Human Capital

Topics: Human resources, Human resource management, Human capital Pages: 14 (4597 words) Published: July 28, 2013
Human Capital |
25.März 2013 |

Table of Contents

Introduction…………………………………..…………………………………………….. Meaning and Importance of Human Capital………………………………………….. How to acquire Human Capital
History………………………………………………………………………………………… Resource based vs. Knowledge based Economy…………………………………… Impact of Human capital………………………………………………………………….. Measurements of Human Capital……………………………………………………….. Output-Based Approach……………………………………………………………….. Cost-Based Approach………………………………………………………………….. Income-Based Approach………………………………………………………………. Human Resources and Management……………………………..……………………. Human Capital in the Real World…………………….………………………………. Evaluation…………………………………………………………………………………… Literature…………………………………………………………………………………….

Introduction of the meaning and importance of human capital
When most people think about investments, people think of stocks, banks and in general everything that has to do with money, but it is also possible to invest in education, training and experience. Human capital is the stock of knowledge and skills, embodied in an individual as a result of education, training and experience that makes the individual more productive in the labor market (De la Fuente & Ciccone, 2002). It is now accepted that the foundation of human capital is based on knowledge and skills acquired by an individual throughout an individual’s lifespan. Human Capital is a non-tradable good. Capital is defined as a factor of production. In neoclassical theory, capital is defined on the aspects of production and represents the status of investments made in the past in the economy, which requires the exchange of current consumption for future consumption.

How to acquire Human Capital
Whether an individual acquired or inherited human capital, skills and knowledge are embodied into every individual. Individuals who acquire human capital do not always have control over of how and what kind of human capital they acquire. Human capital is attained formally or informally (Laroche, Mérette & Ruggeri, 2001). Informal human capital is acquired through a variety of social organizations, personal contacts, self-teaching and work experience like learning by doing. Formal human capital acquirement is gained through established institutions and programs, where skills and knowledge are transmitted in educational environments. Human capital can not only be formal or informal, it can also be general or specific. Knowledge and skills are said to be general human capital, because there is a great range of activities where you can use them, if they are easily exchangeable from one firm to another without any significant loss of value. Sometimes human capital can only be used in a limited number of settings and, if a termination of employment happens, it represents a significant loss of value because of the initial investment. The knowledge and abilities humans are born with may not always be fully used. This might happen due to a gap between the acquired and required skills, which are demanded by the labor market from economic changes from the labor market distortions or from individuals´ conscious or unconscious decisions not to use and exploit their potential. (Laroche, Mérette & Ruggeri, 2001) Especially when the individuals are younger, they are not able to make rational decisions about their needs and wants for human capital and they also do not have the ability to evaluate the potential of their native skills. During the first years of life, the decisions are not made by the infant; instead they are made by parents, teachers, governments, and society. As people get older, they start to make more independent decisions; they start to adopt the decision making process on their own human capital investment. A person´s ability to additionally invest in human capital depends on past investments and on their social environment, the influence of their friends and family and...
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