Aurora Borealis
1 March 1979 Financial Analysts Journal Volume 35, Issue 2

Bringing in the Sheaves: The Next Stock Market Cycle

  1. Henry L. Wojtyla

Between 1950 and 1970, the percentage of this country’s GNP devoted to education more than doubled. Although the education boom began to fade by the end of the 1960s, the spending boom continued, with government welfare spending jumping from 12 to 20 per cent of GNP between 1966 and 1976. Although many feel that these expenditures harmed the economy, they can be viewed as investment in human capital; education, on-the-job training, research and development, better health and mobility all enhance people’s productive capacity.

The 1980s should see the beginning of a return on the major investments in human capital of the last three decades. Unlike the 1950s, when the dependent population increased three times faster than the working population, the increase in dependents over the 1980s will be less than a third of the increase in the working population. Furthermore, growth in the working population itself will be highly concentrated in the experienced worker group (expected to increase by more than 13 million)—a group for which the investment in human capital has already been made.

With only a small increase in the dependent population and a decline in the population of young, inexperienced workers, spending on human capital as a percentage of GNP should decline during the 1980s. To take advantage of a mature, highly trained workforce, however, the U.S. will need to increase its rate of tangible investment in high technology by three percentage points—from 10 to 13 per cent. Given this kind of growth in capital goods investment over the 1980s, the economy—and the high technology sector in particular—will reap the benefits of human capital investment.

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