what is human capital in economics

Human capital is a term used in economics to refer to the economic value of a workers experience and skills. It includes assets like education, training, intelligence, skills, and health. Human capital is perceived to have a relationship with economic growth, productivity, and profitability. The concept of human capital recognizes that not all labor is equal, and employers can improve the quality of that capital by investing in employees through education, experience, and abilities. Human capital consists of the knowledge, skills, and health that people invest in and accumulate throughout their lives, enabling them to realize their potential as productive members of society. Investing in people through nutrition, health care, quality education, jobs, and skills helps develop human capital, and this is key to ending extreme poverty and creating more inclusive societies. Human capital can be broadly defined as the stock of knowledge, skills, and other personal characteristics embodied in people that helps them to be productive. It encompasses the notion that there are investments in people (e.g., education, training, health) and that these investments increase an individual’s productivity. Human capital is available to generate material wealth for an economy or a private firm, and how it is developed and managed may be one of the most important determinants of economic and organizational performance.