Measuring Human Capital in the UK Economic Accounts: An experimental satellite account

The Office for National Statistics (ONS) has for over 10 years produced annual stock estimates of human capital assets, in real and nominal terms with a variety of demographic decompositions. Similarly, most published papers from both academic and national statistical institutions have focused on the production and analysis of human capital stock estimates. This paper looks to move beyond this by considering the economic flows associated with incorporating human capital assets into the UK Economic Accounts within the context of an experimental satellite account; thereby explaining the movement between two human capital stock positions and the resulting effect on the main national accounts aggregates such as gross value added, savings, net worth, etc. In doing this we draw on the UNECE Guide to measuring human capital (UNECE; 2016) and the examples of the Human Capital Accounts produced by Canada and the United States, as its starting points for integrating the "production" of human capital assets into the economic accounts and then looks at extending that to include the production of services arising from those human capital assets by looking at parallels with how the System of National Accounts treats other produced assets used within a production process where the economic ownership of the asset resides with another institutional unit. This constitutes a key contribution to the existing body of work, and the estimates presented here are the first of their kind for the UK and demonstrates the importance of human capital assets for the economic accounts due to their magnitude in comparison with current total non-financial assets on the UK balance sheet; on average human capital assets are 220 per cent of total non-financial assets for the reference period 2005-2018.