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Human capital at work

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Human capital at work

The value of experience

McKinsey,

5 min read
3 take-aways
Audio & text

What's inside?

The “experience effect” is driving wage growth for workers around the globe.

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Editorial Rating

8

Qualities

  • Analytical
  • Well Structured
  • Overview

Recommendation

Most people know that work experience matters; but just how valuable is it? In this article, experts from the McKinsey Global Institute and People & Organizational Performance Practice sum up findings drawn from the data of millions of workers across four countries: Work experience contributes significantly to human capital and, therefore, lifetime earnings. Workers who make bold, frequent role changes are rewarded with stronger wage growth than their less mobile peers, and some workers who start out with relatively few qualifications can “catch up” by developing their skills while on the job.

Summary

Work experience is a key component of human capital.

Human capital is the “collective knowledge, attributes, skills, experience, and health of the workforce.” Alongside formal education, work experience is a known contributor to individuals’ human capital. Human capital, in turn, is a major determinant of lifetime earnings.

But just how much does work experience contribute to a person’s human capital? What factors strengthen or weaken the effects of work experience? To address these questions, the McKinsey Global Institute and McKinsey’s People & Organizational Performance Practice examined the work history of four million workers in India, Germany, the UK and the United States. Spanning a wide range of careers, economic contexts and individual backgrounds, this data offers insight into the size and scope of the “experience effect.”

The fewer initial qualifications a career path requires...

About the Authors

Kanmani Chockalingam led the working team as engagement manager for McKinsey. Anu Madgavkar and Jeongmin Seong are McKinsey Global Institute partners, while Sven Smit serves as MGI’s chair and Jonathan Woetzel as its director. Bill Schaninger and Hamid Samandari are McKinsey senior partners, and Davis Carlin is a McKinsey partner.

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