What is the role of human capital in economic development?
This is an important topic for us to understand: that means how an efficient workforce can contribute to the development of a nation. As of now, we have discussed the meaning of human capital, the importance of education, and the sources of human capital formation. Now, we will see the role of human capital in economic development and how does a well-read, literate, able population help in the development of a country. Let’s learn.
The role of human capital in economic development
Before discussing the role of human capital, we will first see the meaning of economic growth. Economic growth means the increase in real national income of a country. The contribution of a literate person to economic growth is more than that of an illiterate person. Also, health plays a major role in forming human capital because a healthy person could provide an uninterrupted labor supply. We have seen that factors like education, health, on-the-job training increase the income-generating capacity of human capital.
The role of human capital formation in economic growth:
Enhancement in the Productivity of human capital
If the investment is made on human capital formation, then it increases the productivity levels of human capital as efficient workers make better use of available resources. Technical skills can be acquired only through education, training, and sound health of the people.
Efficient use of physical capital
We know the types of capital used in the production process. The physical capital can be used effectively only by skilled and intelligent human capital.
Innovation and technological improvement
Human capital formation stimulates innovation and open-mindedness, which helps people to absorb new technologies. As innovations lead to better economic growth.
Key role in the development strategy
India assigned major importance to human capital in its 7th plan,1985-1990. According to human resource development, trained and educated people become an asset in increasing economic growth and in ensuring social change in the desired direction.
Improvement in quality of life
With good human capital formation, the quality of life improves because of quality education, health, and skill formation acquired by the people. Human capital formation enables them to enjoy a higher standard of living as they are able to generate better pay for them and it helps in economic growth.
Positive change in attitude
Investment in human capital makes people more knowledgeable, skilled, and modern in their thoughts and actions. It changes their outlook and attitude towards various aspects such as traditions, job markets that are important in the development of the country. It leads to the emergence of modern society desired for economic development.