Human capital is an intangible asset or quality that is not listed on a company’s balance sheet. These include education, training, intelligence, skills, health, and the valuable things that owners need, such as grace and timeliness. The concept of human capital recognizes that not all labor is created equal. But employers can improve the value of that capital by investing in employees All have economic value for the owners of education, experience, and skills of employees and for the overall economy. Human capital is important because it is thought to increase productivity and thus profitability. So the more an organization invests in its employees (i.e., their education and training), the more productive and profitable it can be.
Understanding Human Capital
An organization is often said to be just as good as its people, directors, employees, and leaders who create human capital for an organization is criticized for its success. Human capital is usually managed by a company’s human resources (HR) department. This department oversees workforce acquisition, management, and optimization. Other instructions include workforce planning and strategy, recruitment, employee training and development, and reporting and analysis. Human capital tends to migrate, especially in the global economy. This is because often there is a shift from developing places or rural areas to more advanced and urban areas. Some economists have called this a brain drain, enriching the poorer places with poorer and more advanced places.
The human capital is being calculated
Since human capital is based on investment in employee skills and knowledge through education, these investments in human capital can be easily calculated. HR directors can calculate total profit before and after any investment. A return on human capital investment (ROI) can be calculated by dividing the company’s gross profit by its overall investment in human capital.
Human capital and economic growth
There is a strong correlation between human capital and economic growth. Because people come with different skills and knowledge, human capital can certainly help to grow the economy. This relationship is measured by how much investment goes into human education.
Some governments recognize that this relationship exists between human capital and the economy and so they provide higher education at little or no cost. People who participate in the higher education workforce often have higher salaries, which mean they will be able to spend more.
Similarly, a person’s capital can be reduced if he or she does not adopt new technology or techniques. On the contrary, anyone who accepts them is his human capital.
