Unequal Wealth Due to Unequal Human Capital

Grace Cardenas – Morning

The most successful and innovative people in America are assumed to have large amounts of human capital, and therefore have been very successful in their fields. However, while the most successful people are flourishing, there is a vast difference between the wealthy and the poor, especially in America. In my opinion, the unequal distribution of wealth is due to the unequal amounts of human capital from person to person. So, what is human capital and how does it contribute to the gap between the rich and the poor?

In Naked Economics, Charles Wheelan defines human capital as “the sum total of skills embodied within an individual,” [1] but how do we decide which skills make one person more successful than another? For a professional athlete, the skills that earn wealth are being able to shoot the most accurately, being the fastest to run down a field, or throwing a ball more powerfully than anybody else, so those are the skills that count in their amount of human capital. However, for a person like Steve Jobs, how far he could throw a ball did not matter, but his intelligence, creativity, and entrepreneurship made all the difference. Therefore, I think that no matter what skill may separate a person from the crowd, it should only be considered part of that person’s human capital if they are able to use it in a productive way.

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Image [5]

Therefore, in America, why is the difference between the rich and the poor so large? As Charles Wheelan states, “the most insightful way to think about poverty, in this country or anywhere else in the world, is as a dearth of human capital.” [2] This starts with education. While some human capital is natural born, the development of intelligence and character in large part determines a person’s human capital in the future. In addition, “educated parents are more likely to put their children in car seats and teach them about letters before they even begin school,” [3] meaning that there is a chain reaction. The kids of the rich will have a better chance to gain human capital than those kids whose parents cannot afford good schooling.

Finally, human capital is directly linked to productivity and in getting a job with a good salary. Productivity can be defined as “the efficiency with which we convert inputs into outputs,” [4] so if a more educated person with more human capital can make 200 burgers in an hour, why should a company hire 10 workers with less human capital to do the same? Furthermore, it does not require much human capital to work at a gas station, therefore the workers there get paid less. On the other hand, aspects of human capital such as intelligence, creativity, education, and charisma are essential in most of the high-paying jobs in America. Therefore, the gap between the rich and the poor, in large part, is a result of the unequal human capital between the rich and the poor.

  1. Wheelan, Charles. “Productivity and Human Capital” In Naked Economics: Undressing the Dismal Science, 127. New York, NY: W.W. Norton & Company, 2010.
  2. Wheelan, Charles. “Productivity and Human Capital” In Naked Economics: Undressing the Dismal Science, 129. New York, NY: W.W. Norton & Company, 2010.
  3. Wheelan, Charles. “Productivity and Human Capital” In Naked Economics: Undressing the Dismal Science, 134. New York, NY: W.W. Norton & Company, 2010.
  4. Wheelan, Charles. “Productivity and Human Capital” In Naked Economics: Undressing the Dismal Science, 135. New York, NY: W.W. Norton & Company, 2010.
  5. Norberg-Johnson, Denise. “Investment in Human Capital.” Electrical Contractor. September 2013. Accessed June 24, 2017. http://www.ecmag.com/section/your-business/investment-human-capital
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