Definitions of human capital the term human capital can trace its roots to the early 1960s, when schultz 1961, p140 proposed that hc consisted of the knowledge, skills and abilities of the people employed in an organisation. Human capital theory the theory of human capital is rooted from the field of macroeconomic development theory schultz, 1993. In terms of the organization, the human capital theory and human resource management raises a number of issues, namely. Schultzs theory of human capital 265 controlled this productive power were considered in custom, law and religion, the human keys to social and economic order. Schultz, investing in people university of chicago press, 1981 gabriel claudiu mursa abstract the article analyzes a book which synthesizes the prodigious work of one of the founders of the human capital theory. One of the most significant strands of that research was that which focused on human capital, occuping a significant part of his career, especially in his early years. Their theory of human capital has become a decoration. Farm surpluses to underdeveloped countries, american journal of agricultural economics, agricultural and applied economics association, vol. Human capital similar to physical means of production, e. What followed was a plethora of studies on the impact of human capital on a wide range of issues. Schultz 1961 recognized the human capital as something akin to property against the concept of labor force in the classical perspective. This pdf is a selection from an outofprint volume from.
Schultz 1961 recognized the human capital as one of important factors for a national economic growth in the modern economy. The introduction of human capital theory into education policy in the united. While concise, shultz s initial definition of hc is somewhat limited in that it. As a public investment, the fundamental argument is that investing in education leads to economic growth through increased productivity, social stability. Human capital scholars at harvard harvard university. With the emergence and development of human capital as an academic field. Powers 1995 and psacharopoulos and woodhall 1997, human capital theory rests on the assumption. Human capital theory the essence of human capital theory is that investments are made in human resources so as to improve. In the past, economic strength was largely dependent on tangible physical assets such as land, factories and equipment. Number 62 of a series of photographs of past presidents of.
Vi, issue 4 august 2016 workforce and the majority of studies that have been made to increase contributions and have showed an important investment in human capital 2 investing in human capital is. Policy issues and research opportunities theodore w. Gary beckers early work on human capital collaborations. Schultzs 1961 seeks to explain the human capital theory by identifying a direct relationship between productivity and human capital, to include a workers earnings in their lifetime schultz, 1961. Origins of the idea at the heart of capital theory belong in early human. In a prolific and illustrious career, the late gary becker 19302014 developed what he would later call the economic approach to human behaviour. Becker, who viewed human capital as the outcome of an investment in workers. Theodore william schultz, born april 30, 1902, near arlington, south dakota, u. The introduction of human capital theory into education policy in the united states laura holden. List of books and articles about human capital online.
Much later authors such as mincer 1958, schultz 1961 and backer 1975 gave meat to this theory when they affirmed that time and money spent on education builds human capital hence one should be able to estimate the rate of return ror on such investment, in a way similar to investment in physical capital. Conceptual analysis of education role in economics. The role of education and of research, new york, free press, 1971. Becker argues that there are different kinds of capitals that. Human capital development theory concludes that investment in human capital will lead to greater economic outputs however the validity of the theory is sometimes hard to prove and contradictory. Schuller, t and field, j 1998, social capital, human capital and the learning society, international journal of lifelong education, 17, 2, pp 226235. Proponents of humancapital theory go on to say that both society and individuals invest in education because of the expected returns or benefits. According to it, human capital rises due to a number of reasons. Interest in human capital was spurred by the works of schultz 1961, becker 1964, uzawa 1965, mincer 1970 and rosen 1976. Investment in human capital is probably the major explanation for this difference.
The introduction of human capital theory into education. I have argued elsewhere schultz, 1974 that while a strong case can be made for using a rigorous definition of human capital, it will be subject to the same ambiguities that continue to plague capital theory in general and the capital concept in economic growth models in. Schultzs article 1961 demonstrates the importance of the concept of human capital in. How the human capital model explains why the gender wage gap narrowed married womens labor force participation rose dramatically from 4. Not that long ago, even economists scoffed at the notion of human capital. Investment in human capital 3 human beings in the prime of their lives without a thought in order to save one gun. The theory of human capital was developed by his student, gary s. Human capital is a measure of the economic value of an employees skill set.
This perspective is important in understanding both investment incentives, and the structure of wages and earnings. This pdf is a selection from an outofprint volume from the national bureau of economic. Mincer, 1974 presents he as both a public and private investment decision for governments and its people. In 1960 theodore schultz expounded a human capital theory of economic growth that includes three elements. How the human capital model explains why the gender wage. General issues one of the most important ideas in labor economics is to think of the set of marketable skills of workers as a form of capital in which workers make a variety of investments. This measure builds on the basic production input of labor measure. This chapter presents the basic elements of human capital theory and applies it mainly to the areas of education and training. Schultz coined this theory in his book titled investment in human capital. In this article, schultz introduces his theory of human capital. The relationship between postsecondary education and skill. While concise, shultzs initial definition of hc is somewhat limited in that it. A theoretical and empirical analysis with special reference to education, illustrates this domain. In recent decades, the human capital theory has come to the fore.
This entry is a critical exploration of the rise and limitations of human capital theory hct within the field of education. The growth accounting literature posits that education, through increasing the human capital stock of individuals, improves their. Although it is obvious that people acquire useful skills and knowledge, it is not obvious that these skills and knowledge are a form of capital, that this capital is in substantial part a product of deliberate investment, that it has grown in western societies. Daron acemoglu mit human capital theory bilkent, july. There is the second viewpoint on human capital itself and the accumulation process of it. There are some theories, differently interpreting the role of education and the issue of demand for individuals in the labor market. Yrs of work forgone to pursue education were rationally compensated with high wage s.
Capital formation by education, journal of political economy, university of chicago press, vol. After the manifestation of that concept as a theory, schultz 1961 recognized the human capital as one of important factors for a national economic growth in the modern economy. It was the unexplained rise in the economic value of man that led to the concept of human capital. He states that knowledge and skill are a form of capital, and investments in human capital leads to an increase in both economic output and workers earnings. Schultz played a crucial role in converting this idea of human capital from a suggestive metaphor to the basis for a wideranging and fruitful research program in economics. Human capital is a collection of traits all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom possessed individually and collectively by individuals in a population. After the manifestation of that concept as a theory. Walter heller and the introduction of human capital theory.
Schultz, investment in human capital, american economic. Based up on the work of schultz 1971 sakmota and powers 1995 psacharopoulos and woodhall 1997, human capital theory rests on the assumption that formal education is highly instrumental and even necessary to improve the productive capacity of a population. The basic theory of human capital london school of. Schultz 1961 recognized the human capital as one of important factors for a national economic growth. Their regnant position was disturbed only when, in the sixteenth and seventeenth centuries, a competitive form of productive power challenged them in the hands of a group. Claudia goldin, human capital 2232014 3 fraction of the growth of income per capita in u.
In short the human capital theorists argue that an educated population is a productive. An agricultural economist who won the nobel prize in economics in 1979, along with william arthur lewis, for his research in. In 1979, schultz was awarded the nobel prize in economics for his work in human capital theory and economic development. Theodore william schultz american economist britannica. In recent times, hct has become one of the most powerful underpinnings of education policy discourse worldwide.
Strengths of human capital theory strengths noted from schultzs article include people being viewed as an important. These resources are the total capacity of the people that represents a form of wealth which can be directed to accomplish the goals of the nation or state or a. Schultz, an american economist, coined the term human capital in the 1960s. Extensions of investment, theory to analyze the formation. As theodore schultz noted in his american economic association. Human capital theory an overview sciencedirect topics. Schultz the university of chicago human capital is a new research area in economics.
255 810 1070 772 1395 736 1578 1117 524 1335 1539 1517 1494 467 1096 128 393 998 1032 232 879 580 1541 103 151 1239 411 1242 1103 1043 574 567 561 1076 1091 54 554 1433 1124 329 1325 798 1198 925 778