Human capital can be understood better if we take an analogy with physical resources. Like physical resources say land can be converted into physical capital and assets, a nation can also convert human resources like students into human capital or human assets like doctors and engineers. Any society needs enough human capital in order to develop more human capital for the future. That is, any upcoming society needs educated people like professors who in turn train and educate human resources and turn them into human capital. Hence an investment into human resources will produce more human capital as returns.
Preventive medicine( vaccination), curative medicine( medical help during the course of an illness), social medicine ( spreading knowledge about health and achieving health literacy), provision of clean drinking water and good sanitation are some of the expenses related to health.
On the job training is an expenditure that firms generally incur. It has different forms: The workers may be trained under the supervision of a skilled an experienced worker, within the firm itself.
Off- campus training or sending the workers out to undergo training related to the job.
Many people shift from the rural areas to the urban areas in search of work. Migration is a phenomenon which happens when people change jobs in order to increase their income. Hence migration is because of two reasons: Unemployment causing migration from the rural to the urban areas
Increase of income which causes technically qualified people like doctors and engineers to migrate.
When migration happens, there is an expenditure involved like the cost of transport, higher cost of living in the migrated persons and psychic costs of living in a different socio cultural society. Since the income got from migration is much more it outweighs the costs of migration. This makes the expenditure on migration a source of formation of human capital.
Education provides knowledge and helps in understanding the changes that happen in the society.
Education acts as a facilitator to promote new inventions and innovations.
An educated labour force also encourages the adoption of new technologies.
Human capital considers education and health as means of increased productivity of the workforce; human development is formed on the idea that education and health are an integral part for human well-being. Human development has its basis on education and health as it is quite plain that unless the people are educated and are healthy they will not be able to make the choices that they value. Human capital treats human beings as the means to increase productivity. Hence any investment in education or health is not profitable unless it increases the out of goods and services. Human development, on the other hand, treats human beings as ends in themselves meaning any investment in unproductive education and health is still essential for the well being of the human beings. In this view, basic education and basic health are important irrespective of their contribution to the economic growth and hence every individual has a right to have their access.
There are two ways to express the government expenditure:
1. As a percentage of the total government expenditure
2. As a percentage of educational expenditure of the GDP
The percentage of educational expenditure in both the total government expenditure and in GDP shows the fact that the government is committed to improve the educational status of our country. During 1952-2002, the percentage of educational expenditure in the total government expenditure increased from 7.92% to 13.17% with the increase in the percentage of GDP was .64% to 4.02. Through this period the increase in the expenditure towards education was not uniform, it has its rises and falls. If we add the individual expenditure on education during this period, then the total amount spent on education would be much more.
Out of the total expenditure on education, elementary education takes the maximum share. Intermediary or tertiary education ( colleges, polytechnics etc) take the minimum share. Though the tertiary education share is lesser, the expense per student is higher than that of elementary education. Obviously, this does not mean funds have to be transferred from tertiary education to elementary education. The expansion of school education needs more teachers who have had collegiate education. Therefore, the expenditure on all levels of education should be increased.