Abstract
Given the importance of human resource economics to address labor utilization together with its implications for the greater economy, the accumulation of human capital is one of the major related topics. Human capital collection greatly drives the instrumental economic considerations such as unemployment, employment turnover, and the functions of both the labor unions and government policies. Unlike most of the resources that depreciate with time, investment in human capital increases in appreciation and continually exploits the available resources. Although it may consume time, it ensures effective use of qualities and skills while enhancing other resources. The human resource plays an imperative role in enhancing economic growth through increased productivity of people and organizations. For this reason, organizations invest in their human resource with the aim of enhancing their skills, knowledge and competency to enhance their career progression and growth of the organization. As such, this paper explores the concept of human capital with respect to the human resource economics.
Introduction
Today, human resource is increasingly playing pivotal roles in organizations. Although it may involve intricate processes, it is a form of investment proven to bear productive results. Human resource offers a promising asset for an organization or business in terms of administration, and the training as well as hiring of personnel. To that end, infusing human resource in the context of economics is a great strategy that boosts the growth and sustainability of labor usage. Such a strategy runs on the influence of human capital. Without adequate accumulation of human capital, the ineffectiveness of human resource economics is imminent. Human capital ensures that individuals or groups are equipped with valuable knowledge, skills, and experience, ideal for the targeted outcome. The major factors that comprise human capital accumulation include employment, education, and migration. The factors streamline the labor utilization within a particular workforce in relation to the benefits of the employees and employers (Lazear, Shaw & National Bureau of Economic Research, 2012). It also ensures that the results sit well with the well-being of the general economy.
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Human capital promotes the functions of companies or countries by matching the set skills for various job positions with the capacity of specific workers. It means that prior to determining what skills fit where, the respective authority or department conduct an assessment of employees` abilities. More so, the placement is in line with the work available and attached mutual benefits the employer and employees are bound to enjoy. In other words, the concept of mutual benefit works in such a way that the employee is happy and motivated to come to work while the employer contented with the inputs of his employees. They both take pride and pleasure of what the organization accomplishes. Even better, the employer hardly sees the need of replacing the employees, thus saving time, money and effort on a long-term basis because of low employee turnover.
The Human Capital Theory
Definition
The human resource economics found a crucial meaning in this theory. The theory endears to show that investing in people can lead to higher knowledge and incomes thus higher human capital. From this hindsight, factors such as unemployment, poverty, and migration undermine the development and usage of human resources. The power of human capital accumulation is evident in Asian countries. Despite these countries lacking natural resources and being constant subjects of racial discrimination, the countries have secured significant economic success through the investment of an educated and well-trained workforce (Sunde & IZA, 2010). In addition, the countries have coupled the human capital with the adoption of new and advanced technologies. Hence, the sectors of manufacturing and servicing have seen improvement leading to the growth of production processes and the economy in general. With this kind of progressive industry, countries attract more educated and well-trained workers globally. It is no surprise that various recognized scholars, particularly Theodore Shultz; suggest that in the endeavors of developing countries to modernize their low economy, they should increase investment in human capital rather than the importance of cultivation (Lazear, Shaw & National Bureau of Economic Research, 2012). However, this does not mean that the nations overlook the relevance of microeconomy. The point is to place more focus on human capital while standardizing microeconomic levels to foster appropriate policies that promote human resource. Human resource economics have a qualitative dimension, which is imperative for economic growth and development. Below is an overview of the representation of human capital theory
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Under the lens of this theory, human resource acquires a different meaning. Traditionally, human resource heavily involved labor force, which was mostly rough work. In other terms, labor force described the work processes and materials enhanced by the use of hands. Today, the concept has changed, and human resource does not solely narrow down to manual work. The modern world embraces the possession of both intellectual and physical skills to obtain goods and services. It also observes distinct personalities and individual needs instead of characterizing employees in mass working. The shift is as a result of the broadened forces of production and pursuit to balance capitalism with socialism. Among the productive forces is the human resource. That way, the perception of contract of employment has changed as well. Organizations and countries do not perceive contract as just work, but as the production of human factor – qualification, skills, and experience (Bofota, 2012). The human factor of production entitles individuals to certain social security regulations with even the potential of jeopardizing an employer or the work-product relationship if not abided by. The human capital appreciates these changes and helps in improving the performance of the modern market economy.
Industrialization and Modernization
The success of industrialization and technological revolution has put emphasis on the accumulation of human capital. The complexities around today`s work require more intellectual abilities of individuals. Valuable employment qualities on demand are intelligence and creativity and raw labor is no longer the primary concern. That is why societies cannot exempt the inclusion of human capital in the fit of global economic development. With the appropriate collection of human capital, the world will enjoy creative and innovation theories, learning capacity and exploitation of information technologies (Briggs & Whalen, 2010). The collection has two dimensions – quantitative and qualitative. The quantitative facet emphasizes on the available labor resources within a segment of work performance. Elements such as adult population (fit for employment), active population, and unemployed population dictate the condition of the quantitative level. While the adult and active population help in empowering the results of human capital, the unemployed population dilutes the outcome. Other economic and demographic factors that determine the accumulation of human capital include mortality, birth, living conditions, and life expectancy.
On the other hand, the qualitative aspect involves the level of general knowledge, training, scientific and technical information among others. The facet is important for the environment of modern production and increment of efficiency. The goal is to augment the quality of work by, for example, promoting a high level of health, motivating workers, increasing general education and training, and enhancing high-quality inputs. In fact, the qualitative dimension causes the salary gap. The human capital theory has it that salary differences mirror differences in employees` productivity (Bofota, 2012). Since experienced workers are deemed to possess higher productivity, they have higher salaries. Furthermore, prestigious careers like law, medicine, and engineering promise higher returns than most of other courses due to the high level of investment in their education. It suffices to say that investing in human capital accumulation leads to greater marginal returns. The same case applies to health care. Improving the well-being of humans avoid wastage of time citing diseases. The expenses of labor protection assure the protection of life and health, thus boosting the working personnel. In the presence of such a favorable environment, employees can easily adjust vocationally and psychologically, coordinate their quantitative and qualitative compositions, and develop their career.
Migration of Labor Market
Disruption of Human Capital Stocks
In spite of the aforementioned radical impacts of human capital on human resource economics, migration of the labor market is a major blow to human resource. The problem sets in whenever the individuals feel threatened by the stocks of human capital at the community level and give in to migratory behavior, which usually involves moving from a poor to a richer area (Briggs & Whalen, 2010). The individuals with the capacity to invest migrate in other regions seeking greener pastures. The migration disrupts the community following the inconsistency of human capital stocks between different societies. Consequently, the discrepancies may be prolonged due to the discouragement of other people with the beyond-average education to invest in poor societies. The persistence of this occurrence leads to segregation and educational inequality. It works against the interest of building human capital in all regions to cultivate a good overall economy. Economically deprived places remain devoid of staggering developments and opportunities while the rich areas host more resources and a superior workforce. The young and educated people only seek access to the top social and natural environments causing the dissolution of the poor societies.
Human Capital Vs Poverty
Human capital mobility is now becoming a hot debate, given the effects of migration on globalization and the integration of the economy. In a bid to prevent economic segregation, nations are establishing a suitable relationship between global human capital, the distribution of justice, right to external opportunities and free movement, and the policies surrounding the investment of migrants` human capital. For instance, In Europe, Romanians were the smallest non-national group in 2001, behind Moroccans and Turkish citizens. However, in 2009, Romanians significantly increased in population, approximately from a quarter a million to 2 million. The increment was because of the higher deficiency of human capital in Romania as compared to Turkish and Morocco (Bofota, 2012). Ineffective investments of the past led to the processes of redistribution thus disqualifying employment in less developed states. In reaction, people sought for migrants` destination countries in search for jobs and sufficient training.
Mostly, the migrants have to deal with unfriendly and exploitive working conditions, including poor access to medical care. In such an instance, the problem of human capital vs. poverty kicks in. That fact is that when the rich shun away from investing in impoverished areas, a majority of people continue suffering socially and economically. Impairment of higher education and health devalue human capital since it reduces labor and attempt to thwart socialism (Briggs & Whalen, 2010). People do not have the resources that promote individual development and reliable income production. Worse, the people lack the higher training which would help them in adopting such harsh conditions. To that end, individuals are less flexible, and the risk of unemployment is very high. Apparently, poverty negates the accumulation of human capital because it prevents the costs of maintenance and development. Needless to mention, the wage gap will also increase following the disparities between more educated workers and the less educated lot. Such a higher inequality is a breeding ground for chronic poverty.
Employees: An Investor in Human Capital
It is worth to note that the number of specialized jobs increases as a response to low-skilled workers. Constant educational and training inequalities are at the center of this problem. They derail capital development following the ineffectiveness of education systems and investments in individual training thus procreating destitute societies. Societies should perceive workers as the investors of human capital. The needs for capital development can hardly be achieved if the capacity of employees is not efficiently nurtured. Massive investments in education and training translate to prioritizing individuals and insuring the risk of poverty and unemployment. Organizations may devote their time and money in increasing economic capital stock, but they will not realize the high and sustainable if they fail to incorporate the concerns of educating employees (Sunde & IZA, 2011). In the absence of human capital development, employees have inadequate creativity and decisional independence. Consequently, they are not dynamic enough to respond to new and unexpected situations. The workers are almost incapable of offering the best solutions with regards to labor productivity.
Productivity increases when employees obtain new skills and perfect the old ones (Lazear, Shaw & National Bureau of Economic Research, 2012). Future productivity highly depends on training programs. Education and training are the cost the communities have to pay to prevent the vicious cycle of poverty and promote human capital accumulation for generations. It is equally important to recognize the two types of training, general and specific, when executing training programs. General education sees that the insights one obtains in training can be used in many institutions. It increases the marginal productivity. On the other hand, specific training involves the particular skills used in a certain sector, thereby increasing the productivity of the sector in question. Firms will mostly not pay for the general education. It is upon the employees to cater for themselves acknowledging that the program will increase their future wages and productivity. However, companies will bear the costs of specific training since it is more inclined towards increasing profits. Therefore, employees` abilities steer the accumulation of human capital and significantly dictate the economic development.
Conclusion
Human capital directs human resource economics into focusing on the evaluation of employment issues and their influence on the economy. It confounds solutions for fighting unemployment rates in various industries by attempting to balance the economic stimulation with consumer spending. The need for human development compels unions and governments to protect the rights of workers in efforts to sustain not only institutional operations, but also the long-term strategies and initiatives of human resource. Human capital values the utilization of labor in securing economic stability given the heightened concern for employees. In the process, employers also benefit from a competent workforce. That is why the paper insists on the need to invest in the quality of human factor in addition to the microeconomic investments. Today, the subjects of productivity are skills, knowledge and ideas. Given the limited human capital in underdeveloped countries, the nations must devise ways of increasing the resources since human capital is a prerequisite for economic development. Important is investing mostly in education and policies of human factors.
References
Bofota. (2012). Social capital, human capital and economic development. Theoretical model and empirical analyses. Louvain-La-Neuve: Presses Universitaires.
Briggs, V. M., & Whalen, C. J. (2010). Human resource economics and public policy: Essays in honor of Vernon M. Briggs Jr. Kalamazoo, Mich: W.E. Upjohn Institute for Employment Research.
Lazear, E. P., Shaw, K., & National Bureau of Economic Research. (2012). Personnel economics: The economist's view of human resources. Cambridge, Mass: National Bureau of Economic Research.
Sunde, U., & IZA (Forschungsinstitut zur Zukunft der Arbeit). (2011). Human capital accumulation, education and earnings inequality.
