Human Capital, Social capital and Human Development

Human Capital: The Nobel Prize–winning economist Theodore W. Schultz was the first to use the term human capital in the article “Investment in Human Capital,” appeared in the American Economic Review in 1961. Along with other resources in an organization, people have capabilities that drive organizational performance. The terms ‘human capital’ and ‘intellectual assets’ all have in common the idea that people make the difference in how an organization performs. It is a complex combination of factors. In actuality, it is the information that the person possesses and his or her ability and willingness to share it that establish value potential. The productivity of human capital is the key to sustaining successful service delivery and profitable management in an organization.

Human capital is the knowledge, skills, competences and other related attributes embodied in individuals that are acquired through schooling, training and experience and are relevant to the organizational priorities. These attributes embodied in are useful for the production and delivery of goods and services along with organizational management. Education is a key to human capital supplemented by work experience, health, working conditions and other factors that may give potential entrepreneurship. Basically level of education and experience are the standards used to measure potentiality of human capital.  

Human capital is an intangible asset as it is not owned by the organization that employs it.Basically, human capital arrives at 10 am and leaves at 5 pm form the point of view of organization.

Form above definitions human capital includes:-

• ·         Level of education     
• ·         Skills
• ·         Level of experience
• ·         Stock of competences
• ·         Knowledge
• ·         Other personality attributes

Characteristics

1. ·         Substitutable, but not transferable from organizational view.
2. ·         Gained through education and experience (A veteran may have less training than a young, but may have more human capital overall due to experience and shared knowledge)
3. ·         It is infinitely elastic, including immeasurable variables such as personal character or connections with insiders.

Types

Human capital literature often distinguishes between "specific" and "general" human capital. Specific human capital refers to skills or knowledge that is useful only to a single organization or single task, whereas general human capital (such as literacy) is useful to all organization or to multi-functions.

Social Capital

The definition of social capital owes its prominence mainly to the work of Robert Putnam in political science (1993, 1996).  For the majority of writers, Social Capital is defined in terms of networks, norms and trust, and the way these allow agents and institutions to be more effective in achieving common objectives. The most common measures of social capital look at participation in various forms of civic engagement, such as membership of voluntary associations, churches or political parties, or at levels of expressed trust in other people. Social capital has been deployed to explain a wide range of social phenomena, including general economic performance, levels of crime and disorder, immigrant employment and health trends. Social capital reintroduces a moral dimension into educational and economic thinking.

Social capital focuses on networks: the relationships within and between them, and the norms which govern these relationships.  Despite some ambiguity, social capital is generally understood as a matter of relationships, as a property of groups rather than the property of individuals.

Putnam has suggested that social capital facilitates co-operation and mutually supportive relations in communities and nations and therefore becomes a valuable means of combating many of the social disorders inherent in modern societies, for example crime. It is the relationship between trust, social networks and the development of modern industrial society. (Social capital development on the internet via social networking websites such as Facebook or Myspace tends to be bridging capital)

The World Bank (1999) defines social capital as: 'Social capital refers to the institutions, relationships, and norms that shape the quality and quantity of a society's social interactions... Social capital is not just the sum of the institutions which underpin a society – it is the glue that holds them together'. It has been noted that social capital may be not always invested towards positive ends. An example of the complexities of the effects of social capital is violent or criminal gang activity that is encouraged through the strengthening of intra-group relationships. This shows the importance of distinguishing between bridging social capital as opposed to the more easily accomplished bonding of social capital.

Civic engagements such as neighborhood associations, sports clubs, and cooperatives, are an essential form of social capital.  

Differences between Human and Social Capital:

Focus: The key distinction between human and social capital is that the former focuses on individual agents, and the latter on group, relationships between them and the networks they form.

Input/measures: Human capital is measured primarily by levels of qualification achieved.  Social capital is measured broadly, and often simplistically, in terms of attitudes or values, or by levels of active participation in civic life or in other networks.

Outcomes: The output of human capital is generally measured in terms of enhanced income or productivity.  Social capital has been linked directly to performance at very different levels. (at the level of nation states at the regional level or between and within communities or organizations. It also has wider outcomes – including the generation of further social capital.)

Two key issues in evaluating social capital/ Characteristics

First, social capital is not equally available to all, in much the same way that other forms of capital are differently available. Geographic and social isolation limit access to this resource. Second, not all social capital is created equally. The value of a specific source of social capital depends in no small part on the socio-economic position of the source with society having negative impact such as: exclusion of outsiders, excess claims on group members, restrictions on

Why talk about social capital?

·         It allows resolving collective problems more easily.

·         People often might be better off if they cooperate,

·         Greases the wheels that allow organizations to advance smoothly.

·         Widens awareness of the many ways (In high social-capital areas public spaces are cleaner, people are friendlier, and the streets are safer and societies are characterized by lower crime rates)

·         Trust and social networks flourish, individuals, firms, neighborhoods,

·         Better health, higher educational achievement, better employment outcomes, and lower crime rates.

Social capital can take many forms. Residents of the same neighborhood, people who work for the same company and groups of friends all have networks of relationships. In addition to being personally and psychologically rewarding, these connections can also confer additional advantages. People in the same network will be more inclined to rely on each other when they need services, and if an individual lacks a connection to a particular service, he or she may be able to find one by exploiting social capital.

Human Development

Human development paradigm looks at the wellbeing of the individuals and on their capacity to promote development. In the early development literature, GDP income per capita was traditionally used for measuring human development in a country. By poor human development, one can understand low access to education, employment and social security systems.

It focuses on measuring well-being and optimizing well-being at the expense of human health. This question cannot be answered strictly from an energy, feminist, family, environmental health, peace, social justice, or ecological well-being point of view, although all of these may be factors in our happiness, and if tolerances of any of these are violated seriously, it would seem impossible to be happy at all.

The concept of human development embraces every development issue, including economic growth, social investment and empowerment of basic needs and social safety nets, and political and cultural freedom. There is fairly broad agreement on major aspects of the human development concept:

• Development must put people at the center of its concerns.
• The purpose of development is to enlarge all human choices, not just income
• The human development paradigm is concerned both with building up human capabilities, through investment in people, and with using those human capabilities fully, through an enabling framework for growth and empowerment
• Human development has four essential pillars: equity, sustainability, production and empowerment
• The human development paradigm defines the ends of development and analyses sensible options for achieving them

Short Definitions of human development:

• 1990: a process of enlarging people’s choices
• 1991: The real objective of development is to increase people’s choices
• 1992:  A process of enlarging people’s choices.
• 1993:  Involves widening [people’s] choices
• 1994: To create an environment in which all people can expand their capabilities
• 1995: A process of enlarging people’s choices
• 1996: A process of enlarging people’s choices.
• 1997: The process of enlarging people’s choices
• 1998: A process of enlarging people’s choices.
• 1999: The process of enlarging people’s choices
• 2000: A process of enhancing human capabilities
• 2001: About expanding the choices people have to lead lives that they value.
• 2002: About people, about expanding their choices to lead lives they value. (p. 13)
• 2003: To improve people’s lives by expanding their choices, freedom and dignity.
• 2004: The process of widening choices for people to do and be what they value in life.
• 2005: About building human capabilities—the range of things that people can do, and what they can be.
• 2007/8:  About expanding people’s real choice and the substantive freedoms – the
• capabilities – that enable them to lead lives that they value.
• 2009: The expansion of people’s freedoms

- UNDP Human Development Reports Research Paper, June 2010 by Sabina Alkire

Human development can be viewed as the process of achieving an optimum level of health and well-being. It includes physical, biological, mental, emotional, social, educational, economic, and cultural components. Only some of these are expressed in the Human Development Index, a composite scale that has three dimensions: life expectancy at birth, adult literacy rate and mean years of schooling, and income as measured by real gross domestic product per capita. Like all one-dimensional scales that attempt to measure multiple complex variables, it is flawed by inherent inaccuracies, but it is nonetheless a useful comparative measure of the well-being of a population.

It is about creating an environment in which people can develop their full potential and lead productive, creative lives in accord with their needs and interests. People are the real wealth of nations. Development is thus about expanding the choices people have to lead lives that they value. The most basic capabilities for human development are to lead long and healthy lives, to be knowledgeable, to have access to the resources needed for a decent standard of living and to be able to participate in the life of the community. Without these, many choices are simply not available, and many opportunities in life remain inaccessible.

References:

1.          David, D, Dubois William, J. Rothwell, (2004), Competency Based Human Resource Management. California: Davies-Black Publishing.

2.         Kumar, Chandra Shekhar (2006), Humann Capital and Growth Empirics. The Journal of Developing Areas, Vol. 40, No. 1 pp. 153-179

3.          Phillip H. Kim, Howard E. Aldrich, Lisa, (2006), The Impact of Financial, Human, and Cultural Capital on Entrepreneurial Entry. Journal of  Small Business Economics, Vol. 27, No. 1, pp. 5-22.

4.          Marcel van Marrewijk and Joanna Timmers, (2002), Human Capital Management: New Possibilities in People Management. Journal of Business Ethics, Vol. 44, No. 2/3.

5.         Tom Schuller, (2008), thinking about social capital. Edited by Dario Castigliong, Jan W. Van Deth, and Gugliel Mo Wolleb Published in the United States by Oxford University Press Inc., New York.

6.         Australian Bureau of Statistics, (2000), Measuring Social Capital: current collections and future directions.

7.         Woolcock, M (2001), the place of social capital in Understanding Social and Economic Outcomes.ISUMA Canadian Journal of Policy Research 2 (10) 11-17.

8.         Cote S, Healy T (2001) The Well Being of nations. The role of human and social capital. Organisation for economic Co-operation and Development, Paris. 

9.         UNDP Human Development Reports Research Paper, June 2010 by Sabina Alkire