We often hear from our elders that if we do not study then we will not be able to do anything good with our lives. By anything good, they solely mean that we will not be able to earn much money. This saying is true up to some extent but there are a few exceptional cases in which it doesn’t apply but then again exceptions are everywhere, aren’t they?
What is Human Capital Formation in Economic Development?
The concept of Human Capital is simple, it includes intangible assets such as education, training, intelligence, skills, health, and other things. Some more characteristics of human capital are loyalty and punctuality. Now all the above traits contribute to a more productive and profitable employee which will directly affect the company’s economic growth and hence Human Capital Formation in Economic Development is necessary.
The Economic Importance Of Education
Education and Economic Growth both are directly proportional to each other’s growth. Education and Economy go together in terms of the development of society and upto a very large extent education plays the most important role in the development of Economy.
In the past few centuries people have taken Education for Economic development. There can be no second doubts about the importance of education in economic development. We have seen many great examples throughout history and even now, people like Sundar Pichayi, Satya Nadella, Parag Agarwal and many others have used their education to become CEOs of tech giants of the world.
Now we will discuss the 7 reasons why Education is important in capital formation and economic development.
Education as a tool for development of productive skills
The basic need for survival these days is money and how one will earn money. Money can be earned by developing a set of skills. These sets of skills are taught to those who want to learn them and this is considered as a part of education. Many Universities and Colleges have graduation and post graduation programs which are dedicated towards making students capable of earning their livelihood.
Education in human capital formation
Education is a crucial component of human capital theory since it is regarded as the primary means of acquiring information and thus a means of determining the quality of labor.
The most significant economic theory of education is Human Capital Theory, which has become a crucial driver of economic performance.
Adam Smith (1776) includes human capital in his definition of capital in his book The Wealth of Nations. The importance of skills and knowledge as a tool for economic development has been underlined by A. Marshall.
Economists had forgotten about this concept until Theodore W. Schultz (1960) adopted it for the first time in the 1960s. Becker (1964) and Mincer (1984) expanded on this idea, demonstrating how investing in human capital might affect future real income by embedding resources (skills and knowledge) in people.
Impact of education on economic growth
The Impact of education on economic growth can not be undermined. As discussed earlier, education has played a key role in the development of Economy.
Both secondary and higher education have a positive and significant relationship with economic growth in the linear model. According to the findings, a 10% increase in secondary education leads to a 1.5 percent boost in economic growth, while a 10% increase in tertiary education leads to a 0.9 percent rise in economic growth, ceteris paribus.
Education’s role in making a better society
Education is not only necessary for earning a living but also how you manage in the society and how healthy one is mentally. People who are happy in their lives automatically perform better in their jobs and have a much better impact on others. How does Education have to do anything with this? Education plays a vital role in teaching morals and developing an understanding that helps people to understand each other and have better relationships among them. This results in a happy and lively environment which directly influences the work rate.
Education’s role in Cultural Acceptance
People in India are very accepting of people who come from different backgrounds and we can see that in the educational places as well as the workplaces that people of different cultures work together harmoniously which is fruitful for the economy as people are working in sync depending upon the skills they have not their ethnicity which leads to more productivity and the credit goes to Education. Education teaches us not to distinguish among people on the basis of their backgrounds and this has impacted on our lives in a positive way.
Education’s role in developing the youth
The youth or the young people of the country are very sensitive and education helps them to not only get their lives on track but also get them working towards the betterment of society with new ideas and technologies that help us in our daily lives. Education has led many young people in this country to go on and contribute in the human capital and human development and gained a significant rise in human capital in India.
There are many incidents where Indian youth has created companies which went on to create so many quality jobs and people get the salary they deserve in such companies. Companies like Flipkart, Byju’s, Paytm and more have contributed. This helps in the human capital formation in India.
Education as Investment in human capital
Education is undeniably the most important aspect in human development. All the above details indicate that education serves as the single most powerful means to increase human capital in India. Investing in education means that we are investing in human capital formation.
Parents these days spend fortunes on their child’s education and it is only justified as this is the most safe way to give a career to them. However, the government and education ministers should also invest and work on the current education system so that we will be able to cope up with the world.
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