Scope of the Chapter

In the mid-19th century, Abraham Lincoln was esteemed not only for his wit and rhetoric but also for physical prowess in splitting rails and wresting.

Many readers know the ballad of John Henry, born with a “hammer in his hand.” The legend celebrates the raw strength of that “steel-driving man” who, in the late 19th century, raced a steam drill in digging a West Virginia railway tunnel. Man defeated machine, but, alas, John Henry worked so hard that he “keeled over and died.”

Since John Henry, humankind has reduced requirements for manual work as skilled labor and capital have increasingly replaced unskilled labor. As human work has been deskilled, the wage of unskilled relative to skilled work has fallen.

This chapter focuses on education, skilled labor, health, and human capital. Higher income per capita is strongly associated with lower mortality and higher school completion (World Bank 2004i:35).

The Nobel laureate Simon S. Kuznets (1955b:39) argues that the major stock of an economically advanced country is not its physical capital but “the body of knowledge amassed from tested findings and discoveries of empirical science, and the capacity and training of its population to use this knowledge effectively.” The contrast in economic growth between Japan and Germany, on the one hand, and third-world countries, on the other, after World War II illustrates the importance of labor quality.