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{{short description|Economics concept involving knowledge, skills, and training}}
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'''Human capital''' or '''human assets''' is a concept used by economists to designate personal attributes considered useful in the production process. It encompasses employee [[Philosophy:Knowledge|knowledge]], [[Philosophy:Skill|skills]], [[Philosophy:Know-how|know-how]], good health, and education.<ref>{{Cite book|chapter-url=http://scholar.harvard.edu/files/goldin/files/human_capital_handbook_of_cliometrics_0.pdf|chapter=Human Capital|title=Handbook of Cliometrics|first=Claudia|last=Goldin|editor1=Claude Diebolt|editor2=Michael Haupert}}</ref> Human capital has a substantial impact on individual earnings.<ref name=":1">{{Cite journal |last=Deming |first=David J. |date=2022 |title=Four Facts about Human Capital |journal=Journal of Economic Perspectives |language=en |volume=36 |issue=3 |pages=75–102 |doi=10.1257/jep.36.3.75 |issn=0895-3309|doi-access=free }}</ref> Research indicates that human capital investments have high economic returns throughout childhood and young adulthood.<ref name=":1" /><ref>{{cite journal |last1=Hiel |first1=Alain Van |last2=Assche |first2=Jasper Van |last3=Cremer |first3=David De |last4=Onraet |first4=Emma |last5=Bostyn |first5=Dries |last6=Haesevoets |first6=Tessa |last7=Roets |first7=Arne |title=Can education change the world? Education amplifies differences in liberalization values and innovation between developed and developing countries |journal=PLOS ONE |date=2018 |volume=13 |issue=6 |pages=e0199560 |doi=10.1371/journal.pone.0199560 |pmid=29928058 |pmc=6013109 |bibcode=2018PLoSO..1399560V |doi-access=free }}</ref>

Companies can invest in human capital; for example, through education and training, improving levels of quality and production.<ref>{{Cite web|url=https://www.investopedia.com/terms/h/humancapital.asp|title=Human Capital|last=Kenton|first=Will|website=Investopedia|language=en|access-date=2019-03-28}}</ref>

==History==
[[File:Human capital.png|thumb|Human capital infographic]]
[[Biography:Adam Smith|Adam Smith]] included in his definition of [[Finance:Capital (economics)|capital]] "the acquired and useful abilities of all the inhabitants or members of the society". The first use of the
term "human capital" may be by [[Biography:Irving Fisher|Irving Fisher]].<ref>{{Cite web|url=http://scholar.harvard.edu/files/goldin/files/human_capital_handbook_of_cliometrics_0.pdf|title=Human Capital|last=Claudia Goldin|first=Department of Economics Harvard University and National Bureau of Economic Research}}</ref> An early discussion with the phrase "human capital" was from Arthur Cecil Pigou:

{{block quote|There is such a thing as investment in human capital as well as investment in material capital. So soon as this is recognised, the distinction between economy in consumption and economy in investment becomes blurred. For, up to a point, consumption is investment in personal productive capacity. This is especially important in connection with children: reducing unduly expenditure on their consumption may greatly lower their efficiency in after-life. Even for adults, after we have descended a certain distance along the scale of wealth, so that we are beyond the region of luxuries and "unnecessary" comforts, a check to personal consumption is also a check to investment.<ref>{{cite book |last=Pigou |first=Arthur Cecil |title=A Study in Public Finance |year=1928 |publisher=Macmillan |location=London |page=29 }}</ref>}}

But the term only found widespread use in economics after its popularization by economists of the Chicago School, in particular [[Biography:Gary Becker|Gary Becker]], Jacob Mincer, and [[Biography:Theodore Schultz|Theodore Schultz]]. 

The early 20th century Austrian sociologist Rudolf Goldscheid's theory of organic capital and the human economy also served as a precedent for later concepts of human capital.<ref>{{cite book|last=Lemke|first=Thomas|year=2011|translator-last=Trump|translator-first=Eric Frederick|title=Biopolitics: An Advanced Introduction|place=New York and London|publisher=New York University Press|isbn=978-0814752418|url=https://books.google.com/books?id=cRVNFqFPGtoC&pg=PA108|pages=108–109}}</ref> 

The use of the term in the modern [[Finance:Neoclassical economics|neoclassical]] [[Finance:Economics|economic]] literature dates back to Jacob Mincer's article "Investment in Human Capital and Personal Income Distribution" in the ''[[Finance:Journal of Political Economy|Journal of Political Economy]]'' in 1958.<ref>Mincer, Jacob   ''Studies in Human Capital''. [https://books.google.com/books?id=Exx8_r-RpQkC&dq=%22Investment+in+Human+Capital+and+Personal+Income+Distribution%22&pg=PA3 1.  "Investment in Human Capital and Personal Income Distribution"]. Edward Elgar Publishing, 1993.</ref> Then [[Biography:Theodore Schultz|Theodore Schultz]] also contributed to the development of the subject matter. The best-known application of the idea of "human capital" in economics is that of Mincer and [[Biography:Gary Becker|Gary Becker]]. Becker's book entitled ''Human Capital'', published in 1964, became a standard reference for many years. In this view, human capital is similar to "[[Finance:Capital (economics)|physical means of production]]", e.g., factories and machines: one can invest in human capital (via education, training, medical treatment) and one's outputs depend partly on the rate of return on the human capital one owns. Thus, human capital is a [[Social:Means of production|means of production]], into which additional investment yields additional output. Human capital is substitutable, but not transferable like land, labor, or fixed capital.

Some  contemporary [[Finance:Economic growth#Theories|growth theories]] see human capital as an important [[Finance:Economic growth|economic growth]] factor.<ref>{{cite journal |first1=Eric |last1=Hanushek |first2=Ludger |last2=Woessmann |title=The Role of Cognitive Skills in Economic Development |year=2008 |journal=[[Finance:Journal of Economic Literature|Journal of Economic Literature]] |volume=46 |issue=3 |pages=607–668 |doi=10.1257/jel.46.3.607| url=http://hanushek.stanford.edu/sites/default/files/publications/Hanushek%2BWoessmann%202008%20JEL%2046%283%29.pdf|citeseerx=10.1.1.507.5325 }}</ref> Further research shows the relevance of education for the economic welfare of people.<ref>{{cite journal |last=Rindermann |first=Heiner |title=Relevance of education and intelligence at the national level for the economic welfare of people |date=March 2008 |journal=Intelligence |volume=36 |issue=2 |pages=127–142 |doi=10.1016/j.intell.2007.02.002 }}</ref>

[[Biography:Adam Smith|Adam Smith]] defined four types of fixed capital (which is characterized as that which affords a revenue or profit without circulating or changing masters). The four types were:
# useful machines, instruments of the trade;
# buildings as the means of procuring revenue;
# improvements of land;
# the acquired and useful abilities of all the inhabitants or members of the society.
Smith defined human capital as follows:

<blockquote>Fourthly, of the acquired and useful abilities of all the inhabitants or members of the society.  The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in his person.  Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs.  The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor, and which, though it costs a certain expense, repays that expense with a profit.<ref>[http://www.adamsmith.org/smith/won-b2-c1.htm] Smith, Adam: ''An Inquiry into the Nature And Causes of the Wealth of Nations Book 2 – Of the Nature, Accumulation, and Employment of Stock''; Published 1776.</ref>
</blockquote>

Therefore, Smith argued, the productive power of labor are both dependent on the division of labor:

<blockquote>The greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgement with which it is anywhere directed, or applied, seem to have been the effects of the division of labor.</blockquote>

There is a complex relationship between the division of labor and human capital.

In the 1990s, the concept of human capital was extended to include natural abilities, physical fitness and healthiness, which are crucial for an individual's success in acquiring knowledge and skills.<ref>{{Cite book|title=Encyclopedia of the City|url=https://archive.org/details/encyclopediacity00cave|url-access=limited|last=Caves|first=R. W.|publisher=Routledge|year=2004|isbn=9780415252256|pages=[https://archive.org/details/encyclopediacity00cave/page/n402 362]}}</ref>

As a result of his conceptualization and modeling work using Human Capital as a key factor, the 2018 Nobel Prize for Economics was jointly awarded to [[Biography:Paul Romer|Paul Romer]], who founded the modern innovation-driven approach to understanding economic growth.

In the recent literature, the new concept of '''task-specific human capital''' was coined in 2004 by Robert Gibbons, an economist at [[Organization:Massachusetts Institute of Technology|MIT]], and Michael Waldman<ref>Michael Waldman, Ph.D., Faculty Professor at the Samuel Curtis Johnson Graduate School of Management, Cornell University USA|https://economics.cornell.edu/michael-waldman</ref>,<ref>[https://www.johnson.cornell.edu/Faculty-And-Research/Profile?id=mw46 Michael Waldman]'s profile at the Johnson School of Management</ref> an economist at [[Organization:Cornell University|Cornell University]]. The concept emphasizes that in many cases, human capital is accumulated specific to the nature of the task (or, skills required for the task), and the human capital accumulated for the task are valuable to many firms requiring the transferable skills.<ref>{{Cite journal |last1=Gibbons |first1=Robert |last2=Waldman |first2=Michael |date=May 2004 |title=Task-Specific Human Capital |journal=American Economic Review |volume=94 |issue=2 |pages=203–207 |doi=10.1257/0002828041301579 |issn=0002-8282}}</ref> This concept can be applied to job-assignment, wage dynamics, tournament, promotion dynamics inside firms, etc.<ref>{{Cite journal |last1=Gibbons |first1=Robert |last2=Waldman |first2=Michael |date=2006-01-01 |title=Enriching a Theory of Wage and Promotion Dynamics inside Firms |url=http://dspace.mit.edu/bitstream/1721.1/3537/2/4324-03.pdf |journal=Journal of Labor Economics |volume=24 |issue=1 |pages=59–107 |doi=10.1086/497819 |issn=0734-306X |s2cid=222327628 |hdl-access=free |hdl=1721.1/3537}}</ref>

==Background==

''Human capital'' in a broad sense is a collection of activities: all the knowledge, skills, abilities, experience, intelligence, training and competences possessed individually and collectively by individuals in a population. These resources are the total capacity of the people that represents a form of wealth that can be directed to accomplish the goals of the nation or state or  a portion thereof. The human capital is further distributed into three kinds;<ref>David J. Deming, "Four Facts about Human Capital" ''Journal of Economic Perspectives'' (2022).36 (3): 75–102. </ref> 
# Knowledge capital
# [[Social:Social capital|Social capital]]
# Emotional capital.<ref>https://econpapers.repec.org/paper/msewpsorb/r04113.htm</ref>

Many theories explicitly connect investment in human capital development to education, and the role of human capital in economic development, productivity growth, and innovation has frequently been cited as a justification for government subsidies for education and job skills training.

It was assumed in early economic theories, reflecting the context – i.e., the [[Finance:Secondary sector of the economy|secondary sector of the economy]] was producing much more than the [[Finance:Tertiary sector of the economy|tertiary sector]] was able to produce at the time in most countries&nbsp;– to be a fungible resource, homogeneous, and easily interchangeable, and it was referred to simply as workforce or labor, one of three [[Finance:Factors of production|factors of production]] (the others being land, and assumed-interchangeable assets of money and physical equipment).  Just as land became recognized as [[Finance:Natural capital|natural capital]] and an asset in itself, human factors of production were raised from this simple mechanistic analysis to human capital.  In modern technical financial analysis, the term "balanced growth" refers to the goal of equal growth of both aggregate human capabilities and physical assets that produce goods and services.

The assumption that labor or workforces could be easily modelled in aggregate began to be challenged in 1950s when the [[Finance:Tertiary sector of the economy|tertiary sector]], which demanded creativity, begun to produce more than the [[Finance:Secondary sector of the economy|secondary sector]] was producing at the time in the most developed countries in the world.  [[File:Clark's Sector model.png|left|400px|thumb|Clark's Sector model the for US economy 1850–2009<ref>{{cite web|title=Who Makes It? Clark's Sector Model for US Economy 1850–2009|url=http://www.63alfred.com/whomakesit/clarksmodel.htm|access-date=29 December 2011}}</ref>]]  Accordingly, much more attention was paid to factors that led to success versus failure where human management was concerned.  The role of leadership, [[Social:Aptitude|talent]], even celebrity was explored.

Today, most theories attempt to break down human capital into one or more components for analysis<ref name="sveiby.com">{{Cite web |url=http://www.sveiby.com/articles/IntellectualCapital.html |title=Intellectual Capital and Knowledge Management |access-date=2013-02-18 |archive-url=https://web.archive.org/web/20130216095056/http://www.sveiby.com/articles/IntellectualCapital.html |archive-date=2013-02-16 |url-status=dead }}</ref><ref name="ReferenceA">Paolo Magrassi (2002) "A Taxonomy of Intellectual Capital", Research Note COM-17-1985, Gartner</ref><ref name="Sveiby 1997">{{cite journal|last=Sveiby|first=Karl Erik|year=1997|title=The Intangible Asset Monitor|journal=Journal of Human Resource Costing and Accounting|volume=2|issue=1}}</ref> Most commonly, Emotional capital is the set of resources (the personal and social emotional competencies) that is inherent to the person, useful for personal, professional and organizational development, and participates to social cohesion and has personal, economic and social returns (Gendron, 2004, 2008). [[Social:Social capital|Social capital]], the sum of social bonds and relationships, has come to be recognized, along with many synonyms such as goodwill or brand value or social cohesion or social resilience and related concepts like celebrity or fame, as distinct from the [[Social:Aptitude|talent]] that an [[Finance:Individual capital|individual]] (such as an athlete has uniquely) has developed that cannot be passed on to others regardless of effort, and those aspects that can be transferred or taught: instructional capital. Less commonly, some analyses conflate good instructions for health with health itself, or good [[Knowledge management|knowledge management]] habits or systems with the instructions they compile and manage, or the "[[Social:Intellectual capital|intellectual capital]]" of teams&nbsp;– a reflection of their social and instructional capacities, with some assumptions about their individual uniqueness in the context in which they work.  In general, these analyses acknowledge that individual trained bodies, teachable ideas or skills, and social influence or persuasion power, are different.

[[Social:Management accounting|Management accounting]] is often concerned with questions of how to model human beings as a [[Finance:Capital asset|capital asset]].  However it is broken down or defined, 
human capital is vitally important for an organization's success (Crook et al., 2011); human capital increases through education and experience.<ref>{{cite book
  | last1 = O'Sullivan
  | first1 = Arthur
  | title = Economics: Principles in Action
  | url = https://archive.org/details/economicsprincip00osul
  | url-access = limited
  | publisher = Pearson Prentice Hall
  | year = 2003
  | location = Upper Saddle River, New Jersey
  | page = [https://archive.org/details/economicsprincip00osul/page/n21 5]
  | isbn = 978-0-13-063085-8}}</ref> Human capital is also important for the success of cities and regions: a 2012 study examined how the production of university degrees and R&D activities of educational institutions are related to the human capital of metropolitan areas in which they are located.<ref>{{cite news | url=http://journalistsresource.org/studies/society/education/colleges-universities-regional-human-capital/ | title=Do Colleges and Universities Increase Their Region's Human Capital?}} JournalistsResource.org, retrieved June 18, 2012</ref><ref>{{cite journal | last1 = Abel | first1 = Jaison R.  | last2 = Deitz | first2 = Richard | year = 2012 | title = Do Colleges and Universities Increase Their Region's Human Capital? | journal = [[Earth:Journal of Economic Geography|Journal of Economic Geography]] | url = http://www.newyorkfed.org/research/staff_reports/sr401.html | doi = 10.1093/jeg/lbr020 | volume = 12 | issue = 3 | pages = 667| doi-access = free | hdl = 10.1093/jeg/lbr020 | hdl-access = free }}</ref>

In 2010, the [[Organization:OECD|OECD]] encouraged the governments of advanced economies to embrace policies to increase innovation and knowledge in products and services as an economical path to continued [[Finance:Prosperity|prosperity]].<ref>{{Cite news |url=http://www.economist.com/node/16219687?story_id=16219687 |title=Human resources |newspaper=The Economist |date=27 May 2010 |publisher=The Economist (May 27th 2010)}}</ref>  International policies also often address human capital flight, which is the loss of talented or trained persons from a country that invested in them, to another country which benefits from their arrival without investing in them.

==Measurement of human capital==
===World Economic Forum Global Human Capital Index===
Since 2012 the [[Organization:World Economic Forum|World Economic Forum]] has annually published its Global Human Capital Report, which includes the Global Human Capital Index (GHCI).<ref>{{cite web|url=https://www.weforum.org/reports/the-global-human-capital-report-2017|title=The Global Human Capital Report 2017|website=World Economic Forum|access-date=30 November 2018}}</ref>  In the 2017 edition, 130 countries<ref name="Observatory">{{cite web|url=http://www.competitividad.org.do/wp-content/uploads/2017/10/Indice-de-Capital-Humano-2017.pdf|title=Índice de Capital Humano 2017|website=Observatorio de Competitividad|access-date=30 November 2018}}</ref> are ranked from 0 (worst) to 100 (best) according to the quality of their investments in human capital. Norway is at the top, with 77.12.<ref name="Observatory" />

===World Bank Human Capital Index===
In October 2018, the [[Organization:World Bank|World Bank]] published the Human Capital Index (HCI) as a measurement of economic success. The Index ranks countries according to how much is invested in education and health care for young people.<ref>[https://www.bbc.com/news/business-45816049 "Not pounds and pence - here's a different way to measure our wealth"], BBC, 11.10,2018</ref> The [[Organization:World Bank|World Bank]]'s 2019 [[Organization:World Development Report|World Development Report]] on ''The Changing Nature of Work''<ref>{{cite web| url = http://documents.worldbank.org/curated/en/816281518818814423/pdf/2019-WDR-Report.pdf| title = World Bank World Development Report 2019: The Changing Nature of Work.}}</ref> showcases the Index and explains its importance given the impact of technology on labor markets and the future of work. One of the central innovations of the World Bank Human Capital Index was the inclusion and harmonization of learning data across 164 countries. This introduced a measure of human capital which directly accounts for the knowledge and skills acquired from schooling, rather than using schooling alone, now widely recognized to be an incomplete proxy. The learning outcomes data, methodology, and applications to the human capital literature underlying this effort were published in ''Nature''. <ref> Angrist, Noam, Simeon Djankov, Pinelopi K. Goldberg, and Harry A. Patrinos. [https://www.nature.com/articles/s41586-021-03323-7 "Measuring Human Capital Using Global Learning Data"], ''Nature'' (2021). </ref>

;Human Capital Index ranking (top 50 countries)<ref>{{cite web| url = http://documents.worldbank.org/curated/en/816281518818814423/pdf/2019-WDR-Report.pdf| title = WORLD DEVELOPMENT REPORT 2019}}</ref>
{{columns-list|colwidth=22em|
# {{flagcountry|Singapore}} 0.88
# {{flagcountry|South Korea}} 0.84
# {{flagcountry|Japan}} 0.84
# {{flagcountry|Hong Kong}}, SAR of China 0.82
# {{flagcountry|Finland}} 0.81
# {{flagcountry|Ireland}} 0.81
# {{flagcountry|Australia}} 0.80
# {{flagcountry|Sweden}} 0.80
# {{flagcountry|Netherlands}} 0.80
# {{flagcountry|Canada}} 0.80
# {{flagcountry|Germany}} 0.79
# {{flagcountry|Austria}} 0.79
# {{flagcountry|Slovenia}} 0.79
# {{flagcountry|Czech Republic}} 0.78
# {{flagcountry|United Kingdom}} 0.78
# {{flagcountry|Portugal}} 0.78
# {{flagcountry|Denmark}} 0.77
# {{flagcountry|Norway}} 0.77
# {{flagcountry|Italy}} 0.77
# {{flagcountry|Switzerland}} 0.77
# {{flagcountry|New Zealand}} 0.77
# {{flagcountry|France}} 0.76
# {{flagcountry|Israel}} 0.76
# {{flagcountry|United States}} 0.76
# {{flagcountry|Macau}}, SAR of China 0.76
# {{flagcountry|Belgium}} 0.76
# {{flagcountry|Serbia}} 0.76
# {{flagcountry|Cyprus}} 0.75
# {{flagcountry|Estonia}} 0.75
# {{flagcountry|Poland}} 0.75
# {{flagcountry|Kazakhstan}} 0.75
# {{flagcountry|Spain}} 0.74
# {{flagcountry|Iceland}} 0.74
# {{flagcountry|Russian Federation}} 0.73
# {{flagcountry|Latvia}} 0.72
# {{flagcountry|Croatia}} 0.72
# {{flagcountry|Lithuania}} 0.71
# {{flagcountry|Hungary}} 0.70
# {{flagcountry|Malta}} 0.70
# {{flagcountry|Slovak Republic}} 0.69
# {{flagcountry|Luxembourg}} 0.69
# {{flagcountry|Greece}} 0.68
# {{flagcountry|Seychelles}} 0.68
# {{flagcountry|Bulgaria}} 0.68
# {{flagcountry|Chile}} 0.67
# {{flagcountry|China}} 0.67
# {{flagcountry|Bahrain}} 0.67
# {{flagcountry|Vietnam}} 0.67
# {{flagcountry|United Arab Emirates}} 0.66
# {{flagcountry|Ukraine}} 0.65
}}

===Other methods===
A new measure of expected human capital calculated for 195 countries from 1990 to 2016 and defined for each birth cohort as the expected years lived from age 20 to 64 years and adjusted for educational attainment, learning or education quality, and functional health status was published by ''The Lancet'' in September 2018. {{wipe|Finland}} had the highest level of expected human capital: 28·4 health, education, and learning-adjusted expected years lived between age 20 and 64 years. Niger had the lowest at less than 1·6 years.<ref>{{cite news|url=https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(18)31941-X/fulltext|title=Measuring human capital: a systematic analysis of 195 countries and territories, 1990–2016|last1=Lim|first1=Stephen|access-date=5 November 2018|publisher=Lancet|last2=et|first2=al}}</ref>

Measuring the human capital index of individual firms is also possible: a survey is made on issues like training or [[Finance:Financial compensation|compensation]],<ref name="Community">{{cite web|url=http://www.chrmglobal.com/Qanda/54/1/What-is-Human-Capital-Index-.html|title=What is Human Capital Index ?|website=Community for Human Resource Management|access-date=30 November 2018}}</ref> and a value between 0 (worst) and 100 (best) is obtained. Enterprises which rank high are shown to add value to shareholders.<ref name="Community" />

=== Human capital management ===
Human capital management (HCM) is the term used to describe workforce practices and resources that focus on maximizing needed skills through the recruitment, training, and development of employees.<ref name=":0">{{Cite web|title=Definition of Human Capital Management (HCM)|url=https://www.gartner.com/en/information-technology/glossary/hcm-human-capital-management|access-date=2022-02-04|website=Gartner|language=en}}</ref><ref>{{Cite web|title=What Is Human Capital Management: Overview, Functions and Benefits|url=https://www.indeed.com/career-advice/career-development/what-is-human-capital-management|access-date=2022-02-04|website=Indeed Career Guide|language=en}}</ref> Departments and software applications responsible for HCM often manage tasks that include administrative support, reporting and analytics, education and training, and hiring and recruitment.<ref name=":0" /><ref>{{Cite web|title=What is Human Capital Management (HCM)?|url=https://www.oracle.com/human-capital-management/what-is-hcm/|access-date=4 February 2022|website=Oracle}}</ref>  

==Cumulative growth==
Human capital is distinctly different from the tangible monetary capital due to the extraordinary characteristic of human capital to grow cumulatively over a long period of time.<ref>{{cite web |work=Investopedia |title=Human Capital: The most overlooked Asset Class |author=David Allison |url=http://www.investopedia.com/articles/younginvestors/09/human-capital.asp#axzz1Wb8QpjGs}}</ref>  The growth of tangible monetary capital is not always linear due to the shocks of [[Finance:Business cycle|business cycle]]s. During the period of prosperity, monetary capital grows at relatively higher rate while during the period of [[Finance:Recession|recession]] and depression, there is deceleration of monetary capital. On the other hand, human capital has uniformly rising rate of growth over a long period of time because the foundation of this human capital is laid down by the educational and health inputs.<ref>{{cite book|last=Becker|first=Gary|title=Human Capital: A theoretical and empirical analysis with special reference to Education|year=1994|publisher=The University of Chicago Press}}</ref>  The current generation is qualitatively developed by the effective inputs of education and health.<ref>{{cite book|last=Hansen|first=W. Lee|title=Education, Income and Human Capital|year=1970}}</ref>  The future generation is more benefited by the advanced research in the field of education and health, undertaken by the current generation. Therefore, the educational and health inputs create more productive impacts upon the future generation and the future generation becomes superior to the current generation. In other words, the productive capacity of future generation increases more than that of current generation. Therefore, rate of human capital formation in the future generation happens to be more than the rate of human capital formation in the current generation. This is the cumulative growth of human capital formation generated by superior quality of manpower in the succeeding generation as compared to the preceding generation.

==Intangibility and portability==
Human capital is an intangible asset, and it is not owned by the firm that employs it and is generally not fungible.  Specifically, individuals arrive at 9am and leave at 5pm (in the conventional office model) taking most of their knowledge and relationships with them.

Human capital when viewed from a time perspective consumes time in one of these key activities:

# Knowledge (activities involving one employee),
# [[Social:Collaboration|Collaboration]] (activities involving more than 1 employee),
# Processes (activities specifically focused on the knowledge and collaborative activities generated by organizational structure&nbsp;– such as silo impacts, internal politics, etc.) and
# Absence (annual leave, [[Medicine:Sick leave|sick leave]], holidays, etc.).

Despite the lack of formal ownership, firms can and do gain from high levels of training, in part because it creates a corporate culture or vocabulary teams use to create cohesion.

In recent economic writings the concept of firm-specific human capital, which includes those social relationships, individual instincts, and instructional details that are of value within one firm (but not in general), appears by way of explaining some labour mobility issues and such phenomena as [[Finance:Golden handcuffs|golden handcuffs]].  Workers can be more valuable where they are simply for having acquired this knowledge, these skills and these instincts.  Accordingly, the firm gains for their unwillingness to leave and market talents elsewhere.

==Marxist analysis==
[[File:Sabah Sarawak labour advert Kuala Lumpur.JPG|thumb|right|An advertisement for labour from Sabah and Sarawak, seen in Jalan Petaling, Kuala Lumpur]]In some way, the idea of "human capital" is similar to Karl Marx's concept of labor power: he thought in [[Philosophy:Capitalism|capitalism]] workers sold their labor power in order to receive income (wages and salaries). But long before Mincer or Becker wrote, Marx pointed to "two disagreeably frustrating facts" with theories that equate wages or salaries with the interest on human capital.

# The worker must actually ''work'', exert their mind and body, to earn this "interest." Marx strongly distinguished between one's ''capacity'' to work, labor power, and the activity of working.
# A free worker cannot sell his human capital in one go; it is far from being a liquid asset, even more illiquid than shares and land. He does not sell his skills, but contracts to utilize those skills, in the same way that an industrialist sells his produce, not his machinery. The exception here are slaves, whose human capital can be sold, though the slave does not earn an income himself.

An employer must be receiving a [[Finance:Profit (economics)|profit]] from his operations, so that workers must be producing what Marx (under the [[Finance:Labor theory of value|labor theory of value]]) perceived as surplus-value, i.e., doing work beyond that necessary to maintain their labor power. Though having "human capital" gives workers some benefits, they are still dependent on the owners of non-human wealth for their livelihood.

The term appears in Marx's article in the ''New-York Daily Tribune'' "The Emancipation Question," January 17 and 22, 1859, although there the term is used to describe humans who act like a capital to the producers, rather than in the modern sense of "knowledge capital" endowed to or acquired by humans.<ref>[https://marxists.anu.edu.au/archive/marx/works/1858/12/31.htm ''The Emancipation Question'' in New-York Daily Tribune, January 17 and 22, 1859] {{webarchive|url=https://web.archive.org/web/20080731022259/http://marxists.anu.edu.au/archive/marx/works/1858/12/31.htm|date=2008-07-31}}</ref>

Neo-Marxist economists have argued that education leads to higher wages not by increasing human capital, but rather by making workers more compliant and reliable in a corporate environment. The reasoning of which being that higher education creates the illusion of a meritocracy, thus justifying economic inequality to the benefit of capitalists, regardless of whether the educated human capital actually provides additional labor value.<ref>{{Cite journal|last1=Bowles|first1=Samuel|last2=Gintis|first2=Herbert|date=May 1975|title=The Problem with Human Capital Theory--A Marxian Critique|url=https://www.jstor.org/stable/1818836|journal=The American Economic Review|publisher=American Economic Association|volume=65|issue=2|pages=77–80|jstor=1818836|via=JSTOR}}</ref>
==Risk==
When human capital is assessed by activity-based costing via time allocations it becomes possible to assess human capital risk. Human capital risks can be identified if HR processes in organizations are studied in detail. Human capital risk occurs when the organization operates below attainable operational excellence levels.  For example, if a firm could reasonably reduce errors and rework (the process component of human capital) from 10,000 hours per annum to 2,000 hours with attainable technology, the difference of 8,000 hours is human capital risk.  When wage costs are applied to this difference (the 8,000 hours) it becomes possible to financially value human capital risk within an organizational perspective.

Risk accumulates in four primary categories:
# Absence activities (activities related to employees not showing up for work such as sick leave, industrial action, etc.).  Unavoidable absence is referred to as Statutory Absence.  All other categories of absence are termed "Controllable Absence";
# Collaborative activities are related to the expenditure of time between more than one employee within an organizational context.  Examples include: meetings, phone calls, instructor led training, etc.;
# Knowledge Activities are related to time expenditures by a single person and include finding/retrieving information, research, email, messaging, blogging, information analysis, etc.; and
# Process activities are knowledge and collaborative activities that result due to organizational context such as errors/rework, manual data transformation, stress, politics, etc.

==Corporate management==
In corporate management, human capital is one of the three primary components of [[Social:Intellectual capital|intellectual capital]] (which, in addition to tangible assets, comprise the entire value of a company).  Human capital is the value that the employees of a business provide through the application of skills, know-how and expertise.<ref name="Maddocks">Maddocks, J. & Beaney, M. 2002. See the invisible and intangible. Knowledge Management, March, 16-17.</ref> It is an organization's combined human capability for solving business problems. Human capital is inherent in people and cannot be owned by an organization. Therefore, human capital leaves an organization when people leave. Human capital also encompasses how effectively an organization uses its people resources as measured by creativity and innovation. A company's reputation as an employer affects the human capital it draws.<ref name="sveiby.com"/><ref name="ReferenceA"/><ref name="Sveiby 1997"/>

==Criticism==
Some labor economists have criticized the Chicago-school theory, claiming that it tries to explain all differences in wages and salaries in terms of human capital.  One of the leading alternatives, advanced by Michael Spence and [[Biography:Joseph Stiglitz|Joseph Stiglitz]], is "signaling theory".  According to signaling theory, education does not lead to increased human capital, but rather acts as a mechanism by which workers with superior innate abilities can signal those abilities to prospective employers and so gain above average wages.

The concept of human capital can be infinitely elastic, including unmeasurable variables such as personal character or connections with insiders (via family or fraternity). This theory has had a significant share of study in the field proving that wages can be higher for employees on aspects other than human capital. Some variables that have been identified in the literature of the past few decades include, gender and nativity wage differentials, discrimination in the work place, and socioeconomic status.

The prestige of a credential may be as important as the knowledge gained in determining the value of an education. This points to the existence of [[Finance:Market failure|market imperfections]] such as non-competing groups and labor-market segmentation. In segmented labor markets, the "return on human capital" differs between comparably skilled labor-market groups or segments. An example of this is discrimination against minority or female employees.

Following Becker, the human capital literature often distinguishes between "specific" and "general" human capital. Specific human capital refers to skills or knowledge that is useful only to a single employer or industry, whereas general human capital (such as literacy) is useful to all employers. Economists view firm-specific human capital as risky, since firm closure or industry decline leads to skills that cannot be transferred (the evidence on the quantitative importance of firm specific capital is unresolved).

Human capital is central to debates about welfare, education, [[Medicine:Health care|health care]], and retirement.

In 2004, "human capital" ({{lang-de|Humankapital}}) was named the [[Social:Un-word of the year|German Un-Word of the Year]] by a jury of linguistic scholars, who considered the term inappropriate and inhumane, as individuals would be degraded and their abilities classified according to economically relevant quantities.<ref>[http://einestages.spiegel.de/external/ShowTopicAlbumBackground/a23795/l42/l0/F.html#featuredEntry Spiegel Online: ''Ein Jahr, ein (Un-)Wort!''] (in German).</ref>

"Human capital" is often confused with human development. The UN suggests "Human development denotes both the process of widening people's choices and improving their well-being".<ref name="hdr.undp.org">Composite indices — HDI and beyond,http://hdr.undp.org/en/statistics/indices/ {{Webarchive|url=https://web.archive.org/web/20131114183701/http://hdr.undp.org/en/statistics/indices/|date=2013-11-14}}, retrieved July 27, 2013</ref> The UN Human Development indices suggest that human capital is merely a means to the end of human development: "Theories of human capital formation and human resource development view human beings as means to increased income and wealth rather than as ends. These theories are concerned with human beings as inputs to increasing production".<ref name="hdr.undp.org" />

==See also==
{{colbegin|colwidth=30em}}
* [[Engineering:Automation|Automation]]
* [[Philosophy:The Birth of Biopolitics|The Birth of Biopolitics]]
* Brain drain
* [[Finance:Capital (economics)|Capital (economics)]]
* [[Finance:Capital accumulation|Capital accumulation]]
* Capitalize or expense
* [[Social:Cross-cultural capital|Cross-cultural capital]]
* Human Capital Management
* Human development theory
* [[Social:Human resources|Human resources]]
* [[Social:Intellectual capital|Intellectual capital]]
* [[Social:Intellectual capital management|Intellectual capital management]]
* [[Social:Industrial and organizational psychology|Industrial and organizational psychology]]
* Labor power
* Mincer equation
* [[Organization:Organizational capital|Organizational capital]]
* [[Finance:Relational capital|Relational capital]]
* [[Finance:Structural capital|Structural capital]]
* [[Biography:Theodore Schultz|Theodore Schultz]]
* [[Social:Talent management|Talent management]]
* [[True cost accounting]]
* [[Finance:Working time|Working time]]

{{colend}}

==Notes==
{{reflist|30em}}

==References==
* Géza Ankerl: L'épanouissement de l'homme dans la perspective de la politique economique. Sirey, Paris 1966.
* {{cite book |author=Gary S. Becker |year=1993 |edition=3rd | title=Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education |publisher=University of Chicago Press |isbn=978-0-226-04120-9}}
* {{cite journal |author=Ceridian UK Ltd |title=Human Capital White Paper |year=2007|url=http://www.ceridian.co.uk/hr/downloads/HumanCapitalWhitePaper_2007_01_26.pdf|access-date=2007-02-27}}
* Samuel Bowles & [[Biography:Herbert Gintis|Herbert Gintis]] (1975). "The Problem with Human Capital Theory – A Marxian Critique," ''American Economic Review'', 65(2), pp.&nbsp;74–82,
* Crook, T. R., Todd, S. Y., Combs, J. G., Woehr, D. J., & Ketchen, D. J. 2011. Does human capital matter? A meta-analysis of the relationship between human capital and firm performance. Journal of Applied Psychology, 96(3): 443–456.

* Seymour W. Itzkoff (2003). ''Intellectual Capital in Twenty-First-Century Politics''. Ashfield, MA: Paideia, {{ISBN|0-913
* Brian Keeley (2007). ''OECD Insights; Human Capital''. {{ISBN|92-64-02908-7}} [http://www.oecd.org/insights/humancapital]

* Sami Mahroum (2007). Assessing human resources for science and technology: the 3Ds framework. Science and Public Policy 34 (7), 489–499. [http://docserver.ingentaconnect.com/deliver/connect/beech/03023427/v34n7/s3.pdf?expires=1323968436&id=66284008&titleid=898&accname=Guest+User&checksum=EBD18C4E7416838EE70C9C2074867A2E]
* Sherwin Rosen (1987). "Human capital," The New Palgrave: A Dictionary of Economics, v. 2, pp.&nbsp;681–90.
* Mark V. Siegler, ''An Economic History of the United States: Connecting the Present with the Past'' (Springer, 2017) see chapter 11 for a survey of the impact of education on the economy.
993-20-4}}

==External links==
* [http://www.nic4nations.com National intangible capital NIC 2016 database / Findings and results for human capital]
* [http://www.oecd.org/insights/humancapital OECD Insights: Human Capital – a primer]

{{Types of capital}}


{{DEFAULTSORT:Human Capital}}
[[Category:Human resource management]]
[[Category:Public administration]]

{{Sourceattribution|Human capital}}