The Future of Work is the Age of Human Capital: How We Got Here


We have been on a fifty year march until this time. Understanding how we got here can help us better understand the magnitude of this inflection point.

Zoom out: historical trends light up

For some time now, I have been referring to our entry into the post-pandemic period as an inflection point. Perhaps this is how the pandemic has compressed time, accelerating our digital transformation, or how it has kept us in prolonged uncertainty. I decided to dig deeper and think about what economists, sociologists, and philosophers have noted about the past and what that might mean for the changing nature of the future of work. Robert Putnam’s last book, The rise in power, maps our over 100-year journey back to the income inequality and political polarization of the 1920s. Putnam refers to those remarkably congruent curves of trends in economics, politics, society, and society. culture as the continuum from “I to us to I”. Putnam argues that we have already come out of this downward spiral and that may be the time to start over. Putnam approaches this inflection point as a sociologist and political scientist. Others have observed similar arcs, trends, or cycles, including the work of an economist and historian Neil howe in collaboration with the late William strause in their 1997 seminar book The Fourth Turning Point: What the Cycles of History Tell Us about America’s Next History Change. In this book, Strause and Howe, infamous for coining the term “millennium,” provide us with a historical view of several centuries of eighty-year cycles each with four distinct “turns”. The most recent cycle began with the “high” phase, beginning with the end of World War II and ending with Kennedy being shot. The 3rd turning point was the ‘unraveling’ and division of the 90s (when the book was written). At that point, they predicted an impending “crisis” even identifying 2020 as the end of the tangle with a major crisis that would lead to a new “high” shift in shared goals. Previous crisis rounds include the American Revolution, Civil War, World War II, and the Great Depression. Additionally, historians have noted that the bubonic plague sparked a renaissance while World War I and the 1918 flu were followed by the Roaring Twenties. Following the breakthroughs demonstrated by vaccine development, this pandemic may well spark a period of unprecedented scientific discovery and advancement, but I think it may be something even deeper.

Humans as a cost to contain, even as humans create more and more value

At the end of 2019, the Business Roundtable declares the end of the era of shareholder value. Business education from the 1980s to late 2019 preached that companies exist to deliver profits to shareholders and investors at all costs. Many of these “costs” were human, which was reasonable in the 1970s, as most human labor went into the production of physical assets. Recent data from Aon shows that in 1975, tangible and physical assets accounted for 84% of the company’s value on the S&P 500, while only 17% of that value was intangible, especially human capital.

By the end of 2018, these categories had reversed and intangible assets accounted for 84% of the total value. Missing out on this change not only created income inequalities, but wasted human and economic potential as well. As the stock market soared, our real return on assets has declined by 75% since 1965, according to a study by John Hagel of Deloitte.

Short-term self-interest rather than long-term shared interest

As Friedman’s thesis on shareholder value took hold, short-term, zero-sum thinking began to emerge. Taxes, for example, were ridiculed when they did not support our vested interests, such as the education of our children. We began to view efforts to reduce poverty or invest in racial minorities as reclamation rather than community and economic investment. Author Heather McGhee emphasizes this point in her recent book, The sum of us: what racism costs everyone and how we can thrive together, in its observation of the public swimming pool policy. Starting in the 1950s in the United States, after decades of increased investment in shared assets, we chose to close public pools rather than racially integrate them. In short, we have cut off access to public goods, denying everyone instead of providing common public goods.

In the age of human capital, income inequality weighs on economic growth

Investing in people, especially as our economy changes, is not a new idea. In the International Monetary Fund article “More or less”, author Branco Milanovic noted ten years ago (2011), “The main reason for this shift (towards concern about income inequality as a brake on economic growth) is the growing importance of human capital in development. When physical capital mattered most, savings and investments were essential. Second, it was important to have a large contingent of the rich who could save a greater proportion of their income than the poor and invest them in physical capital. But now that human capital is scarcer than machines, widespread education has become the secret to growth. And widely accessible education is difficult to achieve unless a society has a relatively even income distribution. In addition, generalized education not only requires a relatively even distribution of income but, in a virtuous circle, reproduces it by reducing the income gap between skilled and unskilled labor. ” JP Morgan Chase, CEO Jamie Dimon, made a similar observation in his Letter to shareholders 2021, “(Income inequality) could easily have weighed 1% on our growth rate. This is the new normal – and it doesn’t have to be. “

Poverty makes us all poor

In 2019, long before the pandemic amplified the division between the haves and have-nots, Georgetown Education and Workforce Center found this “A child in the lower quartile of socioeconomic status who scores high on tests in kindergarten has only a 3 in 10 chance of having a college education and a good entry-level job as a young adult, compared to 7 in 10. 10 child in the top quartile of socioeconomic status who has low test scores. ” In other words, it is better to be born rich than smart. The pandemic has exacerbated this inequality, further destroying our potential.

Racism is expensive

Research at Citi, The cost of black inequality in the United States, found this, If the racial gaps for blacks had been closed 20 years ago, America’s GDP could have benefited from around $ 16 trillion. If we close the gaps today, the equivalent of adding to the U.S. economy over the next five years could be $ 5 trillion in additional GDP, an average addition of 0.35 percentage point to US GDP growth per year and 0.09 percentage point to global GDP growth per year. .

Working moms made the middle class grow, the pandemic chased away moms

As the pandemic continued, home child care fell disproportionately to women, prompting women to leave the workforce to care for their families. Almost 3 million women have left the labor market in 2020, causing female labor force participation rate drops to 33-year low. Again, this is a economic publish; According to a study by the Brookings Institution, “Without the increasing participation of women in the labor force, the growth in income of middle-class households would have remained. largely stagnant since the late 1970s. “ Even without gender pay equity – the progress we have made is due to women and now we are excluding women from the workforce. Women who have left the workforce to help their children go to school face the fact that the learning losses suffered in the past year could cost some young people up to 3% of their income over their lifetime. The Herculean effort of these working mothers (and dads) is finally recognized as LinkedIn recently added “Stay-at-Home Mom” to their professional description options.

Loss of social mobility

Now place these three studies in the context provided by Raj Chetty, Harvard economist whose Equal opportunities project quantifies social mobility in the United States. If the opportunities for low-income children and black children are already in deficit, it only gets worse when you see the broader trend lines. If you were born in 1940, Chetty’s data shows, you had a 90% chance of doing better than your parents. If you were born in 1980, those chances are down to 50%. Doing better than your parents is good for all of us. When you do better than your parents, you become a higher paying taxpayer, fueling our economy with your spending and our collective investment through taxes in our common future. We have countless numbers of lost Einsteins, as Chetty calls those who have been left behind by inequality. We cannot afford it.

The inflection point

I’ve been writing this blog post for several months, unable to decide how to condense and synthesize the considerable research and converging data points that suggest this inflection point to me. As a belligerent optimist who works in the lemonade business, I believe we are on the cusp of a dramatic change that could, if we are intentional and insistent, finally unleash our collective human potential. In the next episode, I’ll start plotting where I think we’re going from here.


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