Economics of Education

Human capital is the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labour so as to produce economic value.

According to T.W. Schultz, there are 5 ways of developing human Capital:-

1) Health facilities and services

2) On-the-job Training

3) Formal Education

4) Study programmes for adults

5) Migration 

Good Human Capital produce other Human Capital. So, investment in human capital is a need for economic development of a country.

# IMPORTANCE OF HUMAN CAPITAL

In the present day, emerging economies like India the significance of human capital arises from the following:

(1) 21st century will promote people who respond to technology. It will reject those who refuse to move fast enough.

2) There is a technological shift to knowledge-based, brainpower industries. Smart countries are those who attempt to make themselves attractive to the brainpower industry by educating their people and creating the required brainpower through education and training.

(3) In the knowledge economy, the value of intangible assets is increasing and that of tangible assets decreasing. In order to have a cutting edge in this scenario, a proper organisational climate with the right people competencies is critical.

(4) Modem physical technology, which is becoming more and more complex, requires the back up of an advanced social technology. Social technology covers all advances in skills acquired by people individually and collectively.

(5) All the well-known breakthroughs in physical technology would not have been possible if they were not preceded by relevant social innovations. Social innovations fosters the birth of more advanced physical technologies, taking them to further matured levels.

(6) Higher education is believed to promote independence and initiative, both of which are valuable intellectual resources for the generation and dissemination of knowledge in society.

(7) Poverty is both a cause and consequence of deficiencies in human development. Increased public spending on aspects of human development is more likely to have greater impact on poverty reduction and, at the same time, in improving human development.

In short, human resource development is an important condition for improving productivity, which hold the key to economic development.

#PROBLEMS OF HUMAN CAPITAL IN INDIA

1) Rising Population:- Rapidly rising population adversely affects the quality of human capital formation in developing countries. It reduces per capita availability of existing facilities. A large population requires huge investment in education and health. This diverts the scarce money to production of human capital at the cost of physical capital.

2) Long-term Process:- The process of human devolopment is a long term policy because skill formation takes time.The process which produces skilled manpower is thus slow.

3)High Regional & Gender Ineqaulity:- Regional and gender inequality lowers the human devolopment levels.

4)Brain Drain:-Migration of highly skilled labour termed as"Brain Drain" adversely affects the E.D.

5)Insufficient on the Job Training in Agriculture:- Agriculture sector is neglected where the workers are nit given on the job training to absorb emergency new technologies.

6)High Poverty Levels:- A large proportion of the population lives B.P.L & do not have access to basic health and educational facilities.A large section of society cannot affoed to get higher education or expensive medical treatment for major disease.

7)More Stress on the Provision of Building & Equipments:- Another major problem countries run into when investing in HC in devoloping countries is that politicians amd administrators lay more stress on the constuction of buildings & provision of equipment  than on the provision of qualified staff.It has been observed that foreign qualified teachers & doctors are appointed in rural areas,where there is little use for them. This misallocation of education resourses can negetivily affect EG. 

ROLE OF HUMAN CAPITAL IN ECONOMIC GROWTH

1) Raises production:-Knowlegable and skilled workers can make better use of resourses.It will increses production in the economy,through his skill and knowledge.Similarly, a healthy person can contribute more to the production through his high productivity.

2)Raises efficiency and productivity:- Investment in human capitals   increses efficiency & productivity,& hence yields higher income to people.This enhanced productivity of human capital contributes substantially not only towards incresed labour productivity but also stimulates innovations & create ability to absorb new tecnologies.Education provides knowledge to understand changes in society & scientific advancements.It facilitates inventions & innovations.Similarly,the avalaibilty of educated labour -force facilitates adaptation of new technologies.

3)Brings Positive Changes in Outlook & Attitudes:-Knowledgeable ,skilled& healthy people have modern outlook & attitudes.Attitudes of such poeple are no longer traditional & custom -bound.They make rational choice in respect of places & job.This promotes mobility of labour .The process of all round modernisation facilitates the emergence of modern society.All these changes lead to Economic Growth.

4)Improves Quality of Life:- Quality of life is indicated by income & health.Income & health depends upon the levels of education,health & skill formation acquired by the person.Illiterate,unhealthy,unskilled & uncertained people are a burden on the economy.They can not contribute much in the devolopment of country.Thus ,it is the quality of populaton means more Economic Growth.

5)Raises Life Expectancy:- Human Capital Formation raises life expectancy or longevity of the people.This includes both a long life & a healthy life.This adds to the quality of life.