University of International Business and Economics
• A critical review of the Human Capital Theory
Human capital refers to the stock of competences, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value..
Human-capital theory This is a modenextension of Adam Smith's explanation of wage differentials by the so-called net (dis)advantages between different employments. The costs of learning the job are a very important component of net advantage and have led economists such as Gary S. Becker and Jacob Mincer to claim that, other things being equal, personal incomes vary according to the amount of investment in human capital; that is, theeducation and training undertaken by individuals or groups of workers. A further expectation is that widespread investment in human capital creates in the labour-force the skill-base indispensable for economic growth. The survival of the human-capital reservoir was said, for example, to explain the rapid reconstruction achieved by the defeated powers of the Second World War.
Human capital arisesout of any activity able to raise individual worker productivity. In practice full-time education is, too readily, taken as the principal example. For workers, investment in human capital involves both direct costs, and costs in foregone earnings. Workers making the investment decisions compare the attractiveness of alternative future income and consumption streams, some of which offer enhancedfuture income, in exchange for higher present training costs and deferred consumption. Returns on societal investment in human capital may in principle be calculated in an analogous way.
Even in economics, critics of human-capital theory point to the difficulty of measuring key concepts, including future income and the central idea of human capital itself. Not all investments in education guaranteean advance in productivity as judged by employers or the market. In particular, there is the problem of measuring both worker productivity and the future income attached to career openings, except in near-tautological fashion by reference to actual earnings differences which the theory purports to explain.
Human-capital theory has attracted much criticism from sociologists of education andtraining. In the Marxist renaissance of the 1960s, it was attacked for legitimating so-called bourgeois individualism, especially in the United States where the theory originated and flourished. It was also accused of blaming individuals for the defects of the system, making pseudo-capitalists out of workers, and fudging the real conflict of interest between the two. However, even discounting theseessentially political criticisms, human-capital theory can be regarded as a species of rational-exchange theory and open to a standard critique, by sociologists, of individualist explanations of economic phenomena.
Some labor economists have criticized the Chicago-school theory, claiming that it tries to explain all differences in wages and salaries in terms of human capital.
The concept of humancapital can be infinitely elastic, including unmeasurable variables such as personal character or connections with insiders (via family or fraternity). This theory has had a significant share of study in the field proving that wages can be higher for employees on aspects other than Human Capital.
• Define the roles of HR in light of Corporate Challenge
Human Resource Management (HRM) is thestrategic and coherent approach to the management of an organization's most valued assets - the people working there who individually and collectively contribute to the achievement of the objectives of the business. The terms "human resource management" and "human resources" (HR) have largely replaced the term "personnel management" as a description of the processes involved in managing people in...