He believed human capital was like any other type of capital ; it could be invested in through education, training and enhanced benefits that lead to an improvement in the quality and level of production.
Wage theory Theories of wage determination and speculations on what share the labour force contributes to the gross domestic product have varied from time to time, changing as the economic environment itself has changed.
Contemporary wage theory could not have developed until the feudal system had been replaced by the modern economy with its modern institutions such as corporations.
Classical theories The Scottish economist and philosopher Adam Smithin The Wealth of Nationsfailed to propose a definitive theory of wages, but he anticipated several theories that were developed by others.
Smith thought that wages were determined in the marketplace through the law of supply and demand. Workers and employers would naturally follow their own self-interest; labour would be attracted to the jobs where labour was needed most, and the resulting employment conditions would ultimately benefit the whole of society.
Although Smith discussed many elements central to employment, he gave no precise analysis of the supply of and demand for labour, nor did he weave them into a consistent theoretical pattern.
He did, however, prefigure important developments in modern theory by arguing that the quality of worker skill was the central determinant of economic progress. Moreover, he noted that workers would need to be compensated by increased wages if they were to bear the cost of acquiring new skills—an assumption that still applies in contemporary human-capital theory.
Smith also believed that in the case of an advancing nation, the wage level would have to be higher than the subsistence level in order to spur population growth, because more people would be needed to fill the extra jobs created by the expanding economy.
Subsistence theory Subsistence theories emphasize the supply aspects of the labour market Human capital development and productivity relationship neglecting the demand aspects. They hold that change in the supply of workers is the basic force that drives real wages to the minimum required for subsistence that is, for basic needs such as food and shelter.
Elements of a subsistence theory appear in The Wealth of Nationswhere Smith wrote that the wages paid to workers had to be enough to allow them to live and to support their families.
The English classical economists who succeeded Smith, such as David Ricardo and Thomas Malthusheld a more pessimistic outlook. Courtesy of The National Portrait Gallery, London Subsistence theorists argued that the market price of labour would not vary from the natural price for long: At the time that these economists wrote, most workers were actually living near the subsistence level, and population appeared to be trying to outrun the means of subsistence.
Thus, the subsistence theory seemed to fit the facts. Although Ricardo said that the natural price of labour was not fixed it could change if population levels moderated in relation to the food supply and other items necessary to maintain labourlater writers were more pessimistic about the prospects for wage earners.
Ricardo maintained that an increase in capital would result in an increase in the demand for labour. Smith defined this theoretical fund as the surplus or disposable income that could be used by the wealthy to employ others.
Ricardo thought of it in terms of the capital—such as food, clothing, tools, raw materials, or machinery—needed for conditions of employment. The size of the fund could fluctuate over periods of time, but at any given moment the amount was fixed, and the average wage could be determined simply by dividing the value of this fund by the number of workers.
Regardless of the makeup of the fund, the obvious conclusion was that when the fund was large in relation to the number of workers, wages would be high. When it was relatively small, wages would be low. If population increased too rapidly in relation to food and other necessities as outlined by Malthuswages would be driven to the subsistence level.
Therefore, went the speculation, labourers would be at an advantage if they contributed to the accumulation of capital to enlarge the fund; if they made exorbitant demands on employers or formed labour organizations that diminished capital, they would be reducing the size of the fund, thereby forcing wages down.
It followed that legislation designed to raise wages would not be successful, for, with only a fixed fund to draw upon, higher wages for some workers could be won only at the expense of other workers. After the wages-fund theory was discredited by W. Longe, and Francis A. Walkerall of whom argued that the demand for labour was not determined by a fund but by the consumer demand for products.
Indeed, the total amount paid in wages depended upon a number of factors, including the bargaining power of labourers. Despite these telling criticismshowever, the wages-fund theory remained influential until the end of the 19th century.
Marx blamed unemployment on capitalists. Furthermore, Marx held that, in capitalism, labour was merely a commodity: Marx speculated, however, that the owner of capital could force the worker to spend more time on the job than was necessary for earning this subsistence income, and the excess product—or surplus value—thus created would be claimed by the owner.
Residual-claimant theory The residual-claimant theory holds that, after all other factors of production have received compensation for their contribution to the process, the amount of capital left over will go to the remaining factor. Smith implied such a theory for wages, since he said that rent would be deducted first and profits next.Why is there something rather than nothing?Might the world be an illusion or dream?What exists beyond the human senses?What happens after death?Does divine or supernatural agency exist?
Is the future already decided?; What is the meaning of life?What is right and wrong?Is the world good or bad?Are humans good or evil?What beings should have .
The concept of human capital stems from the economic model of human-resource capitalism, which emphasizes the relationship between improved productivity or performance and the need for continuous and long-term investments in the development of human resources.
This model can be applied on a broad scale where investments in human capital are. Types.
There are several types of human capital flight: Organizational: The flight of talented, creative, and highly qualified employees from large corporations that occurs when employees perceive the direction and leadership of the company to be unstable or stagnant, and thus, unable to keep up with their personal and professional ambitions.
Jul 21, · It’s important to understand how the cloud and DevOps work together to help businesses achieve their digital transformation goals. Box and Cox () developed the transformation.
Estimation of any Box-Cox parameters is by maximum likelihood. Box and Cox () offered an example in which the data had the form of survival times but the underlying biological structure was of hazard rates, and the transformation identified this. A particular application of marginalist analysis (a refinement of marginal-productivity theory) became known as human-capital theory.
It has since become a dominant means of understanding how wages are determined.