Human Capital VS Physical Capital

 Human capital and Physical Capital are compared on the following basis:-

1) MEANING:- Physical capital implies the non-human assets of the company, such as plant and machinery, tools and equipment, office supplies etc. that help in the process of production.

Human Capital refers to stock of knowledge, talent, skills and abilities brought in by the employee, to the organisation.

2) NATURE:- Physical capital is tangible in nature whereas Human Capital is intangible in nature.

3) FORMATION:- Physical Capital is formed by economic and technical process. Human Capital is formed by social process and conscious decision of the possessor.

4) TRADABILITY:- Physical Capital can be traded in the market. Only the services of human capital can be sold.

5) SEPARABILITY:- Physical capital is separable from its owner whereas Human Capital is not separable from its owner.

6) FINANCIAL STATEMENT:- Physical Capital is shown in financial statement whereas Human Capital is not shown in financial statement.

7) RESTRICTION ON MOBILITY:- Physical Capital occurs due to trade barriers and Human capital occurs out of nationality and culture i.e. Physical Capital is usually mobile and Human Capital is not fully mobile within countries.

8) NATURE OF DEPECIATION:- Physical Capital is constantly used so it results into depreciation. On the other hand, in Human Capital  ageing leads to depreciation, but it can be minimised.

CONCLUSION

When a company invests in its Physical Capital and Human Capital it leads to improvement in the overall level of performance of the business entity, as well as in decision making. Both Physical Capital and Human Capital are two building blocks whose combined use can lead to the production of goods and services.