Human Capital Formation

In this article you will know about " Role Of Education In Human Capital Formation " but first of all lets discuss about meaning of Human Capital. Human capital refers to the stock of ' skill and expertise ' of a nation at a point of time. It is the sum total of skill and expertise of engineers, doctors, professors and workers of all types who are engaged ( or have the capacity and expertise to be engaged) in the process of value addition. 

Human capital formation is simply the process of adding to the stock of human capital. While human capital is a stock concept, human capital formation is a flow concept. Thus, human capital formation occurs when more doctors are produced and when more and more engineers are added to their existing stock in the economy. 

Sources Of Human Capital 

Sources of human capital ( also called determinants of human capital) refer to the ways of adding to the stock of human capital in the economy. Some of the important ways of adding to the stock of human capital are as under:-

1. Expenditure on education- Expenditure on education is the most effective way of raising a productive workforce in the country. It is, therefore, a very important determinant of human capital formation. 

2. Expenditure on health- " A sound in a sound body" is an old saying. Expenditure on health makes a man more efficient and, therefore, more productive. His contribution in the value- addition process tends to raise. He adds more to GDP of the nation than a sick person. 

3. On -the -job training- on the job training helps workers bto hone/ sharpen their specialised skills. It enables them to raise the level of their efficiency/ productivity. 

4.Study programmes for Adults- Other than formal education at the primary, secondary and universal levels, the Government and NGOs organise study programmes for adults to make them proficient in their work areas. This enhance their productivity, serving as a source of human capital formation. 

5. Migration- Migration contributes to human capital formation as it facilities utilisation of inactive skills of the people, or it facilities fuller/ better utilisation of the skills. Migration involves :-
(i) cost of transportation from one place to other, and
(ii) cost of living in different social environment. 

6. Expenditure on information- Information relating to job markets and educational institutions offering specialised skills is an important determinant of skill formation. It enables people to actualise their productive potential. 



Read more :- Business Environment : Its Meaning, Features/Nature And Dimensions https://theeducationtheory.blogspot.com/2023/09/business-environment-its-FeaturesNature-and-Dimensions.html?m=1

Education As An Essential Element Of Human Capital Formation

Education is an essential element of human resource development. Education implies the process of teaching, training and learning, ( especially in school or colleges) . It improves knowledge and develops skills. However, compared to other countries of the world, spread of education in India has not been so encouraging. Even literacy rate in the country continues to be very low. 
According to the Census 2011,barely 74.04 percent of the population is literate as against 90 to 95 literacy in developed countries of the world. 

Importance and objectives of education

  • Education produces responsible citizens. 
  • It develops science and technology. 
  • It facilities use of natural and human resources of all regions of the country. 
  • It expands mental horizon of the people. 
  • It helps economic development through greater participation of the people in the process of growth and development. 
  • It promotes cultural standard of the citizens. 
  • It develops human personality. 
The most powerful way to improve and expand human skills in our country is by developing our education system. Education is the root of human capital formation that is the reason why people invest more on education. Education helps people to develop critical skills like decision making, mental ability, problem solving and logical thinking. People faces so many problems in their professional and personal life. In such situation their skills of better decision making, logical thinking helps them to tackle that problem. 
The government needs to make provision for free of cost education and health services, at least for the backward sections of the society because people from backward society cannot afford high price for education and health. 
Human capital formation leads to higher level of skills and innovations. It imply new ways of doing things, or doing things better than before .