Human Capital Development
Human Capital Development
Introduction
The research paper focuses on human capital development in the firm, and
industry, importance of human capital, and methods of investing in human
capital. Human capital refers to stock of competences, knowledge, and
personality attributes that are embodied in the ability to perform labor so to
produce economic value. Human capital is the attribute that a worker gains
through education, and experience he acquires. Many economic theories
refer to human capital as workforce. It is one of the three factors of
production and is termed as a fungible resource. Adam smith defined four
types of human capital. This is because he viewed human capital from a
different perspective. He viewed human capital as useful machines, and
instruments of trade.
He also viewed human capital as a building material. This is because
human capital is a means of procuring revenue, and improving land. Adam
smith defined human capital as the useful abilities acquired by members of
the society. The process of acquiring talents always cost as real expense.
Smith defined this expense acquired during the acquisition process as
capital fixed, and realized. He further argued that the talents benefit the
person, and his society as a well. After the person has acquired the
knowledge he is considered to be a machine and instrument of trade which
helps in production, and abridges labor. Though the instrument costs some
expenses, it repays the expenses with a profit. This is the reason why
human capital is important in the industry. Smith argues that, the productive
power of labor, skills, and the way it is directed affects division of labor.
According to smith there is a great connection between human capital, and
division of labor
Origin of the term human capital
The idea of human capital was developed by A.W.Lewis in 1954. Lewis
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Human Capital Development
wrote the book economic development with unlimited supply of labor in
1954, and this idea led to development of the term human capital. The term
was not used until Arthur Cecil pigou first discussed it. From Arthur’s idea
the distinction between human capital as investment and material capital
was made ( Herrin 2008). The use of the term human capital in the modern
neoclassical economics was developed by Jacob Mincer. Mincer in 1958
wrote an article on investment in human capital, and personal income
distribution in the journal of political economy. The application of the term
human capital in economics uses Mincer, and Gary Becker suggestions.
Becker in 1964 published a book entitled human capital. According to
Becker’s idea, human capital is compared to physical means of production.
He compares human capital to factories, and machines. This is because one
can invest in human capital in different ways. One can invest in human
capital through educating people, training people in an organization, and
providing medical services. The output one gets from the investment
depends on the amount of human capital one has invested. Thus, human
capital is important in production as people utilize human capital as a form
of labor in the industry. The output of human capital in the industries
depends on how one has invested on human capital (
Herrin 2008)
Human capital development in the firm
Many industries face problems today because they do not know how to
invest well in human capital. This is because the industries do not value the
workforce they have. Others do not treat their employees’ well (Gashi 2009)
. In order to ensure human capital is utilized well in a firm; the firm should
develop programs to cater for workforce in the company. The firm can use
employee training programs to provide training to workforce, or human
capital in the firm. Training programs are important as they help employees
improve their skills, and knowledge. This make employees perform better,
and increase productivity in the firm. The firm can also utilize performance
programs to measure employee performance. This is important as it helps
the firm in identifying employees who need assistance so as to improve
their skills. The firm can also use motivation programs to motivate
employees (
Schultz
2008). The motivation should be done in the right manner without any
discrimination. This is to ensure that the employees are performing well.
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Human Capital Development
This in turn increases productivity in the firm. The firm can invest in
human capital through medical programs. The employees in the firm are
provided with enough medical attention. This ensures the firm has healthy
employees, and it also increases productivity. The firm should invest well in
human capital by providing training programs, performance programs, and
motivation program. This ensures that the firm has invested well in human
capital, and in return the firm gets good profits. Poor investment in human
capital can affect the firm negatively ( Schultz 2008). This is because the
employees do not perform well, and lowers productivity. Poor invest of
human capital affects the profits in the firm, and the employees turn over.
Employees leave the firm to look for better paying jobs. This affects the
production in the firm. Thus, proper investment in human capital is
important for the firm as it ensures proper productivity, and profits ( Currie
&National bureau of economic research 2008)
. Human capital is important in the firm as it has several benefits. Human
capital ensures continuity of a firm. Though a firm is a single business
entity it needs employees, and other stakeholders for it to survive. Without
employees the firm ceases to exist. Hence, human capital ensures
continuity of a firm, and its activities. Another importance of human capital
is provision of competitive advantage. Human capital allows a firm to
compete well in the market. This is because the firm has skilled employees
who can adapt change quickly. This in turns increases productivity in the
firm. For example, if the firm introduces new technology and process, it
requires skilled employees to adapt change quickly, and implement the
technology well so as to compete with competitors well. If the firm does not
have skilled human capital then the competitors will introduce the same
technology, and take advantage of the technology. Thus, the firm should
invest well in human capital (
Schultz
2008)
Conclusion
Human capital is important for survival of the firm. The firm should invest
well in human capital so as to increase productivity, and profit. The firm
should invest in training programs, performance programs, and health care
programs so as to improve employee productivity.
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Human Capital Development
Reference
Currie,J.,&National bureau of economic research.Healthy, wealthy, and wise: socioeconomic
status, poor health in childhood, and human capital development.National Bureau of Economic
Research, 2008
Gashi,A.Human Capital Development: Employer-Provided Training.Lap Lambert Academic
Publishing, 2009
Herrin,A.Human capital and development in the Philippines.PublisherPhilippine Institute for
Development Studies, 2008
Schultz, T.Handbook of development economics, Volume 4.Elsevier, 2008
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