Disadvantages And Disadvantages Of Human Capital

Human capital is related to the marketable skills that the worker possess in the form of capital that enables the worker to make a variety of investment. Human capital is a measure of the economic value of a worker’s skill set. This measure builds on the basic production inputs of labour measures, where all labour is expected to be equal. This concept takes in to consideration that not all labour is equal and that the quality of the workers can be improved by investing in them, through education, and training. This is important since the experience and ability of employees have economic value for employers and for the economy as a whole. Thus, human capital relate to characteristics that the employees has either innate or acquires that contribute

The advantages are that it enables us to think of not only the years of schooling but also to a number of characteristics as part to human capital investment. Such characteristics are school quality, training, and attitudes towards work. This can help understand some of the differences in earnings across employees that are not associated by different qualifications alone. The disadvantages are that the notion of human capital can be pushed too far and think that every remuneration difference is due to human capital. We cannot always assume that the differences in the pay of the employees are related to skill but it can be due to other reason. Such as labour market imperfections, where workers may be paid different because jobs differ in terms of their productivity, taste based discrimination where employers may pay a lower because of the workers race or gender. The last reason is compensating wage differentials, where the pay may be different because workers may face more pleasant working condition or lower effort is required than other

Becker’s view of human capital is that human capital is directly useful in the production process. Human capital increases a worker’s productivity in all tasks through possibly differentially in different tasks, organizations and situations. In this aspect although the role of human capital in the production process may be complex, we can view human capital as a stock of knowledge or skill and this stock is directly part of the production function. Another view by Schultz and Nelson- Phelps is that human capital can be viewed as a capacity to adapt. This approach views human capital as being useful in dealing with disequilibrium situation or in solutions in which there are changing environment and the workers have to adapt. Another view of human capital by Gardener is that human capital has many dimensions or different types of