Name: danniela guegue Instructor: YU LUWEI

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 moden extension 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, the education 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 arises out 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 enhanced future 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 guarantee