Human Capital explained: What is it and how is it measured?
‘Human Capital’ is an economic metaphor for the knowledge, skills, and health of individuals through which they seek to better their lives. As economies have become increasingly knowledge-based and globalised, providing both greater demand and flexibility in movement for skilled labour, the economic significance of human capital has increased at every level in society. This includes for an individual’s employability and earning capacity, for a firm’s competitive advantage as an employer, and for a country’s economic success.
The Organisation of Economic Co-operation and Development defines human capital as “knowledge, skills and health of individuals that facilitate the creation of personal, social and economic wellbeing”. The role of the firm in creating human capital is an increasing area of interest for business leaders and policy makers, due to the sheer size of employment in and the scale and value of in-house training provided by the private sector.
Download our full Human Capital valuation guide that includes:
Overview of GIST’s Human Capital valuation
GIST’s Human Capital methodology measures and values the impacts of a business or organisation’s Employee Hiring & Training, Employee Health & Safety (EHS), and Gender & Diversity practices on its employees’ human capital. GIST follows a Drivers>Outcomes>Impacts’ framework for its human capital assessments.
Overview of data sourcing and processing
A step-by-step guide on how Human Capital values are estimated, collated and displayed by GIST for investor and corporate clients.
Human Capital valuation framework
An income-based approach to measure human capital creation, human capital externalities and employee health and safety impacts being generated by businesses.
Human Capital valuation methodology
An illustration of our model accounts for the flow of human capital to and from the organisation via hiring and attrition, and measures the economic impact of EHS practices on the wellbeing of its employees.