The Role of Human Capital in Economic Growth

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Conceptualized by Mark Blaug forty-five years ago, this is embedded in the economic theory of human resources in the form of human capital theory (Blaug, 1976:827). There have been many advances and breakthroughs since then in the field of human resource economics. Historically, human resource development (HRD) has referred to developing human resources in order to increase economic productivity and therefore a nation’s wealth that is, very closely linked with economic outputs. So, in the development context, the meaning of the terms of human resources development and human development are very much interconnected. Theories of human capital formation and human resource development have often been described as strong in analyzing the supply side in relation to its approach to manpower and planning and education (UN:1990). However, one man’s supply is another’s demand. In fact, human capital theory is basically demand-oriented but it views demand from the level of the individual. So this theory is now being applied or has the potential to be applied, to a number of areas of human resource analysis, where, previously a supply orientation tended to prevail. This new focus on the demand for human resource development may be one of the most important developments in developing countries to emerge from the economic theory of human resources. As UN’s Economic and Social Commission for Asia and the Pacific (UNESCAP) in its report pointed out, The human capital revolution in the economics of human resources in last quarter century has had a major impact on policy-making and planning for human resource development in the developing countries. In many ways, it may be said to have initiated interest in planning for human resource development.There can be little doubt that the impact of continuing developments in the economics of human resources will be an equally potent source of new approaches to human resource development in the next twenty-five years. As human capital is the workforce behind economic growth, it is the position of this writer that support for the workforce or labor, be given not only for the company’s gain but also for the advancement of the individual in terms of knowledge and skills in order to be able to keep up with the changing times and the demands that come with them. Several articles/works were read and taken into consideration in the making of this paper. Gary S. Becker, in his article The Human Capital, discussed education, training and health as the most important investments in human capital and the industry’s increasing reliance on them. Patrick Fitzsimons’ Human capital theory and education discussed the Human Capital Theory as the most influential economic theory of Western education, setting the framework of government policies since the early 1960s, and its recent reformulation which stressed the significance of education and training as the key to participation in the new global economy. F. John Reh’s article New Employee Training – Is It Worth The Investment presented arguments of training new employees in terms of its cost in the part of the employers and the gains that they will get from them.