Human Capital Investment Analysis

Human capital investment is the process companies use to develop employees. Human capital investment relates to the theory of skilled versus unskilled labor. Unterhalter in Deneulin and shahani (2009 pp.201) states that Education is an investment in human capital that pays off in terms of higher productivity. Without education, people can be subject to abuses by the most powerful, without education, people may be constrained to find menial jobs that do not fulfill them, without education, those who are marginalized or oppressed may not have the resources to denounce the injustices they suffer from and to claim their rights. Therefore Education can be viewed as investment, an agent of economic stability, and a discipline. In times of crisis,

Theodore Schultz (1982) has pointed out that with economic development and the requirement for highly educated and trained manpower, parents become increasingly concerned with the quality of their children, as against the number of children emphasized in traditional societies. Therefore, parents’ investment in their children education is more of an investment in growth agent (education). In modern economic thought, the notion of education as investment in human capital and as a crucial factor in economic development is a fairly new concept. The Prime Minister of India in his introduction of the Seventh Five-Year Plan laid emphasis on human factor in development process using the following words: “In the final analysis, development is not just about factories, dams and roads. Development is basically about people. The human factor, the human context, is of the supreme value. We must pay much greater attention to these questions in

These are in great measure economic investment and, combined with other human investment, predominantly account for the productive superiority of the technically advanced countries. Therefore it is then fair to say once more that education can be seen as an investment in human capital and an agent of change. Psacharopoulos and Patrinos study on “Human capital and rates of return” (2004) conclude that educational quality, measured by cognitive skills has a strong impact on individual earnings, moreover educational quality has a strong and robust influence on economic growth with “truly causal relationships”. McIntosh and Vignoles (2001) studied wages in the United Kingdom and found strong returns to this investment while Finnie and Meng (2002) and Green and Riddell (2003) established the same fact in Canada. Nickell (2004) considered how differences in the distribution of incomes across countries were affected by the distribution of skill and concluded that “the bulk of the variation in earnings dispersion was generated by skill dispersion. Other studies have also concluded that skills have an increasing impact on the distribution of income and that the income distribution becomes more dispersed in reflection of growing rewards to individual skills (Juhn, Murphy and Pierce 1993, Levy and Murnane