Discover the key characteristics of human capital and why they are essential for the success of businesses. Learn how investing in human capital can drive innovation and growth.
Characteristics of Human Capital.
The real importance and significance of human capital formation can be fair-ty judged from the following facts.
- Helps in rapid growth. Human resources after developing through essential’ factors like skills, education, technical know-how and experience become more affective and thus their improved efficiency accelerates the rate of growth of physical capital, stock which, in turn/rapid the growth rate of the economy. Various studies made by Schultz Harbison, Dension, Kendrick. Abrmovitz, Beck. Bowman, Kuznct and a host of other economists reveal that one of the important factors responsible for the rapid growth of the American economy has been the relatively increasing outlays on education. They all admit that a dollar invested on education brings a greater increase in national income than a dollar spent on dams, roads factories or other tangible capita! goods.
Important factor of production Classical economists like Adam Smith. Veblen and Marshall greatly stressed the importance of human capital in production. Adam Smith included in a country’s stock of Fixed capital the acquired and useful abilities all the inhabitants.
To Veblen technological knowledge and skills formed the community’s immaterial equipment or intangible assets, without which physical output could not be utilised productively’ Marshal regarded education as “a national investment and the most valuable, of all the capital that is invested in human beings.
Economists of our time also hold the view that it is the lack of investment in human capital that has been responsible for the slow growth of underdeveloped countries. These economists suggest such countries to spread education, knowledge and technological know-how and reuse the level of skills and physical efficiency of the people the level of skills and physical efficiency of the people.
- Helps in solving the dual manpower problem; Underdeveloped countries have to face to a dual manpower problem. They at one hand lack the necessary skills needed for the industrial sector and have a surplus labour force at the other. These two adverse problems are inter-related. Human capital formation can solve them through creating essential skills in men as a productive resource and converting them into gainful employees
- Helps in fully utilisation of imported physical capital. Imported physical capital can fully be utilised only when the human capital is fully capable to do so. Though technical know-how and skills are usually imported with foreign physical capital, yet it is insufficient to meet the varied requirements of the country. Thus the need for investment in human capital attaches great importance in underdeveloped countries.
- Helps in making physical capital more productive Despite the massive import of physical capital by an under developing country it cannot accelerate its growth rates mainly due to non-existence of developed human resources. Human capital is, therefore, needed to create new and expanding government services, to introduce new system of land, use of new methods of agriculture, and to develop new infrastructure, to carry advanced industrialisation and to set tip improved educational system. Obviously, there Is a great need of engineers, technicians, technical supervisors, managerial and administrative personnel, scientists, doctors, agronomists, veterinarians, accountants, statisticians and accumulated through a well thought plan of investment in human capital.
Helps in removing economic backwardness.
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- The economic backwardness of an underdeveloping country is mostly accounted for her low labour efficiency, factor immobility, limited specialisation in occupation and trade, inadequate supply of entrepreneurship and deficient customery values and traditional social institutions. Besides, due to slow growth in knowledge, the economic quality of the population remains low and reflects as a severe constrain on progress. To remove this economic backwardness, it is imperative to improve the quality of human factor.
- Helps in raising the general living standards of the people–Investment in human capital can also help in raising the general living standards of the people of an under developing country. In fact, education and training make possible the fuller and rational utilisation of surplus manpower by providing larger and better job opportunities in both rural and urban areas which, in turn, raise incomes and living standards of the people.