In the midst of the gloom present globally including in Australia (while the economy still doing well), here’s a different view of how the country should be measured: the value of human capital.
Hope for clever nation
Published: June 9, 2012
A SURGE in the value of the nation’s human capital – the knowledge and expertise of its people – has helped offset flagging national income growth from falling commodity prices, boosting Australia’s wellbeing at an even faster rate than suggested by this week’s national accounts.
The Herald/Lateral Economics index of wellbeing, which measures improvements in human welfare across a range of indicators, not just economic output, grew 2 per cent in the March quarter, compared to growth in gross domestic product of 1.3 per cent.
The biggest contributors to the human capital surge were a rise in the number of adults with formal qualifications, an increase in children in early schooling – thanks mostly to a ”baby boomlet” – and increasing retention rates at high schools. However, rising income inequality continues to detract from wellbeing, as did a slight rise in long-term unemployment.
”It’s interesting – and laudable – that we’ve been able to increase the retention rate while unemployment has been relatively low as it’s easier for kids to get a job rather than go on if there are lots of jobs around,” said Nicholas Gruen, chief executive of Lateral Economics and lead author of the index.
Dr Gruen said the growth in human capital was Australia’s best long-term defence against declining economic growth.
”These things are invisible in the national accounts but are the foundation of the productivity dividends of the future. They’re money in the bank – and one hopes a happier, more intelligent society as well.”
A fall in commodity prices meant national disposable income – the biggest contributor to wellbeing – remained flat for the quarter at $285 billion, in contrast to robust growth in GDP. This is because foreigners were paying us less for the increased production. However, offsetting this weak performance, the value of the nation’s accumulation of human capital is estimated to have grown 7.6 per cent in the March quarter to $102 billion.
Increases in human capital are measured to a World Bank standard and adjusted for improvements across a range of education indicators.
An increase in adult formal qualifications added $4.8 billion to wellbeing. Half of this came from an increase in the proportion of the prime working-aged population with a post-school qualification from 56.4 per cent to 57.4 per cent. The other half came from an increase in the size of the working aged population.
The higher contribution to wellbeing from high schooling was due to both more students entering high school and a higher rate of retention in year 12. Lateral Economics expects the high school retention rate to increase by 1.2 percentage points to 80 per cent this year.
A spokeswoman for the Prime Minister said that since 2007 funding for early learning and care had tripled, while new ”learn or earn” provisions for families and young people receiving assistance had been designed to boost school retention rates.
Dr Gruen said the reasons for the human capital surge were complex and hard to pin down.
”The Hawke-Keating government presided over surging human capital development with strong increases in school retention and post-secondary education and training,” he said. ”That was followed by rises under the Howard government, until the mid-noughties which saw a substantial setback. I’m not too sure that I’d call it an ‘education revolution’ but the Rudd-Gillard government has presided over further strong steady growth in school retention rates.”
This story was found at: http://www.smh.com.au/opinion/political-news/hope-for-clever-nation-20120608-201hk.html