My remarks on the subject of human capital have provoked some interesting comments and links, so it occurs to me that I ought to say something more on what is actually a complex subject. Let us begin with the fiction on which the ideological rationalization of capitalism is founded, namely that workers are petty capitalists who produce the commodity labor-power, which they bring to market and offer for sale, like other commodity producers, in competition with other producers of the same commodity. Marx's anatomization of this fictio juris is exquisite, and cannot be improved upon. The treatment of workers as producers of the commodity labor-power is of course crazy, as Marx very nicely shows us. To think in that fashion is to suppose that the worker's body is her fixed capital and her food and clothing her circulating capital. The problem is that a worker who notices that she is not earning the economy-wide equilibrium profit rate on her capital, "and who, like any prudent capitalist, wishes to shift to a more profitable line, will find it necessary to separate herself ("alienate herself," to use the technical legal term) from her body. And by a quite unfortunate metaphysical accident-which, however, can scarcely be blamed on capitalism itself! -she is unable to survive that particular liquidation of her investment!" [to quote myself from my essay A Critique and Reinterpretation of Marx's Labor Theory of Value -- see the archive at box.net.]
Economic theory, of course, cooperates in the fantasy that workers run small businesses producing the commodity labor power. And The Law in its majesty enforces wage bargains as though they were contracts between capitalists who meet as equal participants in the free market. But The Law is not an ass, and when a worker with more book learning than is good for him comes before the bar and requests that he be permitted to deduct on his income tax return the cost of "doing business" -- which is to say, his food, clothing, shelter, and other expenses incurred in the course of producing his commodity for the market -- the Law sniggers behind its hand and denies his request.
Enter Gary Becker, who resurrected the concept of "human capital" to take account not of the worker's body or her food and clothing but rather to incorporate into Economic Theory the important fact that in a modern capitalist economy, some categories of workers regularly earn wages significantly higher than the standard pay for semi-skilled machine operatives, as a consequence of their educational credentials and the skills supposedly thereby represented. These workers, it is suggested, have invested in themselves by holding themselves off the labor market while they acquire further education, often at considerable expense, thereby accumulating "human capital." . They are thus like business owners who use a portion of their profits [or take loans] to purchase more sophisticated machinery, the cost of which, amortized over the life of the machines, is a good deal less than the market value of the additional product churned out by the improved capital goods.
This modern version of the old notion of human capital allows economists to blame the low wages of unskilled workers on their own improvident failure to invest rather than consume, an interpretation of poverty that is quite comforting to those sitting atop piles of accumulated capital.
But the analytical concept of human capital has other interesting uses in our attempts to understand modern capitalism, which exhibits a segmented and highly pyramidal wage structure. It can, for example, be deployed to make sense of the notion of relative exploitation. High wage workers can be understood as both exploited by their employers and exploiting lower wage workers, a construal that seems to comport with our intuitive sense that corporate executives, lawyers, professors, and such like high wage employees occupy a social position more akin to the owners of capital than to hourly wage earners at the bottom of the income pyramid.
In the essay referenced earlier, I tried to build a simple mathematical model that would capture some of these ideas formally, as a substitute for the classical labor theory of value, which, as I show, is fatally flawed.