Factors Affecting Human Capital

by Flora Richards-Gustafson; Updated September 26, 2017
Factors in and out of the workplace affect human capital.

An intangible asset, human capital is the workforce a company employs. Human capital is a combination of employee competencies and their commitment to the organization for which they work. According to University of Chicago professor Gary S. Becker, economists may refer to a workforce as “human capital” because their combination of skills, health, values and knowledge are regarded as an asset.

Competences

The abilities an individual has and her capability to expand upon them can help her create a positive gain in human capital. Competences are more than just skills because employees have the power to gain new knowledge and generate new skills with training. The sharing of competencies does not make them scarcer; instead, the opposite effect occurs. For example, a doctor can gain a level of human capital with training and education, but then develops a greater gain in human capital over time with continued practice and experience. In addition to formal education, a worker can increase her human capital at work, through different experiences and with training. According to Becker, economic growth depends on the abilities of workers to gain new competences through education and training.

Knowledge

One of the most important factors in the development of human capital is knowledge, according to Gordon Marshall, author of “A Dictionary of Sociology.” However, knowledge is only effective when an individual receives an education that does not include incompetent teachers, outdated materials and teaching methods that do not cater to the needs of the student. Becker states that education is an investment in human capital, and individuals in the U.S. with a postsecondary education can earn a higher income. Knowledge can help an individual further increase his competences. When combined with empathy, knowledge can also help generate goodwill, another human capital asset that is intangible.

Organizational Development

A company that invests in its employees also places an investment in human capital. When employees receive the tools, support, structure and knowledge needed, they can increase their human capital and adapt better to the changes in their respective industries. Organizational development helps employees strive for a similar goal, create an environment of collaboration and trust and improve problem-solving techniques. Organizational development is an ongoing process that a company can use to create gains in human capital and positive employee development.

Risk

Human capital risks can begin with the influence of families. Becker states that parents can affect a child’s level of education, habits, values, work habits and motivation to do well. However, risks in human capital can also happen when a company operates below industry standards. These risks may occur when a company does not meet employee needs or provide the tools necessary to increase productivity. Other risk factors include employee absences, constant group activities that hinder productivity and activities that cause poor work quality or errors.

About the Author

Flora Richards-Gustafson has been writing professionally since 2003. She creates copy for websites, marketing materials and printed publications. Richards-Gustafson specializes in SEO and writing about small-business strategies, health and beauty, interior design, emergency preparedness and education. Richards-Gustafson received a Bachelor of Arts from George Fox University in 2003 and was recognized by Cambridge's "Who's Who" in 2009 as a leading woman entrepreneur.

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