Human capital formation means “acquisition and increase in the number of people who have skills, education and experience and who are important for the economic and political development of the country”. Therefore, as a creative productive means, it is concerned with investment on the individual and his development.
In developing countries, due attention is not paid to human development in the process of planned economic development. This is the reason that the desired development goals are not achieved in these countries and the rate of development remains low there.
Therefore, in the process of development, along with spending on capital resources – plant and machinery, attention should also be paid to the development of human capital.
In fact, the perfection of production belongs to man. Even though new technology has reduced man’s labor power, production is ultimately the result of human action on material substances. In this way, the credit for accelerating economic development lies with man.
Pro. According to Arthur Lewis, “Economic development is the result of human efforts.” And it depends on the ability of those people, their qualities and attitudes.
The economist Schulz states that, “The most important feature of our economic system is the development of human capital. Without doing this we cannot get rid of widespread poverty and hard physical labor.
The theory of human capital holds that it is possible to gauge the value of these investments to employees, employers, and society as a whole. According to human capital theory, a substantial investment in people will result in a growing economy.
For example, some countries offer their people a free college education out of a realization that a more higher education population tends to earn more and spend more, thus stimulating the economy. In the field of business administration, human capital theory is an extension of human resource management.
Read in Hindi: What is called human capital formation?