Human capital
Human capital refers to the collective skills, knowledge, experiences, and attributes that contribute to an individual's ability to produce economic value. It encompasses a wide range of factors, including creativity, work ethic, social skills, and specific knowledge relevant to various fields. The significance of human capital extends beyond individual performance to the broader economy, as a well-managed workforce can drive a company's success or failure. Effective managers assess and prioritize the specific attributes needed for different roles, ensuring that hiring aligns with the demands of the position. For example, a kindergarten teacher may need empathy and sensitivity, while a creative role in an advertising agency may prioritize innovative thinking.
Furthermore, businesses often strive to cultivate and enhance these attributes through supportive workplace environments and practices. Countries also recognize the importance of human capital, as evidenced by global rankings that reflect educational investment and workforce potential. However, developing nations frequently face challenges in retaining their talented individuals, who may migrate in search of better opportunities, creating a brain drain that hampers local economic growth. In contrast, developed nations benefit from this influx of skilled labor, highlighting the complex dynamics of human capital on a global scale.
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Subject Terms
Human capital
Human capital is the sum of every attribute that adds economic value to what an individual can produce. This includes a person’s creativity, useful knowledge in specific areas, work skills in a particular field, social skills, personality, and work ethic. All of these combine to determine the quality and quantity of what a person can produce in terms of economic work, and by extension what he or she will contribute to the overall economy in which the individual participates. Because societies are driven by an interest in material value, the role of human capital in securing that value has become a key focus in countries around the world.
Overview
Managers may view the success or failure of their business depending on how well they assess and manage human capital. If they do it well, their business will prosper. If they do it poorly, their business will rapidly fall behind competitors and may fail. Assessing human capital for workplace needs begins with correctly identifying which attributes are needed to produce the desired result. For example, if the work context is teaching kindergarten, the attributes required of the teacher include sensitivity, empathy, and responsiveness. The results of securing a teacher whose human capital includes those attributes would be nurtured and high-achieving students.
In another context, such as a steel mill, physical strength and industriousness are key. At an advertising agency, creativity and insight are most valued. All of these attributes are aspects of human capital that managers must carefully consider when making hiring decisions. Although in previous generations such decisions were made on the basis of stereotypes, most human resources managers of the twenty-first century focus on each person’s individual capabilities. A manager with the perceptiveness to do so (which is a form of human capital in itself), will come to accurate and informed conclusions.
Managers also need to decide what value they place on each attribute. The very creative applicant for an advertising agency might be able to develop more successful ad campaigns, resulting in greater revenue and overall economic value for the company. For that reason, a higher value will be placed on hiring and retaining that person, and that value can be expressed through an excellent salary and benefits package. In addition to assessing the value of human capital on a case-by-case basis, business people have learned the benefit of fostering the attributes they desire. For example, the caring, sensitivity, and responsiveness of the person hired to teach a kindergarten class can be maintained by giving him or her regular breaks. The industriousness of a steelworker can be increased by varying his or her workload so to prevent burnout by excessive repetition. Similarly, the productivity of the ad agency staff person could be enhanced by providing a vibrant and enjoyable work atmosphere. Companies such as Google have famously embraced this ideal, doing all they can to make the workplace environment enjoyable to enhance the creativity of their employees. By doing so, they raise the value of their human capital, and correspondingly the economic output of their business.
Not only companies but also countries place value on human capital, as it is applicable to issues of education, immigration, and global economic competitiveness. In 2017, the World Economic Forum released its human-capital rankings per country, with the top five comprising Norway, Finland, Switzerland, the United States, and Denmark. Canada ranked fourteenth, while the United Kingdom was twenty-third. Countries on the lower end of the list, largely sub-Saharan African nations, often find that their top-performing citizens will leave to be educated, and perhaps find employment, in more economically stable countries. This creates a problem for emerging, traditionally impoverished nations, as they struggle to hold on to their most valuable human capital. On the other hand, this phenomenon benefits developed countries, and the companies doing business within those countries.
Bibliography
The Global Human Capital Report 2017. World Economic Forum, 2017, www3.weforum.org/docs/WEF‗Global‗Human‗Capital‗Report‗2017.pdf. Accessed 26 Sept. 2024.
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