question_answer 6)

What factors contribute to human capital formation?

Answer:

There are various (actors which contribute to human capital formation as discussed below (i) Education An educated individual has more knowledge and skills than an uneducated person. Hence, education imparts the necessary attitude and aptitude for adopting new technologies and efficient management practices which help in raising productivity. Education is an important factor in human capital formation which leads to higher efficiency and productivity in human beings and thus higher income and standard of living which again facilitates further investment in education and health. (ii) Health A sound mind in a sound body like education, investment in health is also considered as an important factor for human capital formation as it directly increases the supply of healthy labour force. A healthy person is an asset for the nation as he is more productive than a sick person who is unable to work efficiently due to bad health. Therefore, investment in health facilities to build a physically as well as mentally strong human capital, is essential for increasing productivity. Preventive medicine (vaccination), curative medicine (medical intervention during illness), social medicine (spread of health literacy) and provision of clean drinking water and good sanitation are the various forms of health expenditures. Health expenditure thus, a source of human capital formation. (iii) On the Job Training Firms provide on-the-job training to their workers to enhance their skills which helps in human capital formation. The workers may be trained in the firm itself under the supervision of a skilled worker or the workers may be sent for off-campus training, Expenditure regarding on-the job training is an important factor of human capital formation as the return of such expenditure in the form of enhanced labour productivity Is more than the cost involved. (iv) Migration It contributes to human capital formation as it facilitates utilisation of inactive skills of the people. People from rural areas, migrate to urban areas in search of employment. Technically qualified persons, like engineers and doctors, migrate to other countries because of higher earnings in such countries. Migration in both these cases involves cost of transport, higher cost of living in the migrated places and psychological costs of adapting to a new socio-cultural setup The Increase in earnings in the new place outweighs the costs of migration. Hence, expenditure on migration is also a lacier of human capital formation. (v) Information Information relating to the labour market and other markets is also a factor which contributes to human capital formation. Information regarding the level of salaries in various types of jobs, whether the educational institutions provide the required skills and at what is the associated cost is necessary to make decisions regarding investments in human capital as well as for efficient utilization of the acquired human capital stock Information is necessary 10 make decisions regarding investments in human capital.