What is Human Capital Formation?
How to define human capital formation: A country can turn physical resources like land, mineral products, water power into physical capital like factories, power stations, dams & reservoirs, etc. To run physical resources, we need good human capital. Like physical capitals, the country can turn human resources like students into human capital like engineers, doctors, administrative officers, scientists, architects, teachers and so on. Human capitals are needed to develop and run physical capitals as well as human capitals. People with human capital like knowledge, skills, expertise, experience, represent the country in front of the world. These persons enrich society and the nation. To run a country well, we need good human capital and a well infrastructured human capital formation system.
Human Capital refers to skill, ability, expertise, knowledge in a person.
Human Capital Formation is the development of skill, ability, expertise, knowledge of a person for years. Quality education, sound health, well-behaved communication are recognizable manifestations of a well human capital formation. Human capital formation helps the economic and political development of a country.
Investment in Education: An educated person is an asset for a nation and is capable to produce more effort for the upliftment of society. On the other hand labour with more efficiency contributes to the economic growth of a nation. And labour becomes efficient or skilled with the inclusion of education. Spending on education by individuals enables the development of the human capital in that person, which helps that person to increase productivity and efficiency of labour. That’s why spending on education is as effective as spending on physical capital.
- Education gives a person a better standing in social life.
- Education enables a person to make better choices in life.
- Education provides knowledge.
- Education helps a person to innovate and invent.
- Education makes a person curious and thus empowers them to question.
Health Investment: A healthy person can supply more workforce than an unhealthy person. Education stimulates knowledge to grow. Knowledge enables one to get better job opportunities with a better salary amount, which is spent on healthy foods. Healthy foods make a person healthier. In addition, it helps to create a habitat with a sound lifestyle. Availability of medicines, clean drinking water and good sanitation facilities are necessary to lead a healthy lifestyle.
Giving On-the-Job-Training Investment: Different types of works need different types of capabilities to pursue. An educated one can make oneself more pursuable for a job by getting on-the-job training.
Investment for Information: Knowledge is the key thing to do a job. A proper supply of information builds intelligence. People spend lots of time and money to acquire information related to their labour, society, lifestyle, etc. This information helps to make decisions regarding the investment in human capital as well as its efficient utilisation. Thus, expenditure on information is also a source of human capital formation.
Importance of Role of Human Capital Formation
- Proper Use of Physical Capital: Increment in productivity of physical capital widely depends on human capital. Educated, skilled, experienced and healthy people effectively make use of physical capital and raise the productivity of capital.
- Inventions, Innovations and Improvement: Human capital formation can trigger inventions to bring innovations in labour to make it easy. Education also creates the ability in human capital to absorb new technological improvements.
- Improvement in Quality of Life: Human capital formation raises the life expectancy in people. Educated and healthy people can lead a good quality of life.
- Population Growth Control: It has been observed through many studies that educated persons have smaller families, compared to uneducated ones. So, it is believed that education can control the population growth rate of a country.
You must be logged in to post a comment.