What if Human Labor Was an Asset, not an Expense?
People add more to a business than their salary expense. What if the books reflected that?
As much as CEOs like to broadcast that their people are the company’s most valuable asset, budgets are balanced with employee wages listed as one of the biggest expenses. In accounting, assets are any resources that a company controls and deploys to produce future value. In a manufacturing-driven economy, it makes sense to focus on asset categories like property, plant, and equipment (PP&E), inventory, and short-term investments. But as countries like the United States transition from an economy based on production of goods to one mainly driven by people’s services and knowledge-work, it might now make sense to change our classification of workers from liabilities (under the cost of their wages) to assets.
I’m not the first to point out the problems with how we classify labor. The modern theory of human capital was first discussed in 1965, and the possibilities of Human Resource Accounting gained initial traction in the 1970s. Accounting academics have explored potential models that could improve the way we report, track, and measure the value of a company’s human resources. But there is no consensus on a solution.
