Human Capital: Poverty’s Worst Nightmare

Allie Pittman-Honorbound

It is a general rule of thumb that living in poverty is not the way that most people would choose to live their lives; however, this is the reality that nearly 13.5% of Americans faced in 2015. [1] A low level of unemployment is essential to the market economy, yet where there is unemployment, there is poverty. This may lead one to question: how can the United States decrease the levels of poverty while increasing economic growth? The answer is simple: by investing in human capital.

Defined by Charles Wheelan in Naked Economics, human capital is, “the sum total of skills embodied within an individual: education, intelligence, charisma, creativity, work experience, entrepreneurial vigor, even the ability to throw a baseball fast.”[2] That being said, one can assume that human capital is incredibly important especially in today’s competitive economy given that it composes nearly 80% of the wealth in the United States.[3] Education is where it all begins because without it, we would not be where we are today. So, by investing in education, one increases his or her human capital, which then results in more job opportunities therefore decreasing one’s chances of living in poverty. According to Ron Haskins, “there now appears to be universal agreement that the combination of technological advances and globalization have resulted in education being a major factor in determining the employment and earnings of many American workers,” as it is very difficult to avoid poverty without receiving wages.[4] With a college degree, one can expect to make enough money to pay back the expenses of attending college while also earning an additional 10% every year. [5] For those who drop out of high school or do not get a college education, the pool of good job opportunities quickly dries up leaving only positions that pay poorly, and require very minimal skills. One cannot hope to increase his or her human capital without first investing in education, as the two are inseparable. Investing in human capital not only works in theory, but also in practice. The economies in Japan, Taiwan, Hong Kong, and South Korea have all grown at an astonishing rate because of their “well-trained, well-educated, and hard-working labor force, and dedicated parents.”[6] With these countries as an example, the United States must push for policies that promote education if we are to decrease poverty and increase economic growth.

Though there are other ways of climbing out of poverty, education is by far the most effective way to step up in the economic hierarchy.[7] Because human capital is the base of the economy, it makes perfect sense to focus our resources on strengthening that base in order to prosper globally.

[1] “Basic Statistics,” Talk Poverty, accessed November 30, 2016, https://talkpoverty.org/basics/

[2] Charles Wheelan, Naked Economics: Undressing the Dismal Science (New York: W. W. Norton & Company, 2010), 127.

[3] Gary Becker, “Human Capital and Poverty,” Acton Institute, accessed November 30, 2016, http://www.acton.org/pub/religion-liberty/volume-8-number-1/human-capital-and-poverty

[4] Ron Haskins, “Combating Poverty: Understanding New Challenges for Familits,” Brookings, June 2012, https://www.brookings.edu/testimonies/combating-poverty-understanding-new-challenges-for-families/

[5] Charles Wheelan, Naked Economics: Undressing the Dismal Science (New York: W. W. Norton & Company, 2010), 127.

[6] Arne Duncan, “Improving Human Capital in a Competitive World-Education Reform in the U.S.,” U.S. Department of Education, March 2011, http://www.ed.gov/news/speeches/improving-human-capital-competitive-world-education-reform-us

[7] Gary Becker, “Human Capital and Poverty,” Acton Institute, accessed November 30, 2016, http://www.acton.org/pub/religion-liberty/volume-8-number-1/human-capital-and-poverty

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s