Whether using Marxian or neoclassical economic theory, people with greater skills are supposed to be paid more because they produce greater value.Even though this process made sense for a long time; a point has been reached where everyone's human capital needs to become viable, in order to maintain both sustainability and the present day economy. Only consider that even supporters of the left were forced to create a separate and lower skills compensation path at university levels. This process of income separation at higher skill levels can only continue, particularly as a gradual monetary tightening process by central bankers since the Great Recession, leaves both university administrators and CEOs alike, little choice.
As a result, the need to monetarily compensate those with long educational commitments, has left too little room for growth in the remainder of the marketplace - particularly as services growth has outpaced other forms of production for some time. And yet some still have little access to services. It should be the right of lower income levels to create needed services for themselves, when those who are compensated for high skills have little choice but to mostly provide services for middle to upper class levels.
Also: even though employment appears as though greatly improved of late, consider how labor force participation rates have changed for the worse in the U.S. As Timothy Taylor recently wrote (and his graphs particularly deserve note) the LFPR for prime age working males and females continues to decline in the U.S. relative to other countries. Here's Taylor:
For men, the U.S. was middle-of-the-pack in labor force participation rates of prime-age males in 1990, and now vies with Italy for the lowest level. For women, the U.S. was near the top-of-the-pack prime-age labor force participation in 1990, but since then has been surpassed by France, Canada, Germany and the United Kingdom, and is now about even with Japan--which has not been historically known as a country with high labor force participation for women.What is especially noteworthy regarding women, is what this says about the "rise" of the healthcare marketplace relative to the rest of the economy. Even with the large presence of women in healthcare, their representation in the marketplace continues to decline! How does one get decreased labor force participation for women, when healthcare continues to grow as a percentage of GDP? This demonstrates the fact that healthcare cannot be expected to substitute for other marketplace factors indefinitely. After all, if people do not have sufficient jobs other than healthcare, they in turn are less able to pay for healthcare as presently defined in the marketplace, when they need it.
Does the claim that human capital isn't important, also imply that the political left can hardly be held responsible for further job creation? If this is part of the reasoning behind the latest volley from the left, I can understand Milanovic's frustration in that it echoes my my own. Job creation was particularly recognized as the responsibility of the right, after the devastating setback of the Great Recession. After all, economic prosperity on supply side terms and a supportive monetary foundation are necessary, before fiscal flows can be maintained for their contributions to job formation. Only consider the difficulty Washington now has with continued funding for DHS, even in a time frame when the economy is supposedly doing "swell". Therefore, the last paragraph from a post by Bryan Caplan back in 2013, "The Grave Evil of Unemployment", appears especially timely now:
I'm proud to call myself a free-market economist. But free market economics can and should improve. Our cavalier and callous attitudes about unemployment are deeply misguided. Free market economists should eagerly share their insights on how to alleviate the grave evil of unemployment, instead of putting their heads in the sand and calling idle misery "optimal."It is clear that some among the right remember the intent of his message, for these individuals continue to carry the banner for full economic access, even now. Just the same, too many have long forgotten what is still at stake. Bryan wrote those words at a time when people still hoped the supply side would take care of important structural issues - issues which diminish the value of human capital. However, instead of doing their part to assist with structural reform, some simply benefited from monetary easing - even as they derided what economic gains there were, after the fact.
I didn't point out Caplan's earlier post to demean the supply side, but simply to point out that much responsibility for structural employment gains ultimately rests with them, and the contractual agreements they expect governments to provide on their behalf. Granted, monetary policy and supply side coordination are necessary, before fiscal activity can continue its meaningful role. But long lasting gains are dependent on the willingness of everyone in the marketplace to do their part for continued progress. Economic activity ultimately rests and relies on structural considerations which have less to do with tax shifting, than complete economic access in the marketplace.
Hence I view any urge to remove human capital from the vocabulary, as a desire from the left of being absolved of the responsibility of today's remaining unemployment. What's more, some among the right have thrown the ball back in the court of the left prematurely, when the left scarcely had the means to provide the jobs that were still needed.
In short - contrary to Milanovic's reasoning - the full use of human capital is more necessary than ever. Without it, societies end up with an impasse by which neither governments or business interests are willing to forge ahead with continued economic prosperity. Indeed, that is what has occurred in the present. All I am really suggesting is that it serves little purpose to throw up one's hands and insist that we cannot rely on our own intellect and personal capacity, to assist in overcoming the economic impasse of our times.
*For any new readers, I have written several posts this month which further detail my approach for human capital and time use potential this month. They are listed below:
Human Capital: The Missing Anchor
Human Capital Also Holds Value in Use
Human Capital Needs a Time Based Marketplace