Question

What is Human Capital? How does this stimulate Economic Growth? Explain. How does increasing the level of education nationally help to improve Economic Growth, both in terms of the CFD and social progress? Why is it important to consider Human Capital in terms other than formal education? What are other forms of non-academic based Human Capital?

Answer 1

human capital is also known as skilled labor which is distinguished from manual labor as there is skills, experiences, education level required to produce a certain output which is satisfied by human capital.

Economic growth is stimulated by human capital because after a threshold level of growth, there are diminishing returns on physical capital but the knowledge-based economy has increasing returns which require a strong human capital base.

Hence, increasing level of education is essential to gain desired skills for an industry and make labor more productive and increase output productivity as well. It also helps in improving social well being when more number of people are educated, better health and higher economic growth are bound to follow.

Human capital is in terms other than formal education as the skills required to work in industries are nonacademical and are specific to different industries. Therefore, there is on the job training and vocational courses to learn and develop desired skills which makes an educated population turn into human capital.