The Ultimate Source of Human Capital

In 1961, Theodore W. Schultz published an article in the American Economic Review entitled “Investment in Human Capital,” that introduced his theory on the topic. In short this theory asserts that just as money provides value to an economy, so also do human skills and education. Since its initial introduction, the concept of human capital has become widely accepted and implemented. Today some colleges even offer Masters programs in the area of human capital.

This theory makes sense. A company with well-trained employees possesses more value than an otherwise comparable company that does not.

As already noted, the primary means of enhancing human capital is viewed to be education and other training. Promotion of good health is also given some consideration. Though these applications have validity as far as they go, they are shortsighted in their exclusion of character, which gives evidence of being the major contributor to human capital.

Think, for example, about how qualities such as honesty and responsibility contribute to the value of an employee, or from the negative perspective, how much employees lacking these qualities can cost a company.

For example, a woman in a position for five years not only develops skill at doing her job but also increases her value through developing relationships, learning the company values, etc. In addition, the company may have invested in additional education for her.

Now consider the loss to the company if this woman lacks character. She may have a drug or alcohol problem that results in loss of work and doing work poorly and ultimately dismissal. She may embezzle or steal money or other property. If caught, the company loses the employee and must start all over in training another person. If not caught the loss could go on for years. Or perhaps the person is irresponsible, doing just enough work to keep from getting fired. Or she may be grumpy and self-centered, creating turmoil and a bad work environment, hurting the productivity of others. The list is virtually endless of the potential cost to a business because of an employee lacking character.

On the other hand, think of the blessings if she possesses strong character, showing up on time, working hard, being friendly and creating good relationship with those around her, exercising honesty and dependability in all of her dealings with her employer, and as a result being a good employee for the long haul.

We see, then, that though education and skills are important, character offers substantially more benefit to an employer, making it the ultimate contributor to human capital.

Now imagine the impact of character as a factor of human capital on society as a whole. The various benefits of character described above will not only contribute to the business climate of the country but also will enhance the overall life and economy of the community. In addition, character leads to the stability of the family, monetary discipline of individuals, morality, and other beneficial qualities that contribute substantially to the welfare of a society. Beyond that, character in government will be a major contributor to every aspect of life. Rigged elections, legislation through bribes, and self-serving politicians are very costly to any society, as sadly we are discovering. Therefore, character constitutes the ultimate contributor to human capital not only to business but also to society as a whole.

We have discussed previously the power of culture. Depending on the nature of a culture, that power can either engender character or discourage it. To a large extent, the degree of character displayed by a given society mirrors the value to which that culture places on it. Consequently, a culture that promotes character will possess a much higher store of human capital, endowing it with a substantial advantage over one that does not.

Our next several posts will demonstrate that the capacity of a Christian culture to promote character has been responsible for American success.

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