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Role of Education in Human Capital Formation

The measure of abilities, educational quality, and characteristics of the labor force in a country, affecting their productivity and earning capacity or potential, is known as human capital. The human capital of an economy is defined by gross human capital. It is quantified by national educational standards. The role of education in human capital formation cannot be overstated.

In this article, you will find out how education is the most significantly crucial factor for human capital formation. Education is the most effective tool to enhance and increase the capacity of the workforce of a country. There is a large difference between the cost of education and the benefits gained from it. This difference is the measure of the value of the human capital of a country. Education helps in enhancing a country's income and in the overall development of a society. The importance of human capital formation cannot be overemphasized. Through this blog, we will analyze the role of education in human capital formation. Without further ado, let us take a look at human capital formation and the importance of education.

Significance of Human Capital

Human capital has a crucial role in molding a country’s economy.

Solving unemployment issues: Employers prefer and look out for a workforce with decent human capital. Thus, having stable human capital can mold one's job career and solve the problem of unemployment.

Enhancing the quality of employment: Individuals with great human capital can create employment opportunities for themselves. Often, highly creative and competent jobs make good platforms for self-employment. Human capital allows individuals to be capable of such job roles.

Uplifting economy and productivity: Human resource development is responsible for the development of the economy of a country. A skilled, creative, and hard-working workforce help increase productivity and aid the nation’s economic development.

Reducing migration of skilled workforce: Globalization has led to increased migration of professional workers from their own country to countries offering a higher income to them. This has a negative impact on a country's development as it causes the loss of the best human resources and workforce. Enhancing the quality of human resources by upgrading the quality of human capital can lead to a reduction in workers' migration.

Role of Education in Human Capital Formation

For the growth and development of human society, education has always played a key role. Education is directly related to the evolution of society and humanity. There are several mediums through which education can be disseminated. For an organization, it is always more profitable to hire professional and qualified personnel compared to hiring unskilled ones. The earnings of skilled professionals are much higher compared to that of unskilled people. A skilled person contributes much more to a country's economy than an unskilled person.

Below are some of the roles that education plays in human capital formation:

  • As mentioned, education helps in the evolution of humanity. Education teaches us to care and be empathetic, not only towards others but also to ourselves.
  • Education promotes the growth of a country's economy. Besides, it also enriches our life experience by providing greater insight into a number of topics. Education is the greatest way of gaining information about something, which can be applied in real life to intellectually grow as an individual.
  • An educated society always stays ahead and is more progressive than a society with low quality of education and educational standards. Furthermore, it helps in raising the standard of the human capital of a country. This in turn increases the national income of a country and enhances government functionaries.
  • Education also provides the opportunity to enhance the cultural richness.
  • Education can also be inspirational for the youth of the country giving them new visions, perspectives, and hopes for a progressive society. Thoughts and visions of youths can be effectively molded with the help of education.
  • Education plays a role not only in the growth of an individual but also in the overall progress of society.

Importance of Education and Human Capital in the Economic Development of a Country

In the case of the economic development of a country, human capital is one of the key factors driving it. Education directly affects the qualitative development of a country's human capital. For an increased growth and amplification of the economy, the government needs to focus on enhancing the quality of its human capital. That is why many countries that invest in education and drive the development of human capital remain ahead of others. The benefits are twofold as education helps the government to have a skilled workforce on the one hand, and, on the other hand, it provides individuals with the opportunity to experience an enhanced lifestyle. Thus, education helps in developing human capital which in turn provides individuals with their best living and working experiences.

For the optimum development of society, human resources of sectors like health, administration, education, and research play significant roles. The nations investing in the human capital of such sectors have the advantage of rapid and healthy development. The quality of education is important for producing a skilled workforce, especially in these important sectors.

Members of a country's population are undoubtedly the key participants, helping in its development. The human capital manages a country's national assets. A highly competent, creative, educated, and skilled individual with high technical capabilities serves this purpose the best. To produce such skilled individuals, education plays a key role. For all individuals, practical knowledge about the work field is important for performing well at work. Education serves both of these purposes.

There is a strong reason for all scholars to consider the human capital of a country to be the most valued asset. Human capital directs the rate of development and drives the economy and technical and research-related growth in every country.


There are several important roles of education in human capital formation. Education facilitates social development. Compared to an illiterate workforce, an educated workforce is much more efficient for a country's progress. Productivity and prosperity are much more enhanced with the help of education. It also helps us experience a much more enriched lifestyle. Education contributes to the growth of every individual, which in turn helps form a literate and aware society.

Last but not least, education helps in the growth of a country's gross income. Furthermore, it also enhances the cultural richness of a country.

Teachmint helps schools envision a future where their students are equipped with 21st-century skills. With our advanced learning management system, you can improve the teaching-learning experience. Our offerings like education erp, admission management system, fee management system, and others conveniently digitize educational institutions.

Suggested Read: 10 Skills Required to be a Class Teacher

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