What Is the Role of Human Capital?

Esther Ejim

The role of human capital in the economy as a whole and in individual organizations simply refers to the human capital contribution of people toward the development of the economy or individual companies and organizations over time. This role of human capital includes using knowledge and experience to help move the company and country forward. Further explanation of the role of human capital can be achieved by looking at the various forms of human capital.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

Human capital is a way of describing the investment in human beings, which may be by the government or individual organizations. An example of human capital is education or training, which may be formal or informal. Countries with large human resources or populations may lack adequate human capital, leading to the underdevelopment of such countries. On the other hand, some countries may have less than half of the human resources in underdeveloped countries, yet they might be very developed in terms of achievement and economic prosperity. This is due to the role played by the human capital who utilize their knowledge and experience to help the country in various ways.

Companies also benefit from investments in human capital. Most companies have systems in place where new employees are trained or further educated in the methods of that particular industry. Over time, such employees become more valuable and productive due to the increase in their human capital gained from the trainings and experience. The companies also experience more innovation and financial turnover from the increased pace of productivity and the role of human capital in their organizations.

Another form of human capital is the investment in the health of the population or employees. Nations with a solid health prevention and management framework will also have a correlative increase in the number of healthy people who will then apply their full attention toward nation building or full productivity in their work place. This is in contrast to countries where the healthcare system is not well structured, and there is a lot of human capital loss through deaths and sick leaves from work.

Good moral values are also human capital investment that result in upstanding citizens who do not engage in excessive lawless activities. This may be contrasted with a country where the moral values are lax, and human capital is lost through incarceration, murders and other forms of human capital and human resource waste. Another reason good morals are beneficial is because such human capital minimizes the amount of taxpayer’s money that is allocated to jails and other outflows of the degradation of moral values in the society.

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