Human capital depreciation and job tasks

This research aims to investigate the link between human capital depreciation and job tasks, with an emphasis on potential differences between education levels. We estimate an extended Mincer equation based on Neumann and Weiss’s (1995) model using data from the German Socio-Economic Panel. The results show that human capital gained from higher education levels depreciates at a faster rate than other human capital. Moreover, the productivity-enhancing value of education diminishes faster in jobs with a high share of non-routine analytical, non-routine manual, and routine cognitive tasks. These jobs are characterized by more frequent changes in core-skill or technology-skill requirements. The key implication of this research is that education should focus on equipping workers with more general skills in all education levels. With ongoing technological advances, work environments, and with it, skill demands will change, increasing the importance to provide educational and lifelong learning policies to counteract the depreciation of skills. The study contributes by incorporating a task perspective based on the classification used in works on job polarization. This allows a comparison with studies on job obsolescence due to labor-replacing technologies and enables combined education and labor market policies to address the challenges imposed by the Fourth Industrial Revolution.

Estimation of the human capital depreciation rate: an international comparison and policy implications in South Korea

This chapter emphasizes skills retention instead of human capital accumulation, which is prominently featured in the social investment literature. The chapter discovers strong empirical support for the so-called use-it-or-lose-it hypothesis, which is that utilising people's skills at work is critical to retaining human capital. Considerable cross-national differences in human capital depreciation across the Organisation for Economic Co-operation and Development (OECD) world point to workplaces as the key site, as differences in workplace organisation may shape differences in how skills are used and, accordingly, differences in human capital depreciation. Considering the differences in skills depreciation, the chapter calls for tailored policy interventions rather than a one-size-fits-all approach. It argues that countries should take different approaches to preserving human capital, depending on their unique patterns of human capital use and depreciation.

Back to work: the effect of a long-term career interruption on subsequent wages in Switzerland

This paper measures the effect of a long-term career interruption on wages after re-employment. Using data from the Swiss Household Panel (SHP) and a fixed effects estimation method allows us to account for time-constant unobserved heterogeneity. We find a significant wage penalty of about 7% in the first year after re-employment if a worker takes up a job with the same characteristics as the job previously held. This wage penalty finally vanishes after 5 to 6 years. Conducting subsample analyses for men and women, we uncover underlying heterogeneity of the effect. Compared to women, men tend to suffer more from a long-term career interruption, both in terms of a higher wage penalty during the first year of re-employment and a larger subsequent recovery time. Our findings support the assumption that human capital depreciation is not the only reason for wage penalties after re-employment.

The Cost of Human Capital Depreciation During Unemployment

This paper argues that human capital depreciation during unemployment generates an externality in job creation: firms ignore how their hiring decisions affect the skill composition of the future unemployment pool, and hence the output produced by new hires. As a consequence, job creation is too low from a social point of view. But the extent to which it is too low varies over the cycle. The reason is that the increase in the expected productivity of a new hire from next period’s unemployment pool caused by hiring an additional worker today, depends on the pool’s composition, which varies over the cycle.