Difference Between Human Capital and Human Development

In this context, the topics that we are going to discuss are – Human Capital and Human Development, these two terms which are used in the subject of economics represent human resources which is an important concept of economics. This sphere deals with the way human resources are being perceived by these terms.

The main purpose of this discussion is to illustrate the difference between Human Capital and Human development. We will also discuss other subtopics like the definition of Human Capital, the definition of Human Development and also, we will know the difference between human resources and human capital.

Human Capital and Human Development 

We will discuss the difference between Human Capital and Human development which is a major part of the study of Economics. These topics start while starting with the basics of Factors of Production. 

Before starting with the difference chart let us know the exact meaning of these terms – Human Capital and Human Development. 

Meaning of Human Capital

(Image will be uploaded soon)

Human capital is being referred to as the measure of the capabilities of labour which will include the skills, their working capacity, education, health, and intelligence of the human.

Not All Resources are Equal

The concept of human capital focuses on this point that not all the resources are equal, but with good training and investment, this gap can be filled.

What Creates Economic Value?

For a business, all the skills, experience, and education of an employee are very important, these all will create economic value for the business and will also create an economy as a whole.

Human Capital is an Important Factor

Human capital is being considered an important factor for business because it will help in the increase of productivity which will be responsible for the profitability of the business.

Hence, according to the human capital concept, if more employees are being invested, then a firm can become more profitable.

Meaning of Human Development

(Image will be uploaded soon)

Human development is referred to the process which expands the capabilities of human beings in terms of abilities and rights. The purpose of human development is to give an appropriate environment for people to enjoy a healthy, creative, and long happy life.

People’s Freedom and Opportunities to Live their Life at their Best

Human development can also be defined as the process of enlarging the people’s freedoms and their opportunities to grow and improve their well-being. Human development focuses on real freedom. Ordinary people may struggle with the basic questions of life about how they are going to live, for this human development process is appropriate. 

In the UNDP

The first UNDP Human Development Report which was published in the year 1990 stated that: “The basic objective of development is to create an enabling environment for people to enjoy long, healthy and creative lives.” The report also defined human development as “a process of enlarging people’s choices”, “and strengthening human capabilities”. This ensures that humans lead longer, healthier, and fuller lives.

Three Issues in Human Development Interpretation

From this elongated definition of human development, we get an idea of three critical issues which are involved in the human development interpretation. Which are as follows: 

1. To lead a long and healthy life

2. To stay educated 

3. To enjoy a decent and good standard of living. 

Based on these three crucial parameters of human development, the process that involved enlarging people’s choices happened, their own additional choices included political freedoms, guaranteed human rights, and various other ingredients of their self-recognition and self-respect.

Without these three Issues

This is undoubtedly true, that the absence of these essential choices will block many other opportunities which people should have while widening their choices to lead their life. Human development thus is a process that widens people’s choices as well as raises the level of well-being which is achieved by these.

There are Six Basic Pillars Supporting Human Development:

1. Equity – This is the idea of fairness being to every person, between two genders, right to education to all, healthcare, etc. 

2. Sustainability - This is the view which we all have that is the right to earn a living which can sustain our lives and will have access to the even distribution of goods.

3. Productivity - Stating the full participation of people which will give rise to the process of income generation. 

4. Empowerment – This is the freedom of the people which influences the development and decisions affecting their own lives.

5. Cooperation – This stipulates the participation and the belonging to the communities and in the groups, this acts as a means of mutual enrichment and a source of social meaning.

6. Security – which offers the human their development, opportunities to freely and safely make choices with confidence.

Difference Between Human Resource and Human Capital

The difference between the human resource and human capital base and stay focused on the job which is performed by people. Human Capital is moreover concerned with the abilities and training the people for gaining their own values. While Human resources may also be defined as a branch in which an organization oversees the recruitment of the capable employees required for the job.

Human Capital is the measure of the human’s capabilities and their skills which are required by the human resource department also to find their prospective employees. 

Also, another way of looking at the difference between human capital and human resources is by looking at the different factors which make up these two concepts.

The following points illustrate the differences between human capital and human development:

Human Capital Vs. Human Development