Human capital revisited

Human Capital refers to the stock of productive skills and technical knowledge embodied in labour. Many early economic theories refer to it simply as labour, or one of the three factors of production and consider it to be a resource. It can be viewed as a way of defining and categorizing peoples’ skills and abilities as used in employment and which otherwise contribute to economy.{{more}} Adam Smith, one of the earliest economists saw human capital as the combination of skills, dexterity and judgment. It is substitutable but not transferable like land, labour and fixed capital. As doctors gain more experience for example, their knowledge base will increase as well as their endowment of human capital. It must be recognized however that mobility with regard to where people want to move and work is part of their human capital. Being able to move from one area to the next is an ability and a benefit of having human capital. To restrict people from doing so would be to inherently lower their human capital.

Human capital is regarded as a subset of intellectual capital and intellectual capital itself is employed mostly by persons in the field of information technology, technology transfer and other fields concerned primarily with technology. Our focus today is however on the human capital subset in the field of sport.

In August 2006, the English Premier League football club West Ham United engaged the services of Argentine Star Carlos Tevez through his agent Kia Joorabchian who owned the player’s economic rights. In fact when the English Premier League was made aware of the complications, West Ham were only allowed to keep playing Tevez after assuring the Premier League that all third party clauses in the player’s contract had been severed. Now Manchester United is seeking to acquire the services of Tevez from West Ham at a fee of £30m. The Premier League is insisting that the deal must be transacted between Manchester United and West Ham who hold Tevez’s registration, and that West Ham must receive the majority of the fees rather than Joorabchian of Media Sports Investments (MSI) who own Tevez’s economic rights. Both West Ham and Manchester United have invited FIFA to intervene in the dispute to have the matter in which Tevez signed away his economic rights, settled.

In the case of David Beckham’s move from Real Madrid in Spain to LA Galaxy in the United States, the player seemed to be more in control of his economic rights and is extracting huge sums through clever use of his human capital. Beckham stands to make US $250 million in five years with Galaxy, but the money his mere presence will bring into the club will make that investment seem a bargain. Galaxy is already lining up prestigious money spinning exhibition games in Europe and Asia which will make them millions. Galaxy sold more than a quarter of a million Beckham shirts in a couple of days and that represented a tripling of LA Galaxy’s ticket base. US Television Station NBC has boldly predicted that LA Galaxy’s star name could eclipse LA Lakers Basketball icon Kobe Bryant.

David and his celebrity wife ‘Posh Spice’ are star attractions in the U.S where more than 5000 fans witnessed his official unveiling as a Galaxy player, and following this ‘on-the-pitch’ affair David carried out an incredible 65 television interviews. This is all part of building the Beckham Brand. In the mean time his wife is already making appearances on American chat houses. The couple seem well entrenched in the celebrity community, but it has little to do with football. Beckham appears to be a celebrity first and a footballer second. This will ensure that their combined earnings from non-footballing activity will not be insubstantial.

While a sportsman’s skills and abilities contribute to building his human capital, it is his ability to market himself as a sporting icon that attracts sponsorship and by extension enhances his earning capacity. Pound for pound the French player Zinadine Zidane was a more skillful and effective on-the-field player than David Beckham but it is Beckham’s ability to market himself side by side with his celebrity wife that has made him one of the leading earners among current soccer players. And finally the introduction of the concept of ‘Ownership of Economic Rights’ in soccer may signal an irreversible trend and the players themselves will need to take greater ownership of their human capital in order to avoid having their economic rights signed over to self-seeking agents.