What Is the Relationship between Human Capital and Productivity?

The relationship between human capital and productivity can be viewed from the angle of the context in which the level of productivity is measured. As such, the correlation between human capital and productivity can be viewed in the context of the home, work, community or nation. When measuring the link between human capital and productivity in these different settings, one evident fact is that any increase in human capital almost always leads to a perceptible increase in the level of productivity.

In the context of the home, human capital and productivity are connected in many vital ways. First, human capital refers to any type of knowledge, experience, skill or other personal improvement input, such as healthcare. Such improvements are referred to as human capital is because they are converted to useful output in the form of an increase in the value of the person over the course of his or her life. A husband and father with desirable human capital, such as good morals, culture, wisdom, knowledge and experience, will be able to manage his home well, raise well-mannered children, and relate with his spouse in a mutually respectful and wise manner. These type people also have a wider effect in the community in terms of their productive value, which may also be measured in terms of their stabilizing effect on the society.

One of the most important places human capital is most valued is in the workplace. Many companies realize the value of human capital and accordingly expend a lot of resources in order to employ and retain employees with the right mix of human capital. Such companies often go as far as offering higher salaries to employees in rival companies with considerable human capital in order to benefit from their wealth of knowledge and experience. The more intensive the human capital, the more productive the employee, which is another reason why companies go to great lengths to train their employees or offer them personal development courses.

For instance, employees with potential leadership qualities may be identified by the human resources department and trained further in the art of business management with an emphasis on the business strategy of that particular company. Such a process might include involving the selected candidate in some strategic planning sessions, meetings with other company representatives, and other forms of capital investment. This form of human capital investment pays off in terms of dynamic, visionary and productive leadership from the employee due to the intensive capital investment. One notable fact about human capital is that it cannot be suppressed, because it is intertwined with the beneficiary and follows such a person wherever he or she goes.