Question

In depth, please explain the significant importance of human capital.

Answer 1

Human capital is referred to as intangible asset which are not mentioned in the balance sheet of company. Human capital resources comprises of knowledge ,skill, talent, abilities, training, experience judgement and wisdom possessed by individually or collectively.
Human capital is very much important because it contributes to the productivity and thus profitability. Human capital contribute to the growth of economy and organisation as well. A company can be more productive by investing time and money on employees training and educational activities.
Like any other asset, human capital may also be depreciated by long time of unemployment and inability to cope up with technological innovation. Human capital of an organisation is managed by the Human Resource Department of an organisation.

How to increase human capital
• Specialisation and division of labour
Specialisation and division of labour allows the workers to concentrate tasks based on their skill and knowledge.
• Training
Giving training helps to increase the knowledge and ability related a particular job or profession
• Creativity
Education wich promote the children to think out of the box can increase the ability of human capital.
• Education
Higher education plays an important role in the development of human capital of a nation. some countries provide quality education to the people at no cost.
• Infrastructure
The infrastructure of an economy may also influence the human capital. Good Transportation system, availability of mobile and Internet facilities and communication are very important for the enhancement of human capital in development of economy.

Importance of human capital

• Human capital is considered as an asset consisting of skill, knowledge preserved by a person which can be used by an organisation to increase its productivity.
• Economic growth and productivity
Economic growth of a country is highly dependent on human capital. educated, and creative workforce helps to increase productivity and leads to economic growth.
• Limited raw material
highly skilled innovative workforce uses only limited raw material by adding value in manufacturing process.
• Human capital flight
An era of globalisation enables the skilled and qualified workers to move to high income countries from low income countries.


Different views on human capital
• Garry Backer"Human capital"
According to the view of Gary Backer human capital is determined by the way of education, training, medical treatment and an ineffective means of production.
• Howard's Gardener - different types oh human capital
In his view gardener emphasised there are different types of human capital. A person with good education may be a good manager , a person with no education may be a good manager .
• Schultz/Nelson-phelps-ability to adapt
Human capital must be looked up from the ability to change or adapt.
• Spence view
According to spence view observable sign of human capital is essentially a significant function.