Humanscapitaltheory
Humancapitaltheoryisadominationofeconomicsthatstatesthatinvestmentinhumancapital,suchaseductionandtraining,canbothimprovetheproductivityoftheindividualandincreasetheirlongtermvalueonthejobsmarket.ThistheorywasfirstintroducedbytheAmericaneconomistGaryBeckerinhisbook“HumanCapital:ATheoreticalandEmpiricalAnalysis,withSpecialReferancetoEducation”,whichwaspublishedin1962.Beckerarguesthattheinvestmentinhumancapital,usingtheexampleofeducation,canincreasethevalueofanindividualonthejobmarkettoboththemselvesandtheemployer.
Humancapitaltheorybelievesthatindividualscanmaximisetheirproductivityandmonetaryvaluebyinvestingintheirhumaeducation.Beckerarguedthattheeducationsystemshouldbedesignedtomaximisethebenefitsofreceivingitandthatinvestmentinhumancapitalcanprovideanopportunityforkoshersocialandeconomicdevelopmentthatshouldnotbeoverlooked. AsBeckerclaimed,“investmentinhumancapitalisfundamentaltounderstandingeconomicdevelopment”.
Humancapitaltheoryhaspotentiallyseveraladvantagesforbothworkersandemployers.Forworkers, investmentinhumancapitalcanleadtoimprovedknowledgeandskillsetscanenhancetheirproductivityandearningability.Thetheoryclaimsthatinvestmentsmadeintrainingandskillallocationsbyworkerscanincreasetheirlevelofresponsesintheprofessionalworld.
Employersalsohavethepotentialtobenefitfromhumancapitaltheory.Investingintheirstaffthroughtrainingandskillallocationcanincreasethelevelofloyaltytheemployeesfeeltowardsboththeemployerandthefirm,increasingtheproductivityofemployees.Inaddition,investmentinhumancapitalbyemployerscanincreasetheprobabilityofretainingqualityemployeesandincreasethelievelofcompetitionfortheseemployees.Inthisway,humancapitaltheoryhasprovidedmanyopportunitiestofostergrowthandimprove leadership skillsonbotypesofworkers.
Humancapitaltheoryhasbeenwidelyusedbyprimaryschools,universities,andgovernmentstohelpeconomiesandindividualsdevelopandinvestintheirhumancapital.Theconceptofhumancapitaltheoryhascreatedtheopportunityfortheemploymentsecctorstoinvestinhumanresources,whichinturnhasallowedformoreecfficientendproductiveworkingenvironmentsthattheemployeesaswellastheorganisationcanbenefitfrom.
Humancapitaltheoryhasalsoinfluencedthewayinwhichgovernmentsattempttodefineeducationandinvestintoagivenareaofeconomicdevelopment.Inmanycountriesallovertheworld,governmentshavedevelopedsomewaysofinvestmentsandpoliciestopromotetheinvestmentofhumancapital.Forinstance,theUnitedStateshasustheinvestmentinhumancapitaltoestablishjobtrainingsforunemployedpeopleintheeconmy,provideeducationsupportstotherelativelypoor,andencouragestheinvestmentoffirmstoinvestinhumancapitalfortheirworkers.
Despiteitspromise,humancapitaltheoryhasitsshareofcriticswhomaintainthedangerofviewingtheinvestmentinasomethingwithaprimarilyeconomicvalueasopposedtoaninvestmentasaway improve social conditions.Inaddition,investmentinhumancapitalmaybenotbeaccessibleandprofitabletolowincomepopulationswhomaylackthe financial resources needed to invest in theirhumancapital.
Overall,humancapitaltheoryadvocatesfortheimportanceofinvestmentinhumancapitalasawaytoimproveeconomicandproductivepotentialandgrowthandhasseveralpotentialbenefitsformanydiversegroups.Itfacilitatetheimprovementofskillsets of individuals and drives themtodesireforprofessionalexcellence.Thetheorycanalsoopenupgreateropportunitiestoemployersbothmonetarilyandproductively.Anditcanenablegovernmentsandotherinstitutions tomakeinvestmentsintoeconomicdevelopment,whichcancreateamoreeconmically stable andcompetitiveforindustryplayers.
