Glossary term
Human Capital: Meaning and Definition
Reviewed and approved by Dr. Anamika ShrivastavaPublished Last updated
Human capital is the stock of skill, knowledge and good health embodied in people that raises their productivity and income. It is formed by investment in education, health, on-the-job training, migration and information. Unlike physical capital, it is inseparable from the person and creates social as well as private benefits.
In more detail
Investment in human capital has costs now and returns later, such as higher earnings, better health and new ideas. It also spreads benefits to others, which is why governments fund education and health. Migration of skilled workers can reduce the home country’s stock but brings remittances and knowledge.
Example
A doctor or engineer trained through years of education represents human capital created from the human resource of a student.
Key points
- Education and health are the main sources.
- Intangible and inseparable from its owner.
- Raises growth by lifting productivity.
Common mistake
Equating human capital with the number of people. Skill and health matter.
Related terms
Where it is explained
This term is explained in Class 11 Indian Economic Development Chapter 5: Human Capital Formation in India.