Human Capital

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DEFINITION of 'Human Capital'

A measure of the economic value of an employee's skill set. This measure builds on the basic production input of labor measure where all labor is thought to be equal. The concept of human capital recognizes that not all labor is equal and that the quality of employees can be improved by investing in them. The education, experience and abilities of an employee have an economic value for employers and for the economy as a whole.

BREAKING DOWN 'Human Capital'

Economist Theodore Schultz invented the term in the 1960s to reflect the value of our human capacities. He believed human capital was like any other type of capital; it could be invested in through education, training and enhanced benefits that will lead to an improvement in the quality and level of production.

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RELATED FAQS
  1. How do firms improve their employees' human capital?

    Human capital describes employees' knowledge, skill sets and motivation that provide economic value to a firm. It is important ... Read Full Answer >>
  2. What is the relationship between human capital and economic growth?

    Human capital and economic growth have a strong relationship. Human capital affects economic growth and can help to develop ... Read Full Answer >>
  3. How do managers measure human capital?

    Human capital is the knowledge, skill sets and intangible assets that add economic value to an individual. Human capital ... Read Full Answer >>
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