Human Capital
"The most valuable of all capital is that invested in human beings"
Alfred Marshall, Principles of Economics - 1890
As practitioners and economic scholars emphasize, the most crucial asset of any organization in the knowledge/digital economy is HUMAN CAPITAL. Human capital encompasses intelligence, education, training, skills, and the ability to work collaboratively in a workplace and is the primary driver of productivity and innovation in all economies worldwide.
Expectation of returns on human capital versus financial capital.
Higher education investment is considered an investment in human capital, comparable to investing in productive assets such as buildings, equipment, and computers. The knowledge economy has undergone a significant transformation in the American job market over the past three decades. Simultaneously, information technology has enhanced economic activities that every society could harness for a brighter future for all its citizens. However, the labor share of income in advanced economies has declined since the 1990s, as reported by the International Monetary Fund's Economic Outlook report, as illustrated below.
This report demands our attention. Many empirical studies have revealed that the rise in income inequality during technological advancements is due to the continuous decline in real wages (adjusted for inflation) paid to the workforce, regardless of the economic value they create.
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Ironically, to remain economically viable in the knowledge economy, business organizations demanded employees' investment in human capital. However, they often overlooked the need to modify their hierarchical corporate structure to create collaborative learning and teaching workplace environments, a crucial step for
success in the modern economy.
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For economic systems to truly thrive, investing in human capital is not enough. We must also make the appropriate financial investment to modify hierarchical corporate structures that corporatists refuse. These changes are not just beneficial but necessary to create collaborative learning and teaching workplace environments.
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A balanced and coordinated human and financial capital system is crucial for managing knowledge and the digital economy. Financial capital is necessary to support the operation and growth of business organizations. However, investment in human capital must come first for economic systems to thrive.
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The real world has shown us that the young, educated workforce is at a crossroads. It must redefine its perception of workplace hierarchy, evaluate the value it brings, and demand fair compensation. The Edified Capitalist Institute makes this transformation possible for all American Small businesses and the educated and skilled workforce.