Capital refers to factors of production used in the production of goods and services. Human capital on the other hand refers to the production elements that generate added value in the economy. If human capital is enriched with productive skills, it can effectively improve productivity thus raising gross domestic product (GDP). Enriching human capital with adequate skills can also have an immense impact on economic growth and productivity. These skills can be gained through education, training, and good healthcare. The amount of return from human capital is private in nature since it increases as the level of skills increases.
Education
One of the major sources of human capital is education. Education not only increases productivity but also improves the acceptability of modern techniques. It drives an attitude toward modern ways of doing things by eliminating traditional thinking thus ensuring a primitive economy. Education increases individual earning capacity which in turn encourages egalitarian society. Education has the capacity to not only improve the future prospect of a nation but also improve the present economic condition of a country. Economists have concluded that university and high school education increase individual income after netting the cost of education. Furthermore, educated people are more likely to earn more than the average population. In fact, studies have shown that university education in the US significantly raises a person’s income. Moreover, individuals with more education tend to have better-educated parents and higher IQ than those who are not educated. Economist Kevin Murphy has shown that educated people get more income than other workers immediately after employment. He noted that accountants, lawyers, and other professionals are likely to experience a rapid increase in earnings.
Health
Health is a source of human capital in the sense that investment in a healthy labor force increases productivity. It involves preventive, promotive, and rehabilitative aspects of human capital. According to Hatch and Dyer, a healthy population directly or indirectly increases the national gross product. Irrespective of the new technological advancement, the human workforce cannot be undermined. Good healthcare is an essential aspect in ensuring human capital remains active and productive. It involves the eradication of diseases such as cholera, tetanus, and malaria to enhance a competent workforce. Driver argues that illness is part of human life and therefore, the Government should ensure there are sufficient hospitals and dispensaries to treat an ailing patient.