By Richard Vedder and Jordan Templeton:
Whatever the merits of President Obama's specific idea of having every American acquire some post-secondary education, it is true that most of our nation's human capital stock (over three-quarters by our calculations) is possessed by individuals with at least some college. Yet a look at earnings data has us convinced that a very large portion of the human capital of, say, college graduates, comes from "learning" that occurs after their formal college training.
We are trying to proportion the $97 trillion stock of human capital of our nation into three categories: human capital dervied from formal schooling, human capital acquired largely from post-education experiences on the job (learning by doing), and human capital acquired that is not directly related to schooling, but reflects, largely, the effects of the non-schooling environment in early childhood and even capital that is genetically inherited at birth.
We are part way through this estimation process, but we find the results so fascinating, and potentially so important, that we are not waiting on usual academic procedures (peer review by an academic journal) to announce our findings. In doing that, we risk saying things that are not entirely accurate, but that is, to our mind, better than risking NOT saying things that are essentially correct (this is akin to Type I and Type II errors in statistics).
Our findings are found in the enclosed table. Let us discuss a few of the results briefly here.
1. $52.8 trillion in human capital can be attributed to formal education ---or to the early childhood non-schooling effects not yet measured. However, $44.3 trillion in human capital --46 percent of the total --is attrbuted primarily to adult learning on the job, along with the maturity and wisdom that comes with age.
2. The post-school informal learning component is considerably stronger amongst college graduates (for which it is a majority of their human capital), and for males. Males still work more years than females, so are naturally expected to have greater productivity gains associated with work experience.
3. Those with very limited education (say less than high school) derive only modest amounts of post-schooling human capital, despite the fact that they have potentially longer working careers (since they are out of school at a younger age). It may well be that higher forms of conventional schooling (like college) give people the ability to learn more effectively on the job, suggesting that "college is a gift that keeps on giving." However, this is not necessairly the explanation for the phenomenon observed here. College graduates may have, for example, higher critical thinking skills than those with lower amounts of education, but this may reflect genetic or even family influences in early childhood as much as the direct effects of schooling. We will be studying this dimension further, along with trying to estimate the growth in human capital and its proximate causes over time.
The methodology will not be discussed in detail here, but it is based on the discounted present value of the earnings streams of Americans classified by gender and educational attainment. The male and female tables follow.