Human capital

Human capital is a concept used by human resource professionals to designate personal attributes considered useful in the production process. It encompasses employee knowledge, skills, know-how, good health, and education, to name a few.[1]

Human capital infographic

Companies can invest in human capital, for example, through education and training, enabling improved levels of quality and production.[2]

Adam Smith included in his definition of capital "the acquired and useful abilities of all the inhabitants or members of the society". The first use of the term "human capital" may be by Irving Fisher.[3] But the term only found widespread use in economics after its popularization by economists of the Chicago School, in particular Gary Becker, Jacob Mincer, and Theodore Schultz. As a result of his conceptualization and modeling work using Human Capital as a key factor, the 2018 Nobel Prize for Economics was jointly awarded to Paul Romer, who founded the modern innovation-driven approach to understanding economic growth.

In the recent literature, the new concept of task-specific human capital was coined in 2004 by Robert Gibbons, an economist at MIT, and Michael Waldman[4],[5] an economist at Cornell University. The concept emphasizes that in many cases, human capital is accumulated specific to the nature of the task (or, skills required for the task), and the human capital accumulated for the task are valuable to many firms requiring the transferable skills.[6] This concept can be applied to job-assignment, wage dynamics, tournament, promotion dynamics inside firms, etc.[7]