Saturday, January 23, 2016

23/1/16: Non-Cognitive Human Capital

In my 2011 paper on the role of Human Capital in the emerging post-ICT Revolution economy, human capital will simultaneously:

  1. Play increasingly more important role in determining returns to technical and processes innovation;
  2. Become more diverse in its nature - or more diversified - spanning measurable and unmeasurable skills, traits, knowledge, attitudes to risk and innovation, capabilities etc.; and
  3. Form the critical foundation of entrepreneurship and core employment base in the so-called Type 1 Gig-Economy - economy based on contingent workforce compered of highly skilled, highly value-additive professionals.

An interesting paper relating to the matter, especially to the last point, is a recent IZA Working paper (October 2015) titled “Non-Cognitive Skills as Human Capital” by Shelly Lundberg.

Per Lundberg: “In recent years, a large number of studies have shown strong positive associations between so-called “non-cognitive skills” — a broad and ill-defined category of metrics encompassing personality, socio-emotional skills, and behaviors — and economic success and wellbeing. These skills appear to be malleable early in life, raising the possibility of interventions that can decrease inequality and enhance economic productivity.”

Lundberg discusses “the extensive practical and conceptual barriers to using non-cognitive skill measures in studies of economic growth, as well as to developing or evaluating relevant policies. …There is a lack of general agreement on what non-cognitive skills are and how to measure them across developmental stages, and the reliance on behavioral measures of skills ensures that both skill indicators themselves, and their payoffs, will be context-dependent. The empirical examples show that indicators of adolescent skills have strong associations with educational attainment, but not subsequent labor market outcomes, and illustrate some problems in interpreting apparent skill gaps across demographic groups.”

From the Gig-Economy point of view, development of all (cognitive and non-cognitive) skills requires time and resources. In traditional workplace setting - of old variety - some of these resources and time allocations are supported / subsidised by employers (e.g. gym memberships, formal paid time off, formal paid career breaks, formal 'team building' activities, actual employer-paid training and education, employer-supported psychological wellness programmes for employees, and so on). In a Gig-Economy setting, these are not available, generally, to contingent workers.

Aside from having impact on contingent workforce skills and human capital, there are more 'trivial' considerations that should be put to analysis. Take, for example, health and psychological well-being. If a contingent workforce using company fails to assure the latter for its contingent workers, who is liable for any damages caused by over-worked, over-stressed, psychologically unwell contingent worker to the company clients?

Again, setting aside humanitarian, social and personal considerations, this question has implications for businesses using contingent workers:

  • Insurance costs and coverage for businesses;
  • Legal costs and coverage for business;
  • Reputational risks for businesses;
  • Counter-party risks for businesses; and so on

In a world where there is no such thing as a free lunch, Gig-Economy based companies should seriously consider how they are going to deal with potential costs of disruption from the Gig-Economy type of employment to life-cycle work practices and financial wellbeing of their contingent workers.

Note: More on the subject of non-cognitive skills and human capital:

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