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Getting a college degree is no longer the only—or smartest—way to invest in human capital. Those who think more broadly will prosper in the years ahead, writes columnist Greg Ip. Plus, experts weigh in on how to get better returns, from early childhood to on-the-job training.
How do you invest in “human capital”? The answer used to be simple: go to college.
Too simple, it turns out. The assumption that human capital comes from formal education—that if we just send more kids to college, incomes will naturally rise—needs to be revisited. The people, companies and economies that thrive over the coming decade will be the ones that recognize that building human capital requires a range of investments from preschool to job-specific training.
Just as a business invests in its physical capital, such as machines and facilities, in hopes of earning a higher profit, a worker invests in human capital via time and money sunk into education and training in hopes of earning more per hour. Adam Smith noted as much in The Wealth of Nations: “The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade.”
Companies will need to engage in massive workforce development to prepare current employees for jobs transformed by technological change, including online courses in data and computer science, says Beth Cobert, chief operating officer of the nonprofit Markle Foundation, who oversees an initiative to connect workers to middle-skill jobs. This means employers will need to be more transparent about the skills they require from prospective workers and those that can be learned through on-the-job training, she says