human capital

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Related to Human Capital Theory: Human Capital Management

human capital

the productive investment of resources in human beings rather than in plant and machinery In economics, such investment in human resources is appraised in comparison with levels of economic return from other kinds of investment. Clearly, investment in human capital begins in the family and continues in school and HIGHER EDUCATION, and is also affected by such inputs as provision for health care.

As a body of economic theory and associated empirical research, the human-capital theory of G. Becker, Human Capital (1975), explains income differentials as, in part at least, a return to human capital, e.g. the correlation between the number of years of formal education and earnings is so explained. The conclusion is often reached by human capital theorists that the returns to education are high. Similarly, POVERTY is sometimes explained as arising from a lack of human capital.

Challenges to the arguments of human-capital theory arise from a number of different sources, especially that the returns associated with education in fact arise from other sources, i.e. education may act merely as a filter or 'S creen’, and native ability or family background actually account for a significant proportion of the correlations between education and earnings (see SCREENING AND SCREENING HYPOTHESIS). Compare FUNCTIONALIST THEORY OF SOCIAL STRATIFICATION. see also CULTURAL CAPITAL.

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