Economics
Human Capital
Human capital refers to the knowledge, skills, experience, and attributes possessed by individuals that contribute to their productivity and economic value. In an economic context, human capital is considered a crucial factor in driving economic growth and development. It encompasses both formal education and training as well as informal learning and on-the-job experience.
Written by Perlego with AI-assistance
Related key terms
1 of 5
12 Key excerpts on "Human Capital"
- Sirithida Wannachai(Author)
- 2019(Publication Date)
- Society Publishing(Publisher)
Human Capital is a microeconomic term defined as a collection of skills and other intangible assets that can create and add economic value to an individual and to the community in general. The concept was formally introduced by Gary S. Becker 1 in his book “Human Capital” which primarily discussed knowledge and skills accumulated by people through education and trainings provided to them by the society. The macroeconomic aspect of Human Capital would be its effect to economic growth . According to Becker, Human Capital pertains to things or activities, of which may be intangible but has significant contribution to improvement of a person. Some examples of these are education, training courses, medical care, even lectures on character and personal development with aim to add value to a person. They are often classified as investments but unlike financial and physical assets such as bank accounts or cash and personal properties which can be easily identified and separated from people, this type of investment such as knowledge, skills, health, and values are impossible to be acknowledged apart from the people. Human Capital can be subdivided into four categories such as cultural, economic, social and symbolic capital. These categories can be developed and measured in countless means and methods. The measure of an individual’s capacity to perform certain amount of task pertains to economic capital. Therefore, this kind of capital could be increased by a worker through adding value to it. It is where education, job trainings, and marketable talents are being employed to a particular worker to increase its 1 He published the book in 1957 as a requirement for his Ph.D. dissertation. This book attempted to use economic theory to investigate the factors affecting earnings, em -ployment, and occupations such as prejudice and other social issues.
- Gerbrand Tholen(Author)
- 2022(Publication Date)
- Policy Press(Publisher)
The concept of Human Capital is used to highlight the classic insight that productive wealth is embodied in labour, skills and knowledge (OECD, 2001). Any stock of knowledge or characteristics the worker has (either innate or acquired) that contributes to his or her economic ‘productivity’ can be included (Garibaldi, 2006 ; Acemoglu and Autor, 2011). Human Capital investments are ‘activities that influence future monetary and psychic income by increasing the resources in people’ and ‘include schooling, on-the-job training, medical care, migration, and searching for information about prices and incomes’ (Becker, 1994, p 11). The individuals thus make investments in themselves and as such become objects of investment, of inputs and outputs. Marketable skills that workers possess are regarded as a key form of capital. Workers improve their skills through training or education which are ‘the most important investments in Human Capital’ (Becker, 1994, p 17). Education drives the marginal productivity of labour and marginal productivity drives earnings. Human Capital acquired through on-the-job training or formal education tends to increase a person’s productivity in the workplace, leading to increased earnings. Wages are based not on the characteristics of jobs, but on the productivity of workers. The lifetime earnings of educated labour, therefore, define the value of investment in education. HCT has become a foundational theory within modern labour and education economics and beyond, and is used and empirically tested throughout the social sciences. It also became the cornerstone of educational policies in most developed nations. The idea that a country’s prosperity is seen as directly linked to the cognitive skills of its workforce is now very much accepted (Hanushek and Woessmann, 2015). Post-war growth in participation in education contributed towards levels of rising national economic growth experienced in many countries
eBook - PDFIntegrating Human Capital with Human Development
The Path to a More Productive and Humane Economy
- John F. Tomer(Author)
- 2016(Publication Date)
- Palgrave Macmillan(Publisher)
More recently, the term capital has been increasingly used in connection with less tangible types of capacity. It seems that the term capital may now I N T EG R AT I NG H U M A N C A PI TA L 4 refer to anything physical or human that provides capacity for a society. In essence, capital is that which is produced by humans, is long lasting, represents capacity, involves a cost, and might be investable on the basis of a self-conscious calculation relating to the future (Tomer 2008b, p. 13). “Human Capital” is clearly a kind of capital. According to Becker (1964, p. 1), HC refers to the “resources in people,” typically the skills and knowledge that enable people possessing more of these resources to realize higher monetary and psychic income. Becker’s HC definition is what is known as the standard or mainstream economics (ME) con- ception of HC because it fits squarely within the established framework of neoclassical analysis. Many economists who do HC research adhere closely to Becker’s conception of HC. There is no doubt that the standard HC concept is very useful and important. Let’s consider why. According to standard HC theory, indi- viduals invest in education and training in order to acquire knowledge, learn job skills, gain experience, acquire habits such as punctuality and virtues such as honesty, and otherwise gain competence. These invest- ments can be expected to raise worker productivity and, thereby, reward workers with higher earnings. According to the theory, people, say workers, will invest in HC whenever its internal rate of return exceeds the risk adjusted rate of discount. That is, they will undertake HC invest- ments when the present value of the investment’s benefits (the lifetime returns to the investment) equal or exceed the present value of the direct and indirect costs of the investment.
eBook - PDF- Thomas Hyclak, Geraint Johnes, Robert Thornton, , Thomas Hyclak, Thomas Hyclak, Geraint Johnes, Robert Thornton(Authors)
- 2020(Publication Date)
- Cengage Learning EMEA(Publisher)
69 Summary In this chapter, we introduced the important concept of Human Capital. Empirical studies have identified the education, training, and experience of the workforce as key determinants of a country’s total wealth and economic growth. Education can be studied as an investment decision, with the student, the parents, and the government paying the direct and indirect costs of acquiring a useful asset. Estimates of the rate of return to this asset all suggest that this expenditure has a monetary payoff that exceeds most alternative investment options. An important question is whether the labor market values education because of what a student learns while in school or because a student’s success in school is a signal of his or her innate ability. It is difficult to distinguish between these two concepts by analyzing available data on individual decisions or wage returns to years of schooling. Labor econo- mists have been creative in trying to make such a distinction, however, and we have some confidence in saying that the returns to schooling are in addition to the wage gains for native ability. Another important distinction is between general and specific Human Capital. Specific Human Capital is mainly of use in a particular work setting whereas general Human Capital is portable between different employers and jobs. It seems clear that an employer has an incentive to invest in the specific Human Capital of the firm’s workers because the employer can reap the benefits of that investment through the enhanced performance of these workers on the job. Most important, we have relaxed the assumption that all labor is the same. The material in this chapter enables us to think of workers with different abilities and with different levels of education and experience. The notion that some Human Capital is specific to a particular employer further enriches the insight that workers are a heterogeneous bunch of people.
eBook - PDFKnowledge: Its Creation, Distribution and Economic Significance, Volume III
The Economics of Information and Human Capital
- Fritz Machlup(Author)
- 2014(Publication Date)
- Princeton University Press(Publisher)
Knowledge not embodied in persons or machines improves the performance of many or all productive factors, and the returns to the investment come either in the form of monopoly rents or, if the use of the knowledge is unrestricted, in the form of increased real incomes of consumers. There will be several occasions in subsequent chapters to refer to nonmaterial nonHuman Capital in the form of nonembodied knowl- edge produced by costly R and D activities. 19 However, since the rich literature on Human Capital demands primary attention, knowl- edge and skills embodied in persons will be the chief subject of our discussion. Formation of Human Capital Through Education Education, in a wide sense of the word, covers much more than formal schooling; it includes all sorts of teaching and learning, formal and informal, inside and outside schools. In Volume V of this work, education in the home, in the church, in the armed forces, on the job, and even self-education will be discussed in considerable detail. In the present examination of the concept of Human Capital and its use in economic analysis, I shall discuss only two types of invest- ment—additional schooling and job training. 20 The costs of additional schooling and job training are regarded as investments, as formation of Human Capital, because they may yield positive returns in future years. These returns are expected, with some degree of confidence, by those who bear the costs, that is, the investors. In the case of schooling, the investors may be national, state, and local governments (spending the taxpayers' money), pri- vate benefactors, families, and (if they are potential earners of in- comes) the students themselves. In the case of job training, the inves- tors may be, apart from instances of governmental subsidization, the employers or the workers themselves.
- Derek A. Neal(Author)
- 2018(Publication Date)
- Harvard University Press(Publisher)
In this framework, job training, formal education, health care, and many other activities are investments in Human Capital. Modern soci-eties differ significantly in terms of how much of their incomes they devote 1 2 Introduction to health care, but almost all developed countries spend between 5% and 8% of national output on education. 3 Today, most wealth is held in the form of Human Capital, and modern societies make large investments in Human Capital through expenditures on education. Thus, how societies provide education to their citizens may mat-ter greatly for the creation and distribution of wealth in modern economies. I.1 Humans as Machines The term Human Capital suggests a comparison between investments in humans and machines. If a factory owner upgrades the quality of his capital stock by investing in more sophisticated machinery, he expects the new machinery to increase his factory’s output enough to justify the cost of improving his machinery. Likewise, many young adults invest in education hoping that the skills they acquire will increase their capacity to produce and therefore earn. They also hope that this increase in future earnings will be great enough to justify the cost of their education. This line of reasoning first appears in chapter 10 of The Wealth of Nations . Adam Smith wrote during a time when most people had little for-mal schooling, but his observations about the relationship between adult earnings in a given skilled trade and the nature of the apprenticeships in that trade inspired much modern research on education and human capi-tal. Smith wrote: Secondly, the wages of labour vary with the easiness and cheapness, or the difficulty and expense of learning the business. When any expensive machine is erected, the extraordinary work to be performed by it before it is worn out, it must be expected, will replace the capital laid out upon it, with at least the ordinary profits.
eBook - PDFGlobal Perspectives on Human Capital in Early Childhood Education
Reconceptualizing Theory, Policy, and Practice
- Theodora Lightfoot-Rueda, Ruth Lynn Peach, Theodora Lightfoot-Rueda, Ruth Lynn Peach, Kenneth A. Loparo, Nigel Leask(Authors)
- 2016(Publication Date)
- Palgrave Macmillan(Publisher)
In addition, it may be time to look at ways in which we can see education through other lenses. This volume takes on the task of reexamination and reevaluation. It is particularly useful because it represents a point of dialog between authors with several perspectives on the need to reconceptualize the purpose of schooling. We present critiques of Human Capital theory from authors using Foucauldian, Gramscian, and Bakhtinian analy- sis, but all dialoguing with each other. In addition, we look at views moving past Human Capital theory, and propose other frameworks for understanding schooling. What Is Human Capital and Education? In this text we use terms such as “education for Human Capital” or “Human Capital theory in education” to refer to a set of discursive assumptions, or “givens” that underlie most contemporary policy dis- cussions concerning education. Although the concept of human cap- ital theory can be quite complex (hence the existence of this book), its central concept can be reduced to a unifying trope—that is, edu- cation is an “investment” that should be judged on the same basis as other financial investments—through future financial gain or loss. In this case the projected gain or loss is determined by the productiv- ity of future labor markets. Decisions concerning schooling can and should be made on the basis of estimated profit that can result from particular curricular and methodological decisions. Furthermore the probable loss or gain that a nation-state or other group that “invests” in schooling incurs can be quantified and assessed or predicted using statistical formulas. As the economist Eric Hanushek states, I’ve looked at the economic implications of schooling, and people who know more earn more; nations that do better in school [ sic] grow faster than other nations. Even if we just look at the economic implications, the
eBook - PDFWhat's the Good of Education?
The Economics of Education in the UK
- Stephen Machin, Anna Vignoles(Authors)
- 2018(Publication Date)
- Princeton University Press(Publisher)
Individuals invest in Human Capital, such as schooling, because Human Capital makes a person more productive and this gain in productivity is reflected in higher wages. Thus it is argued that individuals primarily make investments in schooling and other forms of Human Capital to earn a return, i.e. to increase their income in the future. This book is an attempt to answer, in a number of different contexts, the natural question that arises from this theoretical perspective: namely, what is the economic value of educational investments made by individuals, firms and the state? This essentially simple theory is particularly powerful because it provides a tool to analyse such a diverse range of phenomena. Firstly, there are numerous forms of Human Capital, ranging from formal education through to on-the-job learning or firm-provided training. Thus human-capital theory can be used to explain invest- ments in schooling, the provision of training by firms, the acquisition of vocational qualifications, the benefits of informal on-the-job learning and the like. Furthermore, it provides a framework for analysing any policy interventions that result in invest- ments in education and other forms of Human Capital. Thus when the state invests in programmes such as a youth training scheme or a smaller-class-size initiative, we can analyse the likely impact of these programmes and their expected social and private rates of return using HCT. Of course, the chapters in this book do draw on other theories that are used in the economics of education. For example, Part II draws on models from both the education production function literature and school- effectiveness research, discussing as it does the production of education in schools. Furthermore, some authors challenge aspects of human-capital theory.
eBook - PDF- Glyn Williams, Dr. Glyn Williams(Authors)
- 2010(Publication Date)
- Multilingual Matters(Publisher)
Chapter 3 Human Capital Introduction Having established the relationship between globalisation and the changing role of diverse languages in the New Economy I can now begin to consider the specifics of the relationship between the organisation of work and language use. This demands attention to the concepts that have been invoked in an attempt to highlight the conditions that contribute to a heightened propensity for the generation of knowledge. It involves a focus on what is known as Human Capital. In subsequent chapters I will discuss arguments that pertain to the role of regional culture as Human Capital, and how language as a form of Human Capital can be exploited in the organisation of work. For the moment, the discussion will focus upon the theoretical and conceptual issues that have been claimed to be of relevance for an understanding of Human Capital. This involves an understanding of how Human Capital is operationalised such that it plays an effective role in knowledge generation. Such an objective requires rethinking the structure–agency relationship of sociology to accommodate a greater role for the human subject, and the understanding of social practice. The focus on individual and group learning within the knowledge economy involves the accumulation and exchange of social knowledge. The implication is that much productive and practical knowledge is of a group character. The communication of knowledge is largely a tacit process that operates through interaction. As an essential basis to all knowledge, tacit knowledge must, somehow, be shared through intuitions and tacit meanings. Furthermore, knowledge is a constantly dynamic, emergent, entity that draws upon prior knowledge in developing new shades. At the heart of this process are language and culture as features of Human Capital.
eBook - PDF- W. Keith Bryant, Cathleen D. Zick(Authors)
- 2005(Publication Date)
- Cambridge University Press(Publisher)
Also excluded is the value of the time Americans spent in maintaining their health. The facts show that Americans spend great amounts of time and money investing in themselves. What goes on under one’s nose is frequently noticed and dealt with long after things more remote. So it is with Human Capital. Although people (and even economists) have been investing in themselves and 198 Human Capital 199 their children for as long as there have been people (or economists), economists have paid serious attention to the fact only in the past forty years. Although economists have striven to understand households’ sav-ing behavior, they neglected until lately the process by which people invest in themselves, one of the most important ways of saving. We do not yet have a full grasp of the magnitude of the nation’s capital stock held in human form. Nor are the implications of saving by investing in oneself or one’s family fully understood. It is clear, however, that the concept of Human Capital has been and is central to the understanding of the economic organization of the household. Consequently, this chapter is devoted to an introduction of the concept and to some of the ways that it has shed light on family behavior. Most introductory treatments of Human Capital focus on the demand for education and the roles that schooling and experience play in influenc-ing the labor market behavior of individuals. Because of the focus of this text on the household and the recognition that its behavior in the labor market is only one of its many activities, some of the nonlabor market implications of Human Capital will also be addressed. Human Capital as saving In Chapter 4 we dealt with a two-period model (today and tomorrow) in which the household balances the demands for consumption today against the demands for future consumption.
- Anna Wojciuk(Author)
- 2018(Publication Date)
- Routledge(Publisher)
High university enrolment rates do not necessarily indicate the presence of an optimal strategy for building Human Capital. 5 A strict relationship between educational institutions and employers should be established. The German and Swiss models, in particular, with their 102 Human Capital and knowledge in economics extensive and universal system of apprenticeships, testify to the efficiency of this solution; on the higher level, it continues in the cooperation between universities and the industry. 6 Companies should invest in training, ensuring it maintains quality and is applied systematically. Japanese enterprises where promotion is often partly conditional upon passing a knowledge test are particularly effective at training their employees. Trade organisations offer courses that instruct in abilities useful for the development of the entire trade, allowing for a critical mass to be achieved even when the companies involved are minor. 7 Immigration policy should encourage mobility of persons endowed with specialised abilities. In Porter’s view, the government should also provide support for the develop -ment of science and technology. Due to the spillover effect, the benefits of this progress extend beyond any single firm – hence, control over investments cannot remain in private hands. This applies to basic research, in particular. In states that have competitive advantages, the government supports research in various ways, at times including direct financing of scientific laboratories or tax induce -ments for different entities to engage in scientific endeavours. Development in research is achieved primarily by an innovation policy, since supporting science and technology is in itself insufficient.
- Jonas Ljungberg(Author)
- 2004(Publication Date)
- Palgrave Macmillan(Publisher)
Human Capital and industrialization Studies of Human Capital during early industrialization are still few and far between. Joel Mokyr suggests that the rise of factories ‘is inseparable from the growth in the knowledge-base of production’ and that the move from cottage or home production to factories was necessary since ‘efficient 10 Technology and Human Capital production required more knowledge than a single household could possess’ (2002, pp. 131, 139). However, Mokyr advances no further than Babbage on the question of whether industrialization ‘on balance raised or reduced the demand for skills’ (2002, p. 142). Even if new competence was demanded and the variance of the skill distribution increased, there is yet no final account of the demand for skilled and unskilled labour. Chapter 2 by Jaime Reis is a contribution to such an account. On the basis of data from an industrial census in 1890, he investigates the level of Human Capital among manufactory workers in Lisbon. The focus of the analysis is the skill premium, the remuneration above a certain level of pay assessed as ‘raw labour’. The wide, and negatively skewed, distribution of wages among the Lisbon manufactory workers is striking. In other words, unskilled ‘raw labour’ represented a minority, while most occupations in this modern sector of the Portuguese economy required different grades of skill. Human Capital and technology were already complementary in this case of industrialization, which occurred fairly late but still before the Second Industrial Revolution. A similar pattern can be observed among workers in developing countries with foreign enterprises: both skills and wages are raised above those of the traditional economy (Lindert and Williamson 2001). However, the evidence offered by Jaime Reis shows that in the early industrialization of Portugal, the new technology increased the demand for knowledge and skills.
Index pages curate the most relevant extracts from our library of academic textbooks. They’ve been created using an in-house natural language model (NLM), each adding context and meaning to key research topics.
