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What Is the Relationship Between Human Capital and Education?

Human beings are considered capital in the sense that they generate income and other types of necessary outputs over the course of their lives.
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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 25 November 2014
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The relationship between human capital and education lies in the fact that education considerably improves the concept of human beings as capital as well as their economic and productive output. Human beings are considered capital in the sense that they generate income and other types of necessary outputs over the course of their lives. This concept may be compared to other forms of investments and assets, such as manufacturing plants and production companies, which are also considered to be capital capable of producing good returns over time.

Education is an investment in human beings that may come in various forms. It may be in the form of learning a trade or obtaining a degree, it could take the form of seminars and workshops, or it could be in the form of personal development programs aimed at improving personal skills. The bottom line and the connection between human capital and education is the fact that education improves the economic and productive worth of an individual.

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In a strict sense, capital as applied to human beings refers to those factors that improve their value and worth. Such factors include computer skills training, classroom training, and various forms of informal training. Capital may also refer to governmental expenses on hospitals and the development of a healthcare system. These aspects improve human productivity in the same way that manufacturing plants improve the production of goods. The difference is that manufacturing plants can be separated from the owners and listed as separate capital, whereas the training a person acquires cannot be separated from the person.

Another way of viewing the concept of human capital and education is to consider the effect human productivity has on the Gross Domestic Output (GDP) of a nation. GDP is often used as a measure of the economic situation on a country. Those countries with high a high GDP often have a well-trained and educated workforce. They also have good healthcare models that improve the health and life expectancy of their workers. This illustrates that human capital and education cannot be separated from the economic development of a nation.

Educated individuals are not just able to contribute more to the economy of the nation, they are also able to spend more due to higher incomes. GDP is influenced by the effects of demand for goods and services in relation to the supply. As such, when people are educated, they will have more money with which to demand more goods and the GDP will increase as a consequence.

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