Lessons on human capital for Total Wealth Planners
By Steve Conley, Academy of Life Planning
Two people can have the same savings and very different futures.
One has skills people need, the health to use them and access to worthwhile opportunities. The other has equally valuable experience but is exhausted, caring for a relative or unable to find work that fits their circumstances.
A financial statement may make them look similar. A Total Wealth Plan should reveal why they are not.
Human capital is the knowledge, skills, experience and capabilities embodied in people. Broader definitions also include attributes that support personal and social well-being. It matters because our ability to live, earn, adapt and contribute cannot be understood from financial assets alone.
Six research documents offer useful lessons for Total Wealth Planners. They also challenge an easy assumption: that identifying someone’s potential is enough to unlock it.
1. Begin with the person who creates the income
The supplied review of human capital measurement describes approaches based on past investment, future earnings and indicators such as education and skills. Each illuminates a different part of the picture. None captures everything that matters.[1]
For planners, this broadens the opening conversation. Alongside “What do you own?”, ask:
- What can you do that other people value?
- Where have you built useful experience or judgement?
- Which capabilities do you want to develop?
- What would make those capabilities easier to use?
A small investment portfolio does not tell us that someone has few options. Equally, extensive qualifications do not guarantee that they have accessible opportunities.
The Academy’s practical interpretation is to look at both capability and the conditions for using it. Personal networks sit alongside this as social wealth, rather than needing to be squeezed into a single human capital category.
2. Health belongs in the plan
Castelló-Climent and Doménech’s study models a relationship between educational inequality, life expectancy and investment in education. Its evidence across 92 countries supports the proposed life expectancy channel: a longer expected horizon can strengthen the incentive to invest in learning.[2]
This is a macroeconomic finding, not a prediction about an individual client’s lifespan. Its planning relevance is that the time and capacity available to benefit from learning matter.
A proposed career change may look attractive financially but require a workload the person cannot sustain. Recovery time, accessible working arrangements or a less demanding role may make their existing capabilities more usable.
Total Wealth Planners can explore these circumstances and help clients obtain appropriate expertise. The objective is a life and livelihood that work together.
A plan that increases income while exhausting the person generating it may weaken total wealth.
3. Inspiration needs a route into action
Lucia Rizzica’s UCL thesis provides a particularly valuable lesson. Its UK study found that Widening Participation interventions raised pupils’ aspirations and encouraged them to remain in education after 16. However, university participation did not rise generally; the benefits at that stage were concentrated among pupils from more affluent families. The analysis points to financial constraints as an important barrier.[3]
The distinction matters far beyond education. A person may become more motivated without becoming more able to act.
In planning, “You could retrain” needs to become a workable proposition. What will the course cost? How will living expenses be covered? Can learning fit around caring responsibilities? Is there credible demand for the resulting skill?
This is an application of the research, rather than a tested result for adult clients. But it offers a useful discipline: pair every aspiration with an examination of access.
Do not mistake encouragement for an opportunity the client can actually use.
4. Look for the barrier before prescribing more training
Another study in Rizzica’s thesis examined the expansion of local university provision in Italy. Female enrolment increased, while men were more likely to switch from distant universities to local ones. The findings suggest that non-financial costs of moving away from home constrained women’s participation; effects were larger in areas where women devoted more time to family care.[3]
The lesson is to investigate the design of an opportunity, as well as its existence.
For an adult client, the obstacle might be travel, scheduling, caring commitments or inaccessible recruitment practices. These possibilities require individual enquiry; the Italian study does not establish their prevalence among Academy clients.
Sometimes the next step is learning. Sometimes it is making an existing capability usable through flexible hours, a local opportunity or a different delivery format.
Ask: “What is preventing you from using what you already know?”
5. Development does not automatically produce inclusion
Omoju Idowu Susan’s study of Nigeria examines relationships between human capital development, inequality and economic growth over 1980–2016. It reports that inequality shocks were associated with reduced secondary school enrolment, alongside positive responses to education spending.[4]
Its results are more complicated than a simple claim that more education always reduces inequality. It also reports negative relationships between secondary enrolment and growth, and positive inequality responses to some education measures. These are model-dependent national findings; explanations offered for them should not be treated as established causes.
The practical lesson is to ask who can access development and who benefits from it.
A client paying for another qualification needs to understand how it connects to a real opportunity. What evidence is there of demand? How do employers recognise it? What alternatives could they test before committing substantial time and money?
Capability development deserves a place in the plan. So does scrutiny of the market in which that capability will be used.
6. Measure human capital without pricing the person’s worth
The measurement review explains that an income-based approach estimates the discounted value of expected future earnings. It also recognises that wages are influenced by factors including discrimination and market power.[1]
That creates a serious distinction. Earnings can help us model cash flow, but they cannot provide a complete measure of capability, contribution or human worth.
Unpaid care, community work and mentoring may create considerable value without generating a salary. Low earnings may reflect limited opportunity rather than limited ability.
For Total Wealth Planners, use two views together: a financial projection of plausible earnings and a broader record of capabilities, contribution and well-being.
Keep future earnings visibly conditional. They depend on health, demand, working time, access and choices. They are not cash available today. If those earnings already fund a cash-flow projection, avoid counting them again as a separate pot available to meet the same spending.
Measure earning potential to support decisions. Never confuse it with the value of a life.
7. Turn potential into a small test
The research supports taking education, health and opportunity seriously. It does not validate a particular Academy app or guarantee that a business idea will generate income.
Our practical response is to help the client move from an inventory of capabilities to a manageable experiment.
Consider someone in their late fifties with limited savings and years of operational experience. A conventional conversation might focus on reducing expenditure. A Total Wealth conversation can also investigate whether that experience solves a problem someone will pay to address.
The next step could be three conversations with potential customers, followed by a small paid pilot. Agree a limit on the time and money committed. Review demand, net income, workload and the person’s experience before expanding.
This is the kind of enquiry Get ICE can help structure. The client retains ownership of the decision; human support helps them examine assumptions and interpret what happens.
The purpose is to discover a sustainable option, including discovering early that an option does not fit.
What the evidence can tell us
These documents are not six equivalent empirical studies. They include a journal article combining theory and cross-country evidence, a doctoral thesis with policy evaluations, two national econometric papers and two reviews.
The Vietnam paper’s abstract and conclusion describe broadly positive effects, but its results discussion reports negative coefficients for tertiary education and life expectancy. This inconsistency makes it unsuitable as straightforward proof that every human capital measure increases growth.[5] The 2024 overview discusses links between education, health and growth but does not present a new empirical evaluation.[6]
National relationships also cannot simply be transferred to a particular household. The studies provide useful questions and mechanisms to consider, rather than guaranteed personal returns.
Bring human capital into the next client conversation
Record the client’s capabilities, desired contribution and current constraints. Connect these to their financial position and what “enough” means for their life. Identify one accessible opportunity, agree a proportionate action and review the result.
The Academy of Life Planning provides the educational framework. Total Wealth Plans can hold the client’s developing record and plan. Total Wealth Planners provide human support when useful, while helping the client build the capability to continue independently.
Our role is to help people recognise what they can contribute, understand the conditions around them and choose a next step they can own.
The balance sheet shows what someone has accumulated. Total Wealth Planning also asks what they can make possible.
Sources
- Nkuye Moyo. Measuring Human Capital: A Review of Methodologies Paper. Reading Report II, Peking University Institute of Population Research; undated supplied copy. A review, rather than a new empirical study.
- Amparo Castelló-Climent and Rafael Doménech (2008). Human Capital Inequality, Life Expectancy and Economic Growth. The Economic Journal, 118, 653–677.
- Lucia Rizzica. Essays on the Economics of Human Capital Accumulation. UCL doctoral thesis; supplied title page dated September 2013, declaration dated August 2014. Chapters 1 and 2 underpin the education-policy lessons above.
- Omoju Idowu Susan (2020). Human Capital Development Income Inequality and Economic Growth. The International Journal of Humanities & Social Studies, 8(3). DOI: 10.24940/theijhss/2020/v8/i3/HS2003-078.
- Cong Thanh Ha and Cuong Nguyen Manh (2019). The Relationship Between the Human Capital and Economic Growth: A Case of Vietnam. Industrial Engineering Letters, 9(5). DOI: 10.7176/IEL/9-5-04.
- Abdella Mohammed Ahmed (August 2024). What Is the Major Relationship Between Human Capital and Economic Growth? Supplied article review, Oda Bultum University.
