human capital essay writing

What Is Human Capital? Definition and Examples

• U.S. Economy
• Supply & Demand
• Archaeology
• B.S., Texas A&M University

In its most basic sense, “human capital” refers to the group of people who work for or are qualified to work for an organization—the “workforce.” In a larger sense, the various elements needed to create an adequate supply of available labor form the basis of human capital theory and are critical to the economic and social health of the world’s nations.

Key Takeaways: Human Capital

• Human capital is the sum of knowledge, skills, experience and social qualities that contribute to a person’s ability to perform work in a manner that produces economic value
• Both employers and employees make substantial investments in the development of human capital
• Human capital theory is an effort to quantify the true value of an investment in human capital and is closely related to the field of human resources
• Education and health are key qualities that improve human capital and also directly contribute to economic growth
• The concept of human capital can be traced back to the 18th-century writings of Scottish economist and philosopher Adam Smith

Human Capital Definition

In economics, “capital” refers to all of the assets a business needs to produce the goods and services it sells. In this sense, capital includes equipment, land, buildings, money, and, of course, people—human capital.

In a deeper sense, however, human capital is more than simply the physical labor of the people who work for an organization. It is the entire set of intangible qualities those people bring to the organization that might help it succeed. A few of these include education, skill, experience, creativity, personality, good health, and moral character.

In the long run, when employers and employees make a shared investment in the development of human capital, not only do organizations, their employees, and clientele benefit, but so does society at large. For example, few undereducated societies thrive in the new global economy .

For employers, investing in human capital involves commitments like worker training, apprenticeship programs , educational bonuses and benefits, family assistance, and funding college scholarships. For employees, obtaining an education is the most obvious investment in human capital. Neither employers nor employees have any assurances that their investments in human capital will pay off. For example, even people with college degrees struggle to get jobs during an economic depression, and employers might train employees, only to see them hired away by another company.

Ultimately, the level of investment in human capital is directly related to both economic and societal health.

Human Capital Theory

Human capital theory holds that it is possible to quantify the value of these investments to employees, employers, and society as a whole. According to human capital theory, an adequate investment in people will result in a growing economy. For example, some countries offer their people a free college education out of a realization that a more highly educated populace tends to earn more and spend more, thus stimulating the economy. In the field of business administration, human capital theory is an extension of human resources management.

The idea of human capital theory is often credited to the “founding father of economics” Adam Smith , who in 1776, called it “the acquired and useful abilities of all the inhabitants or members of the society.” Smith suggested that differences in wages paid were based on the relative ease or difficulty of doing the jobs involved. 

Marxist Theory

In 1859, Prussian philosopher Karl Marx , calling it “labor power,” suggested the idea of human capital by asserting that in capitalist systems , people sell their labor power—human capital—in return for income. In contrast to Smith and other earlier economists, Marx pointed to “two disagreeably frustrating facts” about human capital theory:

• Workers must actually work—apply their minds and bodies—in order to earn income. The mere ability to do a job is not the same as actually doing it.
• Workers cannot “sell” their human capital as they might sell their homes or land. Instead, they enter into mutually beneficial contracts with employers to use their skills in return for wages, much in the same way farmers sell their crops.

Marx further argued that in order for this human capital contract to work, employers must realize a net profit. In other words, workers must do work at a level above-and-beyond that needed to simply maintain their potential labor power. When, for example, labor costs exceed revenue, the human capital contract is failing.

In addition, Marx explained the difference between human capital and enslavement. Unlike free workers, enslaved people—human capital—can be sold, although they do not earn incomes themselves.

Modern Theory

Today, human capital theory is often further dissected in order to quantify components known as “intangibles” such as cultural capital, social capital, and intellectual capital.

Cultural Capital

Cultural capital is the combination of knowledge and intellectual skills that enhance a person’s ability to achieve a higher social status or to do economically useful work. In an economic sense, advanced education, job-specific training, and innate talents are typical ways in which people build cultural capital in anticipation of earning higher wages.   

Social Capital

Social capital refers to beneficial social relationships developed over time such as a company’s goodwill and brand recognition, key elements of sensory psychological marketing . Social capital is distinct from human assets like fame or charisma, which cannot be taught or transferred to others in the way skills and knowledge can.

Intellectual Capital

Intellectual capital is the highly intangible value of the sum of everything everybody in a business knows that gives the business a competitive advantage. One common example is the intellectual property—creations of the workers’ minds, like inventions, and works of art and literature. Unlike the human capital assets of skill and education, intellectual capital remains with the company even after the workers have left, typically protected by patent and copyright laws and non-disclosure agreements signed by employees.

Human Capital in Today's World Economy

As history and experience have shown, economic progress is the key to raising the standard of living and dignity of people worldwide, especially for people living in impoverished and developing countries.

The qualities that contribute to human capital, particularly education and health—also directly contribute to economic growth. Countries that suffer from limited or unequal access to health or educational resources also suffer from depressed economies.

As in the United States, the countries with the most successful economies have continued to increase their investments in higher education, while still seeing a steady increase in the starting salary of college graduates. Indeed, the first step most developing countries take to advance is to improve the health and education of their people. Since the end of World War II, the Asian nations of Japan, South Korea, and China have used this strategy to eliminate poverty and become some of the world’s most powerful players in the global economy. 

Hoping to emphasize the importance of education and health resources, the World Bank publishes an annual Human Capital Index Map demonstrating how access to education and health resources affect the productivity, prosperity, and quality of life in nations worldwide.

In October 2018, Jim Yong Kim, president of the World Bank, warned, “In countries with the lowest human capital investments today, our analysis suggests that the workforce of the future will only be one-third to one-half as productive as it could be if people enjoyed full health and received a high-quality education.”

Sources and References

• Goldin, Claudia (2014). Human Capital , Department of Economics, Harvard University and National Bureau of Economic Research.
• Smith, Adam (1776). An Inquiry into the Nature and Causes of the Wealth of Nations . Copyright 2007 MetaLibre.
• Marx, Karl. The Buying and Selling of Labour-Power: Chapter 6 . marxists.org
• World Development Report 2019: The Changing Nature of Work . World Bank
• What Is Cultural Capital? Do I Have It?
• The Critical View on Global Capitalism
• The Differences Between Communism and Socialism
• Should I Earn a Human Resources Degree?
• What Is Capital Deepening?
• How Your Employer Can Pay for Your Education
• What Is Convergence Theory?
• All About Marxist Sociology
• Business Administration Education and Careers
• Growing Industries to Consider If You're Going Back to School
• The Three Historic Phases of Capitalism and How They Differ
• The 5 Sectors of the Economy
• Sociology of Work and Industry
• Black Women Are the Most Educated Group in the U.S.
• How Sociology Can Prepare You for a Career in Business
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Home — Essay Samples — Economics — Economy — The Meaning and Concept of Human Capital

The Meaning and Concept of Human Capital

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Published: Sep 19, 2019

Words: 1201 | Pages: 3 | 7 min read

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Introduction, the meaning of human capital, concept of human capital.

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Importance of Human Capital Research Paper

Definition and importance of human capital, management occupations, importance of human capital to productivity, works cited.

Human capital refers to the fact that people in organizations and businesses are a very important and vital asset contributing to the development and growth in a similar capacity as the physical assets.

Currently, corporations are recognizing the economic importance of investing in their employees because the ability to stay on top of the economy lies in the efforts of developing and retaining their people in the organization. As such, the organizations that responsibly respond to the financial impact of their employee often refer to them as human capital consequently; the people’s skills, abilities, and attitudes collectively contribute to organizational performance and productivity (Weiss, 133).

In a similar way to other physical and monetary assets, organizational performance and efficiency is dependant on the skills, collective attitudes and capability of its employees (Temple, 57) in his study indicates that even in the presence of more advanced technology, competitive cannot be maintained since technology can be adopted unlike having a skilled workforce. Therefore, the organizations should not consider the amount used to improve their human capital as an expense.

Companies should enforce changes and plans to improve their people’s skills and abilities (Weiss, 154). Human capital has been seen important by many economists in explaining the income differences.

These human capitals are defined as important assets just like money and other physical assets in the growth and development of an organization to maintain a competitive edge. They are also seen as cost-effective while at the same time giving high performance unlike the use of more advanced technologies. Human capitals also can be used as indicators to show companies performance and development (Temple, 61)

Management Occupations – Financial Managers.

Business and Financial Operations Occupations.

In the Nonfarm business sector labor productivity, there was an annual increase of 9.5 percent during the third quarter of 2009, the U.S. Bureau of Labor Statistics reported. Unlike in the quarters before, the greatest gain was recorded in 2009 since 2003, which experienced an increase of 9.7 percent.

During the 3rd quarter of 2009, the productivity of the business sector increased by 9.8 % of which this was the marked rise as from the 1972 second quarter. Furthermore, there was a 5.1 % decrease in the costs of unit labor during the Third quarter of 2009 (Rudd, 110).

In the manufacturing sector, a 5.2 percent decrease in hours worked, despite a 7.7 percent increase in output, reflecting a 13.6 percent productivity growth. This also was a marked increase during the 1987 quarterly productivity series. Manufacturing productivity increased by 3.1 % while the output hours decreased by 10.8% and 13.5% respectively over the last four quarters. Manufacturing sector productivity increased 0.8 percent in 2008 and at an average annual rate of 4.0 percent from 2001 to 2007 (Sala-i-Martin, 75).

Human capital has been seen important by many economists in explaining the income differences. These human capitals are defined as important assets just like money and other physical assets in the growth and development of an organization to maintain a competitive edge. They are also seen as cost-effective while at the same time giving high performance unlike the use of more advanced technologies. Human capitals also can be used as indicators to show companies performance and development (Temple, 70)

Table 1: Labor Force Participation Rates, Part-Time Employment Status, and Hours of Work in the United States, by Gender (2005).

From the above table (Table 1), a comparison between the age-earnings profiles of men and women shows that women’s profiles tend to be less concave and to fun out as less as education rises. This thought is also connected to job training opportunities. This is due to the role women traditionally play in child-rearing and household production; historically it has been expected that way.

So in average women will tend to work fewer years for pay in comparison to men, and firms will have less incentive to offer them job training opportunities at the level received by men (Arditti, 28). Because of the shorter expected work life of women, the human capital investment model predicts that the benefits to the average women of investing in job training will be less.

However, nowadays the traditional lifestyle of women has changed, and their working lives are not much interrupted due to the child care programs introduced this has lent to the growth of GDP in the US economy.

Arditti, Fred D., & Tysseland, Milford S. Three ways to present the marginal cost . Financial Management Association International, 1973. Web.

Rudd, Jeremy B. Empirical evidence on human capital spillovers : Board of Governors of the Federal Reserve System, Finance and Economics Discussion Paper no. 2000/46. 1 Web.

Sala-i-Martin, Xavier. 15 years of new growth economics: what have we learnt?, Columbia University Economics Department Discussion Paper no. 0102-47,2002. Web.

Temple, Jonathan. Growth effects of education and social capital in the OECD, in: OECD Economic Studies, no. 33 (2001/II), 2001, pp. 57-101. 1 Web.

Weiss, Andrew. Human capital vs. signaling explanations of wages. Journal of Economic Perspectives, Vol. 9, 4, 1995, pp. 133-154. Web.

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What Is Human Capital?

Understanding human capital, special considerations.

• Human Capital FAQs

The Bottom Line

Human capital definition: types, examples, and relationship to the economy.

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

Investopedia / Ellen Lindner

The term human capital refers to the economic value of a worker's experience and skills. Human capital includes assets like education, training, intelligence, skills, health, and other things employers value such as loyalty and punctuality.

As such, it is an intangible asset or quality that isn't (and can't be) listed on a company's balance sheet . Human capital is perceived to increase productivity and thus profitability. The more investment a company makes in its employees, the chances of its productivity and success become higher.

Key Takeaways

• Human capital is an intangible asset not listed on a company's balance sheet.
• Human capital is said to include qualities like an employee's experience and skills.
• Since all labor is not considered equal, employers can improve human capital by investing in the training, education, and benefits of their employees.
• Human capital is perceived to have a relationship with economic growth, productivity, and profitability.
• Like any other asset, human capital has the ability to depreciate through long periods of unemployment, and the inability to keep up with technology and innovation.

An organization is often said to only be as good as its people from the top down, which is why human capital is so important to a company. It is typically managed by an organization's human resources (HR) department, which oversees workforce acquisition, management, and optimization. Its other directives include workforce planning and strategy, recruitment , employee training and development, and reporting and analytics.

The concept of human capital recognizes that not all labor is equal. But employers can improve the quality of that capital by investing in employees. This can be done through the education, experience, and abilities of employees. All of this has great economic value for employers and for the economy as a whole.

Since human capital is based on the investment of employee skills and knowledge through education, these investments in human capital can be easily calculated. HR managers can calculate the total profits before and after any investments are made. Any return on investment (ROI) of human capital can be calculated by dividing the company’s total profits by its overall investments in human capital.

For example, if Company X invests $2 million into its human capital and has a total profit of $15 million, managers can compare the ROI of its human capital year-over-year (YOY) in order to track how profit is improving and whether it has a relationship to the human capital investments.

Human capital tends to migrate, especially in global economies. That's why there is often a shift from developing places or rural areas to more developed and urban areas. Some economists have dubbed this a brain drain or human capital flight. This describes the process that keeps certain areas underdeveloped while others become even more developed.

Human Capital and Economic Growth

There is a strong relationship between human capital and economic growth , which is why it can help boost the economy. That's because people come with a diverse set of skills and knowledge. This relationship can be measured by how much investment goes into people’s education.

Some governments recognize that this relationship between human capital and the economy exists, and so they provide higher education at little or no cost. People who participate in the workforce with higher education will often have larger salaries, which means they can spend more.

Does Human Capital Depreciate?

Like anything else, human capital is not immune to depreciation . This is often measured in wages or the ability to stay in the workforce. The most common ways human capital can depreciate are through unemployment, injury, mental decline, or the inability to keep up with innovation.

Consider an employee who has a specialized skill. If they go through a long period of unemployment , they may be unable to keep these levels of specialization. That's because their skills may no longer be in demand when they finally reenter the workforce.

An individual's human capital may depreciate if they can't or won't adopt new technology or techniques. Conversely, the human capital of someone who does adopt them will.

History of Human Capital

The idea of human capital can be traced back to the 18th century. Adam Smith referred to the concept in his book An Inquiry into the Nature and Causes of the Wealth of Nations, in which he explored the wealth , knowledge, training, talents, and experiences of a nation. Adams suggested that improving human capital through training and education leads to a more profitable enterprise, which adds to the collective wealth of society. According to Smith, that makes it a win for everyone.

In more recent times, the term was used to describe the labor required to produce manufactured goods. But the most modern theory was used by several different economists including Gary Becker and Theodore Schultz , who invented the term in the 1960s to reflect the value of human capacities.

Schultz believed human capital was like any other form of capital to improve the quality and level of production . This would require an investment in the education, training, and enhanced benefits of an organization's employees.

Criticism of Human Capital Theories

The theory of human capital has received a lot of criticism from many people who work in education and training. In the 1960s, the theory was attacked primarily because it legitimized bourgeois individualism, which was seen as selfish and exploitative. The bourgeois class of people included those of the middle class who were believed to exploit those of the working class. The theory was also believed to blame people for any defects that happened in the system and of making capitalists out of workers.

What Are Examples of Human Capital?

Examples of human capital include communication skills, education, technical skills, creativity, experience, problem-solving skills, mental health, and personal resilience.

What Is the Relationship Between Human Capital and the Economy?

Human capital allows an economy to grow. When human capital increases in areas such as science, education, and management, it leads to increases in innovation, social well-being, equality, increased productivity, improved rates of participation, all of which contribute to economic growth. Increases in economic growth tend to improve the quality of life for a population.

How Can I Increase My Human Capital?

Ways to increase your own human capital include more education, automating finances to improve efficiency, expanding your horizons outside of your social and workplaces, obtaining more experience, increasing participation in a multitude of activities or organizations, improving your communication skills, improving your health, and expanding your network.

What Is Human Capital Risk?

Human capital risk refers to the gap between the human capital requirements of a company or organization and the existing human capital of its workforce. This gap can lead a company towards inefficiencies, inability to achieve its goals, a poor reputation, fraud, financial loss, and eventual closure. To reduce and eliminate human capital risk, an organization should train, foster, and support its workforce.

Human capital refers to the economic value of a worker's abilities and skills. Companies can enhance their human capital through recruitment or training, as well as by implementing management techniques that optimize the productivity of their existing workers. Maintaining and improving the value of human capital is usually the role of a company's HR department.

World Bank. " Building Human Capital ."

Scholars at Harvard. " Human Capital ," Page 1.

Schultz, Theodore W. " Investment in Human Capital ." The American Economic Review, vol. 51, no. 1, 1961, pp. 1-17.

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The Role of Human Capital in Economic Growth

Updated 13 September 2023

Subject Workforce ,  Economy ,  Work

Downloads 40

Category Economics ,  Government ,  Life

Topic Economic Growth

Human capital is defined as the knowledge, skills and competencies possessed by the labour market which is used to produce goods, services and ideas. Various attributes are embodied in human capital. For instance, a person’s education might be good but possess poor management skills. Human capital is therefore dimensional and should be looked at from the ability to adapt and respond efficiently to the customers’ needs. The labour market is currently changing from the full-time manual work to a flexible work environment. This raises the need for countries and organisations to ensure that their human capital is competitive.

Human capital has a direct impact on a country’s productivity, competitiveness and economic performance. There are various determinants of the competitiveness of human capital which include: the social upbringing, education level, the levels of discrimination, among others. The differences in the quality of goods and services produced are highly dependent on human capital. In addition, a worker’s general performance at the workplace which results from different factors such as creativity, innovation, job satisfaction, among others, is also dependent on human capital. The developed countries possess a common trait, significant attention to the quality of their human capital. In most cases, countries had to adopt strategies that are aimed at increasing the diversity of their human capital for them to realise a positive impact on their Gross Domestic Product (GDP). This study, therefore, recognises the importance of conducting more research on human capital and its effect on productivity, competitiveness and economic growth.

The Relationship between Human Capital, Productivity, Competitiveness and

Economic Growth

According to De (2011, p.133), the relationship between human capital and productivity can be well understood if viewed from the context of measuring productivity. By so doing, the connection can be evaluated from the context of home, organisation, society and country. The link between human capital and productivity in these settings exhibits direct proportionality between the two variables.

In the context of a home, human capital is highly valuable in many vital ways. The skills, knowledge and experience that people have are generally converted into significant output which takes the form of the improved value of the person during his or her life. For instance, a parent with competitive human capital who possess desirable wisdom, morals, culture, experience and knowledge, typically manage his or her home well and raise disciplined children and relate to his or her spouse wisely and respectfully. Such homes also have a positive influence on the society regarding their productive value (Shapiro 2006, p.377).

Human capital is highly valued in the context of organisations or workplaces. Most companies have realised the fact that they can earn a competitive advantage by developing their human capital, and ate hence incorporating all the available resources to do the same (Andrzejewski 2010, p.539). Organizations are increasingly adopting motivational strategies that are aimed at attracting and retaining employees that have the right mix of human capital. Companies even go to the extent of offering higher salaries to employees who have a competitive human capital mix in their rival companies as a way of ‘poaching’ them. Research has proved that the more competitive an organisation’s human capital is, the more the production, which translates into more profits (Andrzejewski 2010, p. 437). Organizations also invest in training their employees which pays off regarding competitive leadership as well as visionary and productive employees.

The combined home, society and organisational competitive productivity leads to a high overall national productivity. Scholars have confirmed that productivity is one of the critical determinants of economic growth (Engelbrecht 1997, p.1480). A right mix of human capital allows firms to produce high quality with the same quantity of resources which by extension leads to economic growth.

A study conducted by De (2011, p.37) examined the effects of a country’s literacy level on productivity. The research found out that education and productivity have a directly proportional relationship. The more educated a country is, the more competent the human capital is, and hence more productivity. His research included both formal and non-certified education, whereby its effects were significant on both micro and macroeconomic levels. There are various indicators of productivity that were considered as a result of increased education levels. These include value added per worker, the profits realised by the organisations and the probability of organisational survival in the market. A healthy and significant relationship was also established between education levels and GDP per capita income (Rodriguez Perez and Ordóñez 2003, p.138).

Del et al. (2002, p.44) claims that foundational skills have the most significant influence on productivity. The reason behind this claim is the fact that foundational skills generally for the basis for further studies and engagement in productive activities at the workplaces, hence determining human capital. However, foundational skills have been classified as the hardest skills to attain as an adult. There is, therefore, need for intervention to equip people with the skills during their earlier stages in life. The other factors which determine the competency of human capital are management leadership skills (Engelbrecht 1997, p.246). Organizations benefit from improved performance and high rates of innovation from employees who possess recommendable leadership and management skills. This, in turn, leads to improved productivity in the organisation.

The role of science and technology in today’s world has made the human capital investment to be one of the most critical factors that lead to increased national competitiveness (Tamura 2002, p.76). Human capital has been used as an accelerator of competitiveness in a contemporary economy where the globe has access to technology and modern operational methods. Human capital accumulation produces desirable externalities by which social returns on education are indisputably higher than individual returns. People acquire an education with the purpose of benefiting individually. However, what starts as a personal decision eventually benefits the general levels of society’s knowledge, which in turn facilitates the acquisition of knowledge by others.

The ties between higher education, scientific research and productivity are getting stronger (Tamura 2006, p.64). Economists have consistently confirmed that competitiveness and knowledge stimulate economic growth. This is the reason why all countries that aim at sustaining economic growth and competitiveness, in the long run, must pay undivided attention to the quality of their human capital. International competitiveness can be addressed in different ways. Firstly, it refers to the ability of enterprises and nations to manage the totality of their competencies with the aim of higher profits and prosperity (Lepak and Snell 1999, p. 79). Secondly, international competitiveness is a part of the economic discipline which seeks to analyse the policies and facts that determine the ability of a country to create and sustain an environment that leads to more value creation for its people (Rastogi 2000, p.68). It has also been defined as a collection of policies, factors and organisations that shape the level of prosperity and productivity of a country. One outstanding fact about the above-mentioned definitions is the fact that competitiveness is aimed at increased profits and productivity of a nation as well as its respective enterprises. Therefore, competitiveness is aimed at attaining a long-term economic growth. In addition, competitiveness requires policies that are aimed at developing the quality of human capital.

The role played by human capital in promoting the performance and competitiveness of an economically significant. A classical economist, Smith, claimed that the best way of sustainable economic growth is by ensuring a progressive increase in knowledge and educational development (Rastogi 2000, p.194). Accumulated skills and competency are essential factors that determine the economic growth of a country. Unlike physical capital, human capital is embodied in people and therefore grows through use and experience. Organizations must, therefore, give their employees quality platforms for them to exercise their knowledge as a way of increasing their experience and competency.

The demand for additional training is high among mid-life employees (Lepak and Snell 1999, p.106). However, it is worth noting that the demand for additional training is dependent on the acquired habits and opportunities provided earlier in life. Human capital development should, therefore, be directed towards the young generation, since if they are influenced early enough, then they will have the desire for additional learning and on-the-job-training. Since some skills decline with age and also diminishes if they are not put into use, it is essential for countries to establish a continuous human development system for them to remain competitive (Hitt et al. 2001, p.33).

Economic growth refers to an improvement in the ability of an economy to produce goods and services, compared to past periods of time (Mathur 1999, p.203). Mathur confirmed the fact that economic development is highly associated with human capital, productivity and competitiveness. This relationship can be measured by evaluating the number of resources that are invested in human capital development against the changes in the real gross domestic product (GDP). For instance, if a country decides to offer higher education to the people at subsidised costs, then the citizens are likely to acquire it, hence increasing their knowledge levels which in turn lead to higher productivity. People who have higher education earn more, which increases their disposable income which increases economic development through additional spending.

Organizations can help in increasing human capital and participate in economic growth as well. Economists have associated human capital development with the economic well-being of the nation (Savvides and Stengo 2008, p. 16). The most critical component of a nation’s wealth is increased human skills and competency. An individual’s investment in human capital can also be translated into national development when the information and skills are shared with others. In addition, human capital leads to the development of competitive resource allocation skills (Hitt et al. 2001, p.37). This ensures that a country’s resources are allocated and consumed in a way that leads to maximum value addition.

The more excellent skills acquired through improved human capital increases the mobility of workers into various industries. Their ability to adapt to new work environment increases due to the diversity of skills. This ensures that the labour market is ready to seize opportunities as they are presented, helping the country to re-allocate other resources towards more productive opportunities. Human capital also increases the ability of the labour market to embrace new technologies, which determines the productivity and competence of a nation. Such a labour market is also in a better position to acquire and apply foreign knowledge in local situations. In other words, human capital is the answer to innovation, increased productivity and economic growth (Rastogi 2000, p.63).

A Discussion on Whether the Market for Human Capital can be Made to Work Better

The World Bank and other agencies have recently been promoting policies that focus on the improvement of human capital (Asteriou and Agiomirgianakis 2001, p. 482). Most of the policies are aimed at the development of health, nutrition and education as a way of ensuring access to a healthy and well-educated workforce. It is clear that the developing world requires an increase in human capital for them to start and sustain value-added industries. According to the World Bank, research on human capital is complicated because its determinants are interconnected. For instance, education raises awareness on the need for healthy living. In addition, nutrition ensures a healthy people who are capable of absorbing skills and utilising them accordingly. The intervention on improving human capital is also difficult to measure because it takes longer to learn and the fact that learning is a continuous process that goes on even at the workplaces. 

However, research has succeeded in confirming that a country can improve its economic conditions through improving its labour market (Lee and Mason 2010, p. 160). According to Lee and Mason, if a country can improve its health conditions to a level that leads to an increase in one year on its life expectancy, then it can attract a 4% increase in health spending, which translates into about 0.5% increase in GDP per capita income. Higher levels of education can also lead to improvements in technology adoption which translate into economic growth.

Human capital has contributed significantly to China’s economic growth. According to Jones and Schneider (2016, p. 88), 38.1% economic growth of China between 1978 and 2008 was due to human capital. The percentage is expected to be higher for the period between 1999 and 2008. This is because human capital improved significantly due to the significant educational expansion that took place during this period. Enrolment into higher education institutions increased approximately fivefold for the period between 1997 and 2007. Although the GDP changed slightly over this period since changes in human capital take time before they are translated into GDP increments since people learn through experience, the country’s productivity increased.

According to Yan and Yudong (2003, p.45), one of the primary drivers of China’s economic growth is the Chinese people. Its culture supports caring, ambitious and hardworking families, which is translated into overall improvements in its human capital. Yan and Yudong (2003, p. 51) confirm that there are at least forty Chinese phrases that encourage children as well as grownups to have big dreams and aspirations. As mentioned before, it is hard to change the character traits of an adult, unlike a child who masters certain attitudes and turns them into his or her way of life. The strategies that are aimed at improving the quality of the labour market should, therefore, include well-laid procedures of influencing the children to have big dreams for their future. The Chinese phrases which are known as “Chengyu” motivate the people to work hard and have faith that they will succeed in whatever they do.

The other contributing factor towards China’s improved human capital is the government’s emphasis on education. The PISA international student assessment ranked China as number one in both its 2009 and 2012 evaluations (Jones and Schneider 2016, p. 92). The Chinese higher education institutions graduate approximately 6-7 million college graduates each year, with 40% specialising in engineering and science courses. The Chinese engineers and scientists are the primary drivers of the country’s technological developments, which translates into economic growth. In fact, educated Chinese immigrants have become drivers of significant economies in the world, for instance, the American economy.

Another factor that has led to high-quality human capital markets in China is thrift. The country’s population records 25% personal saving rate, which ensures that the Chinese people rarely suffer from personal bankruptcies. The high saving rates lead to financial security for the Chinese population, hence having reduced government expenditures on social welfares. The funds that would have otherwise been spent on social welfares are spent on other developmental projects such as infrastructure (Lee and Mason 2010, p. 77). The true success driver of the Chinese economy is the investment in human capital which was significantly conducted between the 1950s and 1970s. This has led to the various economic developments, for instance, the glittering skylines and fancy airports in Shanghai and Beijing (Yan and Yunding 2003, p.25). Human capital development has paid the Chinese economy in the long run.

Human capital refers to the skills, knowledge and competency of the people which is used in the production of goods, services and ideas over a specified period. It is evident that human capital, productivity, competitiveness and economic growth are substantially related, whereby an increase in one of them is likely to lead to an increase in the others. This study has succeeded in proving that whenever the human capital is developed, people gain better skills and experience which makes them produce more quality with the same resources, hence increasing productivity. An increase in productivity due to better skills and knowledge is experienced in various contexts, that is, at home, society, companies and the country at large.

Likewise, investment in activities that improve human capital such as education and healthy living programs has a direct positive impact on a country’s competitiveness. It is important to note that globalisation has made it possible for most countries to have access to modern technology, meaning that technology in itself plays a smaller role in determining a country’s competitiveness. However, the ability of a country to earn a competitive advantage is determined by its human capital, which in turn determines how well the country adopts the new technology. This has a direct impact on its GDP, which determines its economic growth. China developed its human capital through ensuring affordable higher education to its people and adopting a culture that encourages children and adults to have big dreams in life. This, in turn, led to a positive effect on its economic development. Human capital development is more effective when conducted among the young generation, as a way of introducing an attitude of hard work and the need to achieve. Countries and organisations should, therefore, focus on improving their human capital as a way of attaining competitive advantage, increased productivity and overall economic development.

Andrzejewski, J., 2010. Human Capital and Productivity. In Kalamazoo College Psychology VanLiere Symposium Collection. Kalamazoo, Mich.: Kalamazoo College.

Asteriou, D. and Agiomirgianakis, G.M., 2001. Human capital and economic growth: time series evidence from Greece. Journal of Policy Modeling, 23(5), pp.481-489.

Bravo-Ortega, C. and De Gregorio, J., 2007. The relative richness of the poor? Natural resources, human capital, and economic growth. Lederman and Maloney, pp.71-103.

Castelló, A. and Doménech, R., 2002. Human capital inequality and economic growth: some new evidence. The economic journal, 112(478).

de La Fuente, A., 2011. Human capital and productivity. Nordic Economic Policy Review, 2(2), pp.103-132.

del Barrio-Castro, T., López-Bazo, E. and Serrano-Domingo, G., 2002. New evidence on international R"D spillovers, human capital and productivity in the OECD. Economics Letters, 77(1), pp.41-45.

Engelbrecht, H.J., 1997. International R"D spillovers, human capital and productivity in OECD economies: An empirical investigation. European Economic Review, 41(8), pp.1479-1488.

Hitt, M.A., Bierman, L., Shimizu, K. and Kochhar, R., 2001. Direct and moderating effects of human capital on strategy and performance in professional service firms: A resource-based perspective. Academy of Management journal, 44(1), pp.13-28.

Jones, G. and Schneider, W.J., 2016. Intelligence, human capital, and economic growth: A Bayesian averaging of classical estimates (BACE) approach. Journal of economic growth, 11(1), pp.71-93.

Lee, R. and Mason, A., 2010. Fertility, human capital, and economic growth over the demographic transition. European Journal of Population/Revue européenne de Démographie, 26(2), pp.159-182.

Lepak, D.P. and Snell, S.A., 1999. The human resource architecture: Toward a theory of human capital allocation and development. Academy of management review, 24(1), pp.31-48.

Mathur, V.K., 1999. Human capital-based strategy for regional economic development. Economic Development Quarterly, 13(3), pp.203-216.

Rastogi, P.N., 2000. Knowledge management and intellectual capital–the new virtuous reality of competitiveness. Human systems management, 19(1), pp.39-48.

Rastogi, P.N., 2000. Sustaining enterprise competitiveness–is human capital the answer?. Human Systems Management, 19(3), pp.193-203.

Rodriguez Perez, J. and Ordóñez de Pablos, P., 2003. Knowledge management and organizational competitiveness: a framework for human capital analysis. Journal of Knowledge management, 7(3), pp.82-91.

Savvides, A. and Stengos, T., 2008. Human capital and economic growth. Stanford University Press.

Shapiro, J.M., 2006. Smart cities: quality of life, productivity, and the growth effects of human capital. The review of economics and statistics, 88(2), pp.324-335.

Tamura, R., 2002. Human capital and economic development (No. 2002-5). Working Paper, Federal Reserve Bank of Atlanta.

Tamura, R., 2006. Human capital and economic development. Journal of Development Economics, 79(1), pp.26-72.

Yan, W. and Yudong, Y., 2003. Sources of China's economic growth 1952–1999: incorporating human capital accumulation. China Economic Review, 14(1), pp.32-52.

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Human capital essay

Any organization needs human capital in order to operate efficiently and boost productivity. The management's inability to develop effective operational strategies may ultimately result in a fall in employee productivity and a decline in the company's financial performance. The human resource division must be informed about every problem that human capital management faces. With the development of technology, it is the responsibility of any organization's management to guarantee that all personnel are trained in pertinent, cutting-edge skills and are in line with the established goals and objectives. In the quest for dealing with issues that are related to human capital management, departmental managers need to ensure that they identify the causes of the problems before coming up with suitable measures. In this paper, an assessment is conducted on the AGC’s problems, their diagnosis, and the change management strategies that can be implemented with the aim of addressing the issues.

One of the human capital management problems faced by the AGC Company is its failure in retaining skilled and talented workers. Most of the employees that get into the organization hardly stay long before resigning. The organization is also faced with challenges of workforce planning, and this makes it hard for it to come up with suitable changes that can be vital in ensuring that it is aligned to set goals and objectives. Another problem that AGC is struggling with is the difficulty in the management of organizational changes, and this is attributed to its poor leadership and employee relations.

There are various techniques that were used in the diagnosis of challenges faced by the AGC. The aspect of its failure in the management of organizational changes was assessed through observations that were made for a given duration. Problems attached to workforce planning, predictive analysis is essential in the diagnosis of its failures, and this entails the creation of better budget requests and better insights with the aim of making better decisions (Change-Management Coach, 2015). The implementation of the ROI analysis was also suitable for the identification of the reasons that led to some of the human capital management challenges.

By conducting a root-cause analysis on the AGC Company, the management change team will ensure that the current issues faced by the organization are addressed. Some of the causes of the current challenges faced by the firm include poor leadership structure and planning and its failure in coming up with suitable strategies (Change-Management Coach, 2015).

Intervention

In the quest for dealing with the current challenges faced by the AGC Company, there are various measures that can be implemented. One of the recommended solutions for the organization was the strengthening of its Human Resource. The department was mandated with the role of hiring skilled and talented workforce, and this was aimed at ensuring that its change management plan was enhanced. Employees were also allowed to be a part of the decision-making process, and this was vital in the enhancement of workforce planning. Another intervention measure that was recommended was the introduction of a training program where the management team was to be trained in planning and their ability to adapt to changes imposed by the firm. The Human Resource Department in collaboration with a team of outsourced experts were mandated with the role of ensuring that all the workers were educated on the relevant skills that will see to it that they are capable of being aligned with the company’s visions (Creasey, Taylor, Hiatt & Boyle, 2014). Another that was suitable for dealing with the challenges faced by the AGC was the implementation of advanced technology in most of its department. In so doing, this played a critical role in enhancing its operational efficiencies, thus an improvement in its productivity. Finally, it was advisable for the AGC to change its planning team and this was essential in ensuring that the new management program for the firm was effectively implemented.

The evaluation methods that were used in the measurement of the effectiveness of the change management plan entailed organization of the collected historical and structural data on the performance of the AGC Corporation, and this was followed by an in-depth interpretation of the data. Departmental managers were mandated with the role of closely monitoring the performance of their workers and this they did by collecting feedback (Creasey, Taylor, Hiatt & Boyle, 2014). An assessment of the provided feedback made it easier for the organizational leadership to identify the progress of the implemented change management plan.

The implemented change management plan has a direct impact on the AGC’s human capital management and its market performance. With the new strategies, the organization will enjoy an improvement in its employees’ productivity, and this will translate to an increase in its market performance, giving it a competitive edge over the rival firms.

Based on the above information, it is evident that it is essential for the management change planning team of the AGC to effectively implement the new change management programs. Its success in enforcing suitable changes into the organization will be dependent on a proper diagnostic analysis.

Change-Management Coach (2015). “Benefits of Change Management”. Retrieved from: http://www.change-management-coach.com/benefits-of-change-management.html. Retrieved on December 8, 2017.

Creasey, T., Taylor, T., Hiatt, J., & Boyle, R. (2014). Best practices in change management. [Loveland, CO]: Prosci.

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José Andrés: Let People Eat

By José Andrés

Mr. Andrés is the founder of World Central Kitchen.

In the worst conditions you can imagine — after hurricanes, earthquakes, bombs and gunfire — the best of humanity shows up. Not once or twice but always.

The seven people killed on a World Central Kitchen mission in Gaza on Monday were the best of humanity. They are not faceless or nameless. They are not generic aid workers or collateral damage in war.

Saifeddin Issam Ayad Abutaha, John Chapman, Jacob Flickinger, Zomi Frankcom, James Henderson, James Kirby and Damian Sobol risked everything for the most fundamentally human activity: to share our food with others.

These are people I served alongside in Ukraine, Turkey, Morocco, the Bahamas, Indonesia, Mexico, Gaza and Israel. They were far more than heroes.

Their work was based on the simple belief that food is a universal human right. It is not conditional on being good or bad, rich or poor, left or right. We do not ask what religion you belong to. We just ask how many meals you need.

From Day 1, we have fed Israelis as well as Palestinians. Across Israel, we have served more than 1.75 million hot meals. We have fed families displaced by Hezbollah rockets in the north. We have fed grieving families from the south. We delivered meals to the hospitals where hostages were reunited with their families. We have called consistently, repeatedly and passionately for the release of all the hostages.

All the while, we have communicated extensively with Israeli military and civilian officials. At the same time, we have worked closely with community leaders in Gaza, as well as Arab nations in the region. There is no way to bring a ship full of food to Gaza without doing so.

That’s how we served more than 43 million meals in Gaza, preparing hot food in 68 community kitchens where Palestinians are feeding Palestinians.

We know Israelis. Israelis, in their heart of hearts, know that food is not a weapon of war.

Israel is better than the way this war is being waged. It is better than blocking food and medicine to civilians. It is better than killing aid workers who had coordinated their movements with the Israel Defense Forces.

The Israeli government needs to open more land routes for food and medicine today. It needs to stop killing civilians and aid workers today. It needs to start the long journey to peace today.

In the worst conditions, after the worst terrorist attack in its history, it’s time for the best of Israel to show up. You cannot save the hostages by bombing every building in Gaza. You cannot win this war by starving an entire population.

We welcome the government’s promise of an investigation into how and why members of our World Central Kitchen family were killed. That investigation needs to start at the top, not just the bottom.

Prime Minister Benjamin Netanyahu has said of the Israeli killings of our team, “It happens in war.” It was a direct attack on clearly marked vehicles whose movements were known by the Israel Defense Forces.

It was also the direct result of a policy that squeezed humanitarian aid to desperate levels. Our team was en route from a delivery of almost 400 tons of aid by sea — our second shipment, funded by the United Arab Emirates, supported by Cyprus and with clearance from the Israel Defense Forces.

The team members put their lives at risk precisely because this food aid is so rare and desperately needed. According to the Integrated Food Security Phase Classification global initiative, half the population of Gaza — 1.1. million people — faces the imminent risk of famine. The team would not have made the journey if there were enough food, traveling by truck across land, to feed the people of Gaza.

The peoples of the Mediterranean and Middle East, regardless of ethnicity and religion, share a culture that values food as a powerful statement of humanity and hospitality — of our shared hope for a better tomorrow.

There’s a reason, at this special time of year, Christians make Easter eggs, Muslims eat an egg at iftar dinners and an egg sits on the Seder plate. This symbol of life and hope reborn in spring extends across religions and cultures.

I have been a stranger at Seder dinners. I have heard the ancient Passover stories about being a stranger in the land of Egypt, the commandment to remember — with a feast before you — that the children of Israel were once slaves.

It is not a sign of weakness to feed strangers; it is a sign of strength. The people of Israel need to remember, at this darkest hour, what strength truly looks like.

José Andrés is a chef and the founder of World Central Kitchen.

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Exemplar Essay On Human Capital Management To Write After

Type of paper: Essay

Topic: Human Resource Management , Management , Workplace , Managers , Employee , Employees , Individual , Line

Published: 03/08/2023

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This paper analyzes how senior managers, line managers, and individual employees benefit from the successful HR strategy activities. Human resource department is vital in an organization since it helps these stakeholders in various ways; primarily aiming at improving the company’s productivity. Conflict resolution is one of the universal benefits that these three groups acquire from the various HR Strategy activities. On the other hand, the human resource requires support, collaboration, and tolerance from the stakeholders.

Senior management

Importantly, the top administration of an organization is the biggest beneficiary of successful HR strategy. Since senior management controls the whole business, it will realize the following benefits. Low costs and efficiency in managing employees; these includes factors such as short hiring process, getting top-notch talent, low costs of managing individual workers, precise results in all transactions, and lowered absenteeism cases (Reilly and Williams 131). Good reputation in the market; workers will strive to build a brand, the company will get awards for excellence performance, impressive reports from the press and employees will not oppose the business's strategies. Development of leaders; senior management will benefit from increased production, small investments in training leaders and smooth internal succession systems (Personnel Today n.p.). Cultures and value promotion; the senior management will benefit from continued success since the HR will promote the company’s culture and value.

Line Managers

Line managers report to the top management so they should closely monitor and audit the employees. However, these managers work in close association with the HR, so they enjoy the following benefits. Professional guidance and advice; services such as constant training programs add more value to the line managers (Personnel Today n.p.).

Management services; the HR assists line managers in the administration and monitoring the employees.

Hiring the required talent at the right time; through the HR, recruitment is done at the right time and lower costs. Handling aspects of engagement and motivation with the workplace; the HR helps in collection of information like labor turnover, the level of commitment, attendance and auditing the factors that cause these trends (Withers, Williamson, and Reddington 138). Getting learning opportunities; the line managers will learn various skills such as effective investment programs, participation and how to handle fellow employees. Further, line managers benefit by achieving general personal development due to individual guidance and discussion.

Individual employees

Essentially, employees benefit a lot from the HR since they are the central part of an organization. The prime advantage is career development trough training and advice (Reilly and Williams 31). Also, individual workers get salary increment recommendations, bonuses, and allowances. Personal development and leadership skills are also other ways that the employees benefit from the HR (Personnel Today n.p.). Individual workers also benefit from favorable job contracts such as paid vacations, health insurance and job protection due to protective contracts. An individual employee also learns how to relate and conduct themselves in the workplace. Successful HR strategy activities help in resolving conflicts between workers so they will acquire good ethics. Senior managers, line managers and individual are all beneficiaries of a respectful, and collaborative workplace created by the HR. Ideally, the HR achieves that by solving conflicts between individual employees or between the management and workers. Additionally, the human resource helps clarify ethics and values of the company to these three groups.

As these stakeholders (senior managers, line managers, and individual employees) acquire the above benefits from HR strategy activities, the human resource, in turn, expects collaboration from these groups. Most importantly, a good relationship between various stakeholders and the human resource ensures maximum benefits. Conclusively, HR is an essential department in every business that wants to realize improved performance.

Works cited

Personnel Today. “How can HR prove it really adds value?” Personnel Today. 3 Sept. 2012. Web. 14 Apr. 2016. <http://www.personneltoday.com/hr/how-can-hr-prove-it-really-adds-value/> Reilly, Peter, and Tony Williams. Strategic HR: Building the Capability to Deliver. United Kingdom: Gower Publishing, 2012. Print. Withers, Mark, Mark Williamson, and Martin Reddington. Transforming HR: Creating Value through People. 2nd ed. Amsterdam: Saint Louis, Missouri, U.S.A.: Butterworth-Heinemann, 2009. Print.

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