Human capital is an important concept in modern economics. However, measures of human capital are available for only a very few countries.
In the Australian System of National Accounts, measures of capital stock are currently confined to physical capital. In order to fill this gap, the ABS has recently produced experimental measures of the stock of human capital for Australia. The analysis uses data from the 1981, 1986, 1991, 1996 and 2001 Censuses.
A person’s human capital is defined as the total income they could be expected to generate in the labour market over their lifetime.
Projections about future income are made according to people’s sex, age and educational attainment. The study then aggregates across all groups to estimate the total human capital stock for Australia.
As people age, their human capital changes. All things being equal, their human capital will decrease due to their remaining time in the labour force being shortened. However, as people spend longer in the workforce they gain skills and experience which increases their productive capacity and their income.
The study shows that there has been a significant increase in the stock of human capital over the 20 year period despite an ageing population.
The growth in human capital stock through the 1980s was mainly due to an increase in the total population rather than an increased rate of growth in a particular area.
In the 1990s however, the growth in human capital stock was driven by a large increase in the human capital stock of bachelor degree and higher degree holders. The study also shows that the value of human capital stock is much greater than that of
Measuring human capital is particularly useful to policy makers and economic and social analysts. The differences in income streams from the different levels of educational attainment can also be useful for analysing returns from investment in education.