The Human Capital Approach to Education

From the economics point of view, the human capital approach is used to define the increase in productivity levels and human capacities as a result of education and health. According to this model, it is advocated that investment in training and healthy leads to an indirect increase in the well-being of humans through an increase in incomes (Sen, 1999). Therefore, in focus on education, the approach argues that investment in education brings about a rise in comfort through an increase in incomes. This is because education increases the resourcefulness and efficiency of the workers by increasing the rate of the cognitive stock of economically productive human capacity, which is a product to the innate abilities and investments in the human being. For one to acquire education, social and private costs must be incurred. The social cost is the cost linked to the government or the private sector for providing education to the citizens, whereas borne by the parents or students or both in a year for acquiring education is called the private cost. These costs have marginal profit to the students and the government/private firms because they learned people get employed by private sectors or government and they can earn salaries among other benefits. Therefore, human capital theory to education enhances the better understanding of the differences between the private and social benefits and cost of education.

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Education has long been recognised as beneficial to both personal success and economic growth. Individual benefits of the investment in education are quantifiable in the form of additional income acquired during the life of the person who invested in education. The difference between the earnings of the people with higher education level and the average earnings of those with lower education can be obtained by factoring in other aspects that affect one success. This helps in calculating the benefits that people with a higher level of education as compared to those with a lower level of education. According to the recent studies, it is there is a significant difference between the earnings of the learned people as compared to those with a lower level of education (Todaro & Smith, 2015). Therefore, it is evident that it is essential for private and social since educated individuals can directly or indirectly benefit from the skills they acquire through education. Employers in the contemporary world across all the industries consider education as part of the qualification. This is supported by the fact that a college degree brings better employment opportunities, higher earnings, and even improved health and longevity.

Regardless of the fact that education is becoming expensive in the modern world does not mean it is losing its marginal benefit. This is due to the reason that the education tools that are used in the contemporary world are more advanced because education technologies are improving as time goes, and besides the job market expect new skills and ideas from the new employees. The sophisticated skills required by the employees are only acquired through education. Therefore, for the candidates to enjoy better opportunities, they are supposed to acquire unique skills that can only be acquired through costly education systems.

Education also promotes democracy and the substantial growth and leads to the reduction of crime and lowers the state welfare and the costs of the prison. These social benefits are substantial in relation to the cost of college education. Developed nations are characterised by educated individuals, while the developing nations are attributed by more illiterate people who can easily engage in social evils such as robbery and prostitution because the existing knowledge is inadequate to create jobs and even work in diverse sectors (Banerjee, Banerjee and Duflo, 2011). This means that the private and the social costs that are incurred by the government and private sectors to facilitate education are vital because they lead to long-term importance to the individuals and the entire nation as far as the social development and stability are concerned. This means that there is a strong correlation between education as human capital and social factors.

The individuals utilise the human capital formed by the education on average about double as many waking hours every week at home or the community as it is used on the job. During such hours it contributes to more productive use of the time. This creates private non-market benefits that are not easily measured by the market earnings and therefore not accounted for in conventional approximates of the value of education. Spending time waking to school and studying is costly to the sponsors and the government, but it is always necessary to factor in the aftermath of the education (Todaro, 2012). Furthermore, people do not spend more time studying as compared to the time people work and earn for their interest as well as the interest of the government. The government may spend more funds of establishing education institutions, which might seem to be costly, but is important to understand that such costs will help the government curb other costs linked to poor access to better education. This is because uneducated people are not as productive as compared to well-educated individuals. From the economic point of view, the learning curves and creativity of properly educated people are high as compared to illiterate persons. Therefore, the government can have a better opportunity to earn more revenue through taxes because productive people can help the government earn more revenue.

In conclusion, the human capital approach to education explains the private and social cost and benefit in a more realistic way. Education has a significant correlation with private and social benefits and costs because educated people enjoy the benefits of education. The same applies to the government because it can allocate funds to facilitate education and eventually experience benefits through revenues, reduction of social evils that may happen if and when the government does to apply preventive measures. Therefore, the investing more in education does not result to low marginal benefits; instead it leads to better individual life as well as an increase in the productivity across diverse industries and ultimately helps the government enjoy a profitable and peaceful nation.



Banerjee, A.V., Banerjee, A. and Duflo, E., 2011. Poor economics: A radical rethinking of the way to fight global poverty. Public Affairs.

Sen, A., 1999. Development as Freedom.

Todaro, M. P., & Smith, S. C. (2015). Economic development.

Todaro, M.S., S.(2012). Economic Development.