The Demography of Skills-Adjusted Human Capital

Reiter, C. ORCID: https://orcid.org/0000-0002-1485-3851, Özdemir, C., Yildiz, D. ORCID: https://orcid.org/0000-0001-6192-0634, Goujon, A. ORCID: https://orcid.org/0000-0003-4125-6857, Guimaraes, R. ORCID: https://orcid.org/0000-0003-1754-9238, & Lutz, W. ORCID: https://orcid.org/0000-0001-7975-8145 (2020). The Demography of Skills-Adjusted Human Capital. IIASA Working Paper. Laxenburg, Austria: WP-20-006

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Abstract

The human capital of the working age population has in the past shown to be a key driver not only of economic growth and poverty reduction but also of health, quality of institutions, and adaptive capacity to environmental change. Human capital has mostly been measured in terms of mean years of schooling of the population or the highest educational attainment distribution. But in recent years the attention has shifted to trying to also measure the quality of education in terms of the skills acquired. While much empirical information already exists on the tests of skills of school age children, the situation is not as good with respect to globally comparable data on adult skills. However, what matters for the multiple benefits of human capital is the skill level of adults of working age rather than the skill level of school age children. While the skills of the school-age population are sometimes used as a proxy for that of the adult population, the two can differ widely, particularly in countries that have seen recent expansions of schooling or changes in the educational system. Hence, for many purposes ranging from economic growth regressions to projections of future productivity, or demographic behaviours that reflect the heterogeneity of adults by their skills, there has not yet been an available dataset on skills adjusted human capital for adults on a global scale.
This paper presents the first such global data set for the period 1970-2015 for a new summary measure of adult human capital called Skills-Adjusted Mean Years of Schooling (SAMYS). Additionally, for 44 countries we present SAMYS by age and sex. The new measure combines the tested level of skills with the quantity of schooling measured by the average years spent in school. Several features of SAMYS advance the state of the art in the field of human capital measurement. Firstly, it combines tests on adult skills with conventional educational and demographic indicators to gain a fuller understanding of the level of human capital in a country. Second, SAMYS have been estimated for a very large number of countries (201 countries for the year 2015 and 185 countries for the period 1970-2015) to present the broadest possible picture of trends in global human capital. Finally, through using the demographic method of back projection along cohort lines, this new measure gives consistent and comparable data for skills adjusted human capital for all adult age groups and both sexes over a 45-year period. The results show that SAMYS have been improving over time in virtually all countries but that the differences between countries are much greater for SAMYS than for mean years of schooling.

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