Question

Compare and contrast in details human capital and signaling models.

Answer 1

The human capital theory represents that the production and the growth of the firms and organization can be increased by the education (knowledge) and training of the employees or workers working under a certain employer or firm. On the other hand, signaling models represent the education and abilities level of the employees or workers working under a certain employer or firm. We can also say that the signaling model refers to the signals (data and information) collected by the employers or firms regarding the employees or workers. Both theories or models are used by organizations in human resource management and development (HR).

In the human capital, the firms or employer gives high wages to the employees or workers who had proper education (knowledge and training) regarding the work performed by him. While in the signaling models, the employer or firm differentiates the workers (good or bad and educated or not) performance. The differentiation is made by signals, that are collected by the employers or workers.