present time, that’s all the more relevant.
Upper Tail Human Capital
— Ruxandra Teslo 🧬 (@RuxandraTeslo) January 1, 2024
The question of what drives technological progress must relate to the question of who
drives it. On this question, classical Enlightenment writers had little doubt: progress
was driven by a tiny elite of able and competent people, some of them… pic.twitter.com/FwTIDLhWVb
5. Efficiency Rate
The more the workers are skilled, the more they’ll be efficient in their work. Efficiency makes a person better in their specific job which eventually reduces costs and increases output rates.
In a world driven by A.I. and tech and math, investing in education and training programs can contribute to improving the productivity in future. And these are what have driven the economic growth of the US over the last several decades as well.
Last Updated on by Icy Tales Team