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Difference between Human Capital and Human Development

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Human Capital and Human Development are two different concepts. The former is a measure of labour’s capabilities, including skills, working capacity, education, health, and intelligence. However, Human Development is the process of enhancing human potential in terms of skills and rights.

Difference between Human Capital and Human Development

What is Human Capital?

A measure of labour’s capabilities, including skills, working capacity, education, health, and intelligence, is referred to as Human Capital. The concept of human capital emphasises the idea that not every resource is created equal, but that this difference may be covered with the right training and funding. For a business, an employee’s education, experience, and talents are crucial since they add value to the company and the economy as a whole. 

It is the sum total of the skill and expertise of engineers, doctors, professors, and workers of all types who are engaged (or have the capacity and expertise to be engaged) in the process of production.

Since they assist in boosting productivity, which contributes to profitability, human capital is regarded as crucial for businesses. Therefore, according to the human capital principle, a company can increase its profitability by investing more in its personnel.

What is Human Development?

Human Development is described as the process of enhancing human potential in terms of skills and rights. The goal of human development is to create the ideal conditions for people to live long, healthy lives filled with creativity. It attempts to improve people’s lives regardless of financial benefit. It is based on the belief that health and education are essential to a person’s well-being.

Human development is a process of enlarging the range of people’s choices, increasing their opportunities for education, health care, income and empowerment and covering the full range of human choices from a sound physical environment to economic, social and political freedom.

People can choose among many different things, but having a long and healthy life, receiving an education, and having access to the resources required for a decent standard of living, such as political rights, guaranteed human rights, and individual self-respect, are all regarded as essential elements of human development.

Difference between Human Capital and Human Development

Basis

Human Capital

Human Development

Meaning

Human Capital is sum total of labour’s capabilities, including skills, working capacity, education, health, and intelligence. Human Development is described as the process of enhancing human potential in terms of skills and rights.

Concept

It is a comparably narrow concept.  It is a comparably broader concept.

Central Theme

It believes that the best way to increase labour force productivity is through good health. It believes that good health and education are important for an individual’s total development because they enable them to make decisions that will result in a happy and secure lifestyle.

Increase

The rise in human capital leads to human development. The rise in human development does not necessarily produce human capital.

Welfare

Health and education are useless in terms of human capital if they don’t increase productivity. Even if they do not increase production, human development believes that having good health and a decent education increases human welfare.

Economic /Social Concept

Human Capital is an economic concept. Human Development is a social concept.

Economic Value

Skills and expertise together add economic value. It is the process of enhancing people’s lives without taking economic value into account.

Last Updated : 24 Jul, 2023
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