The Meaning and Concept of Human Capital

Introduction

The use the term today as if it were always part of our lingua franca. But it wasn’t. Not long ago, even economists mocked at the understanding of “Human Capital.” As Theodore Schultz noted many thoughts that free people were not to be associated with property and marketable assets . To them, that implied enslavement, in 1961 American Economic Association presidential address. But the concept of Human capital according to Adam Smith. He noted in his fourth definition of capital: “The acquisition of expertise during education, study, or apprenticeship, costs a real expense, which is capital in a person. Those expertise are part of his portion and likewise that of society” .

The term “Human capital” is the earliest formal use in economics is apparently by Irving Fisher in 1897. It was later adopted by various writers but did not became a serious part of the economists’ lingua franca as far as the late 1950s. It became greatly more popular after Jacob Mincer’s 1958 Journal of Political Economy article “Investment in Human Capital and Personal Income Distribution.”

In Gary Becker’s Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, published in 1964 and preceded by his 1962 Journal of Political Economy article, “Investment in Human Capital”, Becker notes that the term “human capital” hesitated to use in the title of his book and employed a long subtitle to against guard criticism.

Schultz’s article (1961) the importance of the Human capital in explaining various economic anomalies. Some are easy to examine, such as why both immigrants and students are overly young persons. Some are more difficult, such as why the ratio of capital to income has decreased over time, what defines the growth “residual,” and why Europe recovered so speedily after World War II. Some are more difficult, such as why labour earnings have surged over time and why they didn’t for much of human history. As the clear from most of these issues, the study of Human capital is genetically historical.

The meaning of Human Capital

The successful peoples depend on higher level of competence. In response the peoples are becoming valuable assets. In economics viewpoint, the capital refers to factors of production used to create goods and services. The human is the subject in economics to take power of all activities such as production, consumption, and transaction. Thus it can be identified that human capital means one of production element which can generate values through inputting it.

What is Human Capital Human Capital is defined in oxford English dictionary as ‘the skills the labour force possesses and is regarded as a source or asset.’ It encompasses the conception that there are investments in people (education, training, health) and that these investments increase and individual’s productivity, performance.

An organization can’t carry on if there are no employees. Organization runs with the help of individuals who devote in their own way in its success and productivity. Employees spend maximum part of their day in offices and attempt hard to achieve the goals and objectives of the organization. Employees attachment towards their organization to be motivated from time to time so that they develop a sense of deliver their best.

Every employee in his/her tenure get some set of skills through his experience, exposure, trainings and so on which further increase his/her productivity eventually benefitting the organization. Awareness and expertise which employees flourish in due course of time to further increase the productivity at organizational level refer to human capital. During his stint with the organization employee tries his level best to sharpen his/her skills, progress. Human capital is defined as the collective stock of skills, attributes, knowledge, expertise of employees which further plays an integral role in increasing the productivity of the organization.

Every organization has his lifeline in shape of trained employees, so every organization invests its money and resources to train new employees to get value for organizational goals. Employees in order work hard, upgrade their existing attainments and contribute in their own way to increase the productivity of their organization. In “Economic Development with Unlimited Supplies of Labour”, The word “Human Capital” was introduced by A. W. Lewis. Human capital plays essential role in increasing the productivity and output of an organization.

Concept of Human Capital

The first viewpoint is based on the individual aspects. Schultz (1961) recognized human capital as ‘something akin to property’ against the concept of labour force in the classical perspective. There is second viewpoint on the human capital itself and accumulation process of it. This context drives knowledge and skills obtained throughout educational activities such as compulsory education, postsecondary education and vocational education. The third is closely linked production-oriented perspective of human capital.

Frank & Bemanke (2007) define that human capital is ‘an amalgam of factors such as education, experience, training, intelligence, energy, work habits, reliability, and initiative that value of a worker’s marginal product. Produce economic value embodied the ability to perform labours skills and Knowledge (Sheffin,2003). Consequently, human capital simultaneously includes both instrumental concept to produce certain values and the ‘endogenous’ meaning to self-generate it. Human capital is a synonym of knowledge embedded in all levels such as an individual, an organizations/a nation.

Impacts of human capital: on the aspects of individual, organization and society Individual: Much possibility of increasing individual income, living standard, resulting from the individual productivity.

Organization: Collective competence, organizational routines, tacit knowledge, collective learning, company culture; and rational capital’ (Edvison & Malone, 1997)

Society: The possibility of human capital for ‘democracy, human rights, and political stability’ on common awareness of social constituents (McMahon, 1999). Increase of social awareness of constituents within community (Beach, 2009)Consequently, the link between human capital and social consciousness is based on a close inter-relationship resulting in socio-political development (Alexander, 1996; Grubb & Lazerson, 2004; Sen, 1999).

To be Understandable, every work must have to formulate the objectives of the study. Moreover, objectives are more normally suitable to the research community as evidence of the researcher’s clear sense of the purpose and direction. So, in the light of the research topic, the main objective of this study is to1. “Examine the impacts of human capital on organizational productivity.

There are number of limitations in this study:

• Firstly, in Pakistan, there are so many branches of NBP for research, but we have just one city’s branches; for case study. So, it was difficult to collect complete data and finds its accuracy.
• Secondly the work overload and short time during the final year’s last semester, researcher had to do a lot of academic work such as write-up of internship report, preparation of viva exams, presentations, midterms, assignment etc. and in this short time I had to finish all the work which apparently affected thesis work.

Implication/significance: For increasing organizational productivity in NBP Dadu, Sindh, Pakistan, the human capital specifically. The Pakistan’s Advans Microfinance Bank can and has been attempting to reduce poverty via focusing loaning in areas such as social and economic development, overpopulation, women empowerment, and income. Further this theory can help financial policy makes at Federal and provincial governments to invest on areas, social and economic development, overpopulation, women empowerment and income to reduce poverty by microfinance. More ever, educational institutional and donor of NGOs can also be benefited from this researcher study.