Measuring human capital flows for Australia: a lifetime labour income approach

This paper presents an experimental accumulation account for human capital for Australia. This study focuses on human capital formed through investment in post-school education and working experience. To separate the positive effect on lifetime labour incomes of ageing, the study makes use of wage differentials arising from age at the early stage of working life to estimate investment in working experience. To derive measures of net human capital formation, the study decomposes total depreciation into three elements: depreciation on education capital, depreciation on experience capital, and ageing of base level capital. The contribution of the size of working age population to the growth of human capital stock is treated as other changes. The most important empirical findings from this accounting exercise are: (1) education has become an increasingly important driver of the growth of human capital stock, and this is especially noticeable for women; (2) the impact of population ageing (depreciation) on the human capital stock has trended upwards strongly since the first half of the 1990s, and has significantly slowed down the growth of human capital stock.