Innovation Through Human Capital

Updated May 28, 2021

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Innovation Through Human Capital essay

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The world of rapid urbanization is continuously changing, and with that change individuals, lives are in this spiral of adapting. As a student studying Real Estate Development, I learn that cities are always improving their standards of living, health, and social behavior. With these improvements, the rise of costs within these cities begin. With gentrification comes the assumption of a gap between the elite, upper-class residents and the middle class, poor residents. However, it is the opposite. Has innovation continues to occur within cities, more and more jobs are created, therefore providing opportunities for people in every sector. This evolution within our society leads to optimism for every “class” of individuals within wealthy communities.

In the article “Inequality and the City,” writer Paul Krugman discusses the concept of “urban America” and the result of it. He expresses the concepts of gentrification impacting the middle class and poverty-driven communities, stating, “But what about all the people, surely a large majority, who are priced out of America’s urban revival? Does it have to be that way?” (Krugman, 2015, p. 11). As cities keep developing and progressing, the cost of living is going to increase due to the demand of individuals.

In opposing view, author Enrico Moretti discusses the notion of individuals assuming they need to have a career in S.T.E.M. to succeed in the “brain hubs” of America. He uses his research to convey his points in his book The New Geography of Jobs. Within this generation, I think individuals could thrive and become successful regardless of their life path, thus middle class and poor residents should be optimistic for their future, because as Moretti expresses there is a “five-to-one ratio,” thus for each one job in the life sciences, software, and technology industries, five new jobs are created in the local economy indirectly. The New Geography of Jobs embodies these new ideals of roles as the progression of urban sprawl prevails.

Education is a crucial aspect for any individual to obtain a stable job and community. As Moretti mentions, “A worker’s education has an effect not just on his own salary but on the entire community around him.” (Moretti, 2015, p. 4). He explains the complexity of economics and the shift it has begun to undergo. The division in educational levels between communities is causing a significant gap in the productivity of labor, therefore resulting in a difference between salaries. The middle class and poor residents may find this as an obstacle as colleges and universities continuously increasing costs of earning a degree. However, as Moretti makes this point, he presents a different idea.

He precedes with the concept of innovation, and the idea that it has become “America’s engine of prosperity” (Moretti, 2015, p. 55). The innovation sector involves jobs that are within the traded sector. As the innovation sector of any company creates more jobs, the non-traded sector indirectly creates additional jobs within the same city or region. Moretti uses Apple as an example to support his point. He states that “Apple employs 13,000 directly in Cupertino but has spurred 70,000 indirect jobs in the region” (Moretti, 2015). Thus, resulting in the “multiplier effect,” which is the concept of a given change to specific input causing an even more substantial change in output.

The cities known as the hubs or hot cities, such as Silicon Valley, are the driving force of local, service economy. Highly educated and less educated workers complement one another due to their reliance. When we think about it, every elite businessman or woman always have people working for them, thus resulting in productivity and increasing wages.

Moretti makes another point in regards to human capital is critical to successful economies within a community. As mentioned earlier, education is a crucial aspect in obtaining a higher wage job; however, human capital is another essential aspect. He explains that human capital is the concept of people and their ideas who also learn from the people and experiences around them. He mostly refers to lower educated individuals learning from higher educated individuals. Moretti states that “today human capital is the best predictor of high salaries both for individuals and for communities” (Moretti, 2015, p. 90). Having college-educated workers within a community provides an increase in wage for workers who have low levels to no college-degree.

Finally, Moretti discusses that our “salary depends more on where you live than your resumé” (Moretti, 2015, p. 88). If the community you live in specializes in a specific product or service, then the jobs know as minimum wage or lower-wage jobs in other cities will pay a higher salary due to the demand and necessity. He provides the example of Las Vegas and waiters. He expresses that Las Vegas is the place for waiters due to the supply and demand for it. Las Vegas as one of the most luxurious and expensive restaurants, bars, and clubs; therefore, waiters can earn six figures or a high hourly wage with tips (Moretti, 2015).

In conclusion, the middle class and poor residents within wealthier communities should have optimism due to the increase in innovation and new industries. As the cost of living increases, we notice that more people are earning their college degree; however for those that cannot obtain it or have low levels of education could take the opportunity that innovative companies continue creating, and grow their “human capital” to increase their wages. The room for growth is within each community, and as urban sprawl continues to work its way into our society, individuals have to learn to adapt to the new norms of society by expanding their skills through those who are known to be the elite and upper class.

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Innovation Through Human Capital. (2021, May 28). Retrieved from https://samploon.com/innovation-through-human-capital/


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