Human Capital Definition, Characteristics And Importance

Published: 2021-05-30
Views: 2146
Author: TracyJ
Published in: Business

Human capital refers to the group of people who work for or are qualified to work for an organization—the “workforce”—in its most basic sense.

Human capital, on the other hand, is more than just the physical labour of the people who work for a company. It is the sum total of intangible qualities that those individuals bring to the organization that may contribute to its success.

Experience, good health, education, personality, skill, moral character and creativity are just a few of them.

Characteristics of Human capital

• It's a fictitious asset: Human capital, unlike physical assets, cannot be seen or touched ( such as machinery and motor van).
• It cannot be transferred: It can't be sold in a society that doesn't practice slavery. Simply put, it is not transferable in the same way that physical capital is.
• It is extremely mobile: Human capital is mobile in terms of both geography and occupation. Ibey has the ability to move around.
• Human capital is inextricably linked to ownership: people are endowed with it, and it cannot be separated from ownership.
• It can be shared: A person with knowledge and skill can share what he knows with others.
• Self-generating and expandable: This feature is linked to the possibility of increasing human capital by increasing the stock of knowledge and skill.

Importance of Human capital 

Unemployment is caused by structural factors. Individuals with the human capital that is unsuitable for modern employers may have difficulty finding work.

Employment of high quality

In today's economy, the gap between low-skilled, low-paying temporary jobs is widening (gig economy). High-skilled and creative workers now have more options for self-employment or stable employment.

Productivity and economic growth

Long-term economic growth is becoming increasingly reliant on human capital development. Increased labour productivity and economic growth can be aided by a more educated, innovative, and creative workforce.

Human capital flight 

Skilled workers have been able to move from low-income countries to higher-income countries as a result of globalization and increased worker mobility. This may have negative consequences for developing economies, as they will lose their best human resources.

Raw materials are scarce

Countries with limited natural resources, such as Japan, Taiwan, and Southeast Asia, have experienced economic growth. Count on a highly skilled and creative workforce to add value to raw materials during the manufacturing process.

Factors that affect Human capital efficiency

1. In-service training

One can learn the skills required for a specific job or activity through training and retraining. Seminars and workshops can be used to provide training.

2. Workplace safety

A workplace safety measure is intended to make the workplace less dangerous. When a worker's workplace is safe and security measures are in place, he or she will give it their all.

3. Clean and hygienic environment:

A conducive and pleasant environment is a precondition for productivity. The efficiency and performance of human capital will be improved if the working environment is kept clean and sanitary.

4. New high-tech equipment and technology

The efficiency of human capital will improve as the level of technology rises. The use of computers and other technological devices will raise human capital levels.

5. Education

Obtaining a higher degree will improve human capital's performance and efficiency.

6. Healthcare facilities improvements

 Human capital can only be effective if he or she is fit and healthy. As a result, improving healthcare facilities will boost efficiency and effectiveness.

7. Increased remuneration

When human capital suppliers are well compensated and motivated, they will want to give it their all, resulting in increased efficiency.

Human capital Assessment

Upbringing in society

Human capital, according to sociologist Pierre Bourdieu, is strongly linked to social upbringing. This has an impact on cultural, social, and symbolic capital.

The act of signaling

The idea that what constitutes human capital is often just ‘signalling' is linked to the social capital of going to the right school. A degree from Oxbridge, for example, elevates a person's status in the workplace and allows them to earn a higher salary.

Three years of studying modern history/PPE, on the other hand, may only provide a small amount of knowledge directly related to the workplace.

Discrimination is a bad thing. Disparities in wages and job opportunities are often the results of discrimination, labour market imperfections, or non-monetary job benefits, rather than differences in human capital.

What are the difficulties of Human Capital?

To make the most of available skills, governments face a number of challenges.

The ability to assess the quality and quantity of skills available in the population, determine and anticipate the skills required in the labour market, and develop and use those skills effectively in better jobs that lead to better lives is required to get the best returns on investment in skills.

Employers play an important role in training their own employees, but some, particularly small and medium-sized businesses, may require government assistance to do so.

In both developed and developing countries, achieving this cooperation and ensuring that it is fruitful is a major challenge.

Skills maintenance

Maintaining skills throughout an individual's lifecycle is another significant challenge, as it necessitates the creation of high-quality, easily accessible adult learning opportunities, including up-skilling and re-training.

This is especially difficult in developing countries, where a large proportion of the population lacks access to primary education.

Action in these countries will need to strike a careful balance between equal access to and completion of lower-secondary education, as well as additional learning in school and for adults.

Policy Framework

Both developed and developing countries must implement framework policies that assist in the creation of better-skilled jobs in the formal sector to ensure that firms make the best use of the skills available.

Failure to do so risks creating a significant mismatch between young cohorts' skills and the opportunities available in the local labour market, increasing the risk of brain drain and, eventually, social unrest.