Gary Becker was a University of Chicago economist best known for his work on human capital. His research covered discrimination, compensation, family formation, birth rates, educational quality – pretty much anything that involved how people maximize the value of their time and talent. Paying for college is one way people invest in human capital.
I really like his stuff. And he’s not the only who has written about the value of human capital.
First, Emma Johnson of Wealthy Single Mommy wrote about a reality of divorce settlements: judges expect divorced women to go to work, and it sometimes turns out that the ex-husband resented taking care of a stay-at-home wife (although I have my doubts about this, possibly prejudiced by a job at an investment bank). Johnson believes that women have to maintain their earning power, and I agree. Even if divorce is not in the cards, can anyone say that death, disability, or unemployment are not?
Second, Jack Hough of the Wall Street Journal wrote about the five largest investments that most people don’t know they have, most of which are related to human capital.
College is about human capital. It is about education, not training; the social life and extracurriculars help people learn new skills and build relationships that can sustain them through life. Even the excess of student fitness centers with climbing walls can set people on a path to physical fitness!
When looking at a college, a person should think about it as an investment in human capital. This goes beyond whether the degree will help with a first job: will the program teach critical thinking and communication skills needed to get promoted? Are there activities that the student wants to do? Will he or she make friends and connections? Many people don’t need a college degree for the first job, or even the second – but at some point, a person who wants to be promoted has to show the critical thinking, communications, and connections that come with a college education.
(And yes, of course there are other ways to develop critical thinking, communications, and connections than going to college – just make sure you do it!)
But it does not end at college. Not at all. Developing human capital is ongoing. It often makes sense for people to take time out of the labor force to care for family members, and families have to do what works best in their situation. The person who is not working a paid job needs to do something to maintain skills. That may be taking a MOOC, volunteering, studying for professional exams – something. Something that he or she can discuss in an interview with a prospective employer, something that brings him or her into contact with prospective employers.
That’s the nature of the world. I’ve been working since I was 14, and yet, I always have to learn new things to keep up. That’s why I’m not working on the midway at an amusement park anymore. Good thing, too, because that park is long closed.