In his famous Wealth of Nations, Adam Smith explored how wealth accumulated and proposed that human capital could be improved through education and training. This, in turn, would help the enterprise become more profitable and ultimately add to the collective wealth of society. However, there are several different definitions of human capital. Read on to learn more about each type of capital. Listed below are a few characteristics that describe the types of capital. In addition, listed below are some of their most essential features.
Intangible qualities
People are an organization’s most valuable assets. The human capital resides in the skill set of the employees. Because this human capital cannot be seen, touched, or measured, it is difficult to quantify the value of human resources. In addition, it isn’t easy to understand what level of capacity is acceptable for an organization. However, organizations increasingly recognize the importance of investing in accounting and other human capital management strategies. Knowing what makes a great employee maximize the value of human resources is critical.
Human capital is defined as the sum of all intangible features of human resources, including the knowledge, skills, abilities, attitudes, and talent of the staff. These assets are essential for generating value in knowledge-intensive industries like software. The concept gained widespread popularity in the 1960s when Gary Becker and Theodore Schultz conducted studies that attempted to quantify intangible human resources. While the idea of human capital is still largely academic, it has spawned several essential management practices and policies.
Dependence on non-human wealth
Among the many aspects of economic development, one of the most important is human capital growth. The idea that human capital has a direct relationship with tangible wealth is powerful, influencing nations’ development in different ways. However, it differs from tangible capital in several fundamental ways. For example, human capital has long-term benefits, and its growth is often not linear. It is also subject to business cycles, and its growth decelerates during periods of recession and depression. Nonetheless, human capital is relevant to economic debates on welfare, retirement, health care, and education.
The study results show that children without access to specific natural resources exhibit significant cognitive and physical development delays. The resulting ailment may even cause later health problems. Furthermore, the effects of childhood parasites may be difficult to repair. Though malaria and hookworm infection rates are low outside of sub-Saharan Africa, they may have significant negative impacts on human capital.
Growth over a long period
The study of human capital has gained popularity over the last few decades and has helped explain several issues, including why some countries perform better than others. Becker’s model assumes people are hard-headed when measuring their human capital investment. He published several seminal articles in the 1960s and later a book based on his research. The main characteristics of human capital are growing over a long period and the ability to invest in a career.
Human capital is different from tangible monetary capital in these ways:
- It grows cumulatively over a long period.
- It is not linear; instead, it decelerates during depressions and recessions.
- It is based on inputs, such as education and health.
In the United States, the foundation for human capital is laid through educational and health services.
Flexibility
The flexible nature of human capital can be defined as a firm’s ability to mix different skills and adapt to different work environments. As such, firms that have high flexibility have the potential to transform human capital more efficiently. The characteristics of flexible employees can be determined through various methods, such as how they approach their work. This article explores some of these methods. It is crucial to examine the different job types to understand the benefits of flexibility,
A firm’s ability to respond to market changes requires that its employees have adequate knowledge portfolios that are continuously updated. This is achieved through absorptive capabilities that can identify, transform, and exploit external knowledge. Moreover, the firm’s capacity for innovation is improved through human resource flexibility. This flexibility also allows the firm to respond to market demands by providing new knowledge to its employees. Flexibility in human capital is essential in a competitive environment.
Mobility
The term mobility has different meanings across the various science disciplines. For example, economic mobility is used to describe the process by which people gain or lose wealth. The term mobility in information systems and computer science refers to the process of computing on mobile devices. These researchers conclude that human capital mobility is a significant characteristic of societies. However, why this so remains a question for scholars. The authors discuss the relationship between mobility and inequality and how to make this more concrete.
The concept of human capital includes many variables, including personal character and connections to insiders. However, the idea has received a fair amount of study. Other aspects of the concept, such as gender and nativity, have been linked to higher wages. Several studies on wage differentials have also examined the role of human capital in the labor market. Also, these findings provide insight into discrimination in the workplace and social class.