Human capital refers to the knowledge, skills, and abilities embodied in individuals that are economically valuable. It recognizes that not all labor is equal and that investing in employees through education and experience has economic value for both employers and the overall economy. Theodore Schultz first coined the term "human capital" in the 1960s and believed it was a type of capital like physical or financial capital.
2. Human Capital
- is a term popularized by Gary
Becker, an economist from
the University of Chicago, and Jacob
Mincer that refers to the stock
of knowledge, habits, social and
personality attributes, including
creativity, embodied in the ability to
perform labor so as to
produce economic value.
3. Human Capital
-is a measure of the economic
value of an employee's skill set.
This measure builds on the basic
production input of labor
measure where all labor is
thought to be equal.
5. Human Capital as a Concept
The concept of human capital
recognizes that not all labor is
equal and that the quality of
employees can be improved
by investing in them; the
education, experience and
abilities of employees have
economic value for employers
and for the economy as a whole.
6. 4 Types of Fixed Capital
(as defined by Adam Smith)
1.Useful machines, instruments of the trade
2.Buildings as the means of procuring revenue
3.Improvements of Land
4.Human Capital
7. Labor power - is a crucial concept used
by Karl Marx in his critique
of capitalist political economy. Marx
distinguished between the capacities to do
work, labor power, from the physical act of
working, labor. Labor power exists in any
kind of society, but on what terms it is
traded or combined with means of
production to produce goods and services
has historically varied greatly.
8. Components of Human Capital
*Thomas Davenport breaks the definition of human capital
into three elements:
1. Ability-is the proficiency in a set of activities or forms
of work. It comprises there subcomponents:
•Knowledge- command of a body of facts required to do
job. Knowledge is broader than skill; it represents the
intellectual concept within which a person performs.
•Skills- facility with the means and methods of
accomplishing a particular task. Skills may range from
physical strength and dexterity to specialized learning.
•Talent- inborn faculty for performing a specific task.
Talent is roughly synonymous with aptitude.
9. 2.Behavior- mean observable ways of acting
that contribute to the accomplishment of a task.
3.Effort- is the conscious application of mental
and physical resources toward a particular end.
Effort goes to the heart of the work ethic.
4.Time- refers to the chronological element of
human capital investment: hours per day, years
in a career, or any unit in between.
10. Davenport proposes the equation :
Human Capital Investment =
Ability + Behavior x Effort x Time
11. Return on Investment
1. Career Growth
2. Recognition
3. Happiness in the Job
4. Pay and benefits
Four Categories:
12. How to find the right
investor?
•Understand the different
investment options you have.
•Know what you want
investors to provide for you.
•Perfect your pitch to find the
right match.
13. Two Elements necessary for
retention and motivation:
1. Commitment to the
Organization
2. Engagement in the Job