Indicator Based approach to measuring Human Capital

Closed 20 Dec 2019

Opened 3 Sep 2019

Feedback updated 9 Nov 2020

We asked

We asked for people’s views on taking an indicator-based approach to measuring human capital. Human capital is a measure of the skills, knowledge and experience of an individual or population that can be applied to the economy or to society at large.

The key elements of the consultation were developing a new lifetime measurement indicator-based framework, which complements and augments the current Human Capital Stock measure. In practice, this means we will aim to produce a suite of indicators (data summarising the population which can be tracked over time) based on the themes set out in the consultation.The indicators are designed to work together to help everyone from the policy maker to the citizen understand the elements that can enhance an individual’s and the country’s human capital. This will help with making key decisions on investing in people at the right time and in the right place.

We requested general feedback on whether this indicator-based approach would be useful for respondents and the work that they do or if they had suggestions for alternative approaches that we could take. We also asked for feedback on specific aspects of the proposal such as:

  • Whether respondents agreed our proposed themes (Health, Compulsory, further and higher education, Work, Family and Home, Crime, Independent Learning and Personality Traits) were complete and relevant.
  • Whether respondents agreed with our proposed three types of indicator; input, enabling factor and outcome.
  • Whether respondents were more interested in us filling data gaps or creating proxy indicators.

You said

We received over 130 responses to the consultation from a wide range of users including central government, local government, industry organisations, academics, third sector organisations, trade unions, public corporations and individuals. We also held an engagement day with over 40 people attending and providing feedback on our proposals.

Overall, users agreed with our proposed indicator-based approach to measure human capital and were particularly in favour of us expanding our measures to consider the full lifetime of individuals, beyond the economically active population. Users said they would also like us to expand our measure to consider the impact on personal and social well-being, as well as retaining some priority on the economic well-being impacts.

Half of respondents thought the measure would be useful for the work they are planning to do, although some users had concerns around the complexity of the proposal. We received many suggestions for additional approaches which we are beginning to consider.

In terms of the proposed themes, there was a broad consensus from respondents that the health, compulsory, further and higher education, family and home and work themes were most relevant and important. The personality traits and crime themes were less well received as respondents were concerned with some of the terminology used and indicators suggested. Users also suggested additional indicators for us to consider.

The majority of users agreed with the approach of using 3 types of indicators, although some suggested also including wider background indicators.

When asked about anticipated data gaps, there were some common priorities highlighted amongst users including outcomes on skills, knowledge, competencies and attributes, data relating to the health, education and work themes and data relating to young adults and children, or those nearing retirement. Overall, users wanted us to prioritise filling data gaps over creating proxy indicators, but they recognized that proxy indicators were a useful way to allow the work to begin sooner.

We received over 50 responses highlighting that users would be interested in helping us to develop measures through involvement in a technical panel.

We did

We intend to:

  • Begin to develop an indicator-based approach to measuring human capital, which would aim to take a lifetime acquisition approach, and where possible, have a broadened definition which includes impacts on personal and social wellbeing.
  • Develop this indicator-based approach iteratively, focusing on the Health, Family and home, Work and Compulsory, further and higher education themes first
  • Aim to first derive indicators where we have data available, but use proxy measures where this is not possible, looking to fill gaps in the medium to longer term
  • Carry out further work on the personality traits and crime themes to reflect the concerns users had around the use, terminology and suggested indicators for these themes.
  • Consider how to incorporate suggested new factors which users felt did not fit within the proposed theme structure, such as cultural engagement, volunteering and caring.
  • Consider how to incorporate an additional type of indicator to reflect a user need for wider background indicators which give more context for the mechanisms that we are reporting on
  • Engage more widely with different types of stakeholders such as academia, industry and head-hunters.
  • Set up agreed roles and terms of references for each user who is interested in becoming a member of the technical panel
  • Continue to get feedback to make sure we are meeting a wide range of users’ needs through the first iterations published

Results updated 10 Mar 2020

The following documents capture the full breadth of responses we received in relation to this consultation, as well as our suggested actions resulting from them.

Files:

Overview

ONS is reviewing how we measure human capital in the UK, and we’d like your views on our proposed approach.

Human capital is a measure of the skills, knowledge and experience of an individual or population which can be applied in the economy or in society at large. It is widely recognised as a driver of productivity and helps people achieve their needs and wants, and improve their well-being.

ONS currently measures human capital stock in monetary terms, as the discounted lifetime earnings of the working age population. We use an internationally recognised approach set out in the United Nations Economic Commission for Europe (UNECE) guide on Measuring Human Capital.

Why we are consulting

In the 2018 Spring Statement, the Chancellor of the Exchequer asked the ONS to develop a more sophisticated measure of human capital. From this ONS has considered how to improve and expand upon our existing estimates to meet a wider set of users’ needs.

In addition there has been growing UK user interest to better understand wider impacts to improve sustainable growth in the economy and the impact on the individual. These focus on:

  • Understanding skills gaps and the threats of automation across all sectors of the economy;
  • The value for money of education and training, from vocational and higher education to apprenticeships and job-related training;
  • Producing international comparable estimates of human capital.

There are also international efforts to develop comparable human capital estimates for policy, from work the OECD is doing on productivity to efforts from the World Bank to develop a human capital index, and ONS is engaging with international efforts on this topic, which feed into this consultation as well as wider work.

ONS published a workplan in October 2018, setting out how we plan to review human capital estimates in the UK. This included a recommendation to consider the feasibility of an indicator-based approach to measuring human capital, which was alongside other areas of work we will look to develop in the future.

This consultation seeks your views on our plans for a new indicator-based approach, presented as a dashboard of indicators. An indicator is a measure, a statistic, of a variable of interest. A dashboard is a collection of indicators presented together. Examples of existing uses of indicator approaches can be found in the consultation annex.

This consultation sets out how we plan to:

  1. measure human capital across the whole lifetime of an individual (rather than focus solely on the working age population)
  2. expand the scope of our analysis, focusing on a series of themes and mechanisms.
  3. focus on specific mechanisms that influence a person’s human capital (rather than wider associations)
  4. present a series of indicators, grouped into three groups (input, outcome and enabling indicators).

This consultation represents the first of several phases in our wider review of measures of human capital. This first phase maps out a human capital measurement framework alongside potential indicators of human capital. This is not restricted to indicators currently measurable by the data available to the ONS. Instead, we will focus on an optimal set of indicators to provide a more complete picture of what impacts an individual’s human capital improvement. Other phases will look to review the full list of skills and knowledge that should be captured, as well as data sources to fill them. An overview of the different phases is outlined in the consultation annex.

All the documents you will need are contained in the related documents section at the bottom of this page and are sometimes linked to througout the survey itself.

 

What happens next

We will publish a response within 12 weeks of this consultation closing.

Audiences

  • Analysts
  • Academics
  • Charities
  • Economists
  • Government
  • Local government
  • Operational managers
  • Policy managers
  • Researchers
  • Statisticians
  • Think tanks

Interests

  • Economy
  • Labour market
  • Statistics
  • Data
  • Formal consultations