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Prof. Shurlly Tiwari

Resource is something which is very helpful in fulfilling the target but which gets depleted in due course of time, with this definition in mind the question that arises is – should an employee salary grow with ages, when he as a resource is getting depleted over time? The simple answer to that can be that an employee increases in his / her experience and brings more value to the organisation, but this does not match with the definition of resource. So human beings cannot be considered as resource, since they do not get depleted but bring value and capital to the organisation, Hence, they are now termed as Human Capital.
In this blog we would like to analyse the derivation of Human Capital from social Capital. The paper elaborates in detail about social capital, its classifications and why social capital is important in day to day life.
What is Social Capital:
There is no single Social Capital definition, but simplistically Social Capital is defined as the networks of relationships among people who live and work in a particular society, enabling that society to function effectively.
Social Capital leads to Human Capital. Human Capita means the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value to an organization or country.
Social Capital is a combination of diversity among the people, sense of belongingness, networks and bonding bridges, feelings of trust and safety, reciprocity and participation. All these things create Citizen Power which also helps in building Values, norms and outlook in life. The combination of all these traits together defines Social Capital.
There are several examples in the society where a link between the social capital and human capital is clearly visible. Human Capital consists of creativity, abilities of the human beings, their skills, their education, training. Based on all these attributes the experience of people is decided and judgements are made which eventually leads to wisdom.
The term Social Capital was first used by James. S Coleman, an American sociologist, theorist, and empirical researcher. who studied the sociology of education and public policy? In 1991, Coleman was elected President of American Sociological Association. and in 2001, Coleman was named among the top 100 American Intellectuals, as measured by the American citations, in Richard Posner’s book.
There are two broad intellectual streams in the world- “Sociological Stream and Economic stream, and both these streams are not possible until and unless Human Capital is understood well by the society.
Coleman says that Human capital in present everywhere, often we have seen people in the same situation but behaving differently, the reason is that all of them have different Social Capital. Social Capital is defined by its function. It is not a single entity, but a variety of different entities having two characteristics in common. Firstly, they all consist of some aspect of social structure, and secondly they facilitate certain actions of individuals who are within the structure. (Coleman1988, p.302)
Different forms of Social Capital:
1.       Obligation: It is an act or course of action to which a person is morally or legally bound by a duty or commitment.
2.       Expectations: A belief that something will or should achieve something.
3.       Trustworthiness of structures: Ability to be relied on as honest or truthful.
4.       Information Channel: A communication channel logical connection to transmit data and information.
5.       Effective Norms and Sanctions: to make valid or binding usually by a formal procedure.
There are three basic concepts of social Capital and they are Resources, structure of Network and nature of relationship.
Social capital functions basically with two elements, one is bonding and the other is bridging. Bonding social capital means bonding which is formed in the homogeneous groups, such as employees within one company.
Bridging social capital refers to the idea of members from different groups sharing their ideas or information. The best example of this is all social networking sites such as Facebook, Twitter etc.
Let us consider some normal situations that we face daily. For eg.
Sharing Information and Resources: You tell your neighbour about the tasty food which you tasted in a restaurant or when a neighbourhood builds a community garden together using shared tools.
Providing assistance: You shift to a new house and your neighbour comes and helps you in unpacking things or when a group of cancer supporters come together for a cause.
Establishing Trust: When travelling in a bus or while returning from office your wallet falls down and a stranger returning it to you or when you feel stressed out someone helps you out to come out of it.
There are lot of companies which got benefited out of social capital to be specific certain companies like Uber, Ola and Airbnb have harnessed social capital to grow their market shares and have become huge pillars in their particular industries.
There are also some negative effects of social capital. For example, negative social capital happens when a social network is used for manipulative or destructive purposes like terrorists use social capital for manipulating people and destroy the society. Certain times a group of people collude to fix market price – which results in a situation of over pricing.
Everything in nature has both its positive and negative sides it purely depends on how we use it to get the fullest of benefits. Social capital if used in a proper way will help nations in solving problems with other countries and live in peace. It will help individuals by giving them a feeling of trust and security.
As we know that social capital is the path to human capital. Human capital is a measure of the economic value of an employee’s skill set. This measure builds on the basic production input of labour measure where all labour is thought to be equal.
The concept of human capital recognizes that not all labour is equal and that the quality of employees can be improved by investing in them; the education, experience and abilities of employees have economic value for the employers and economy as a whole.
Economist Theodore Schultz invented the term “Human Capital” in the 1960s to reflect the value of human capacities. He believed human capital could be invested through education, training and enhanced benefits that lead to an improvement in the quality and level of production.
Human capital is a collection of traits – all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom possessed individually and collectively by individuals in a population. These resources are the total capacity of the people that represents a form of wealth which can be directed to accomplish the goals of the nation or state or a portion thereof.
There are certain factors which determine Human Capital. They are
·         Skills and qualifications
·         Education levels
·         Work experience
·         Social skills – communication
·         Intelligence
·         Emotional intelligence
·         Judgment
·         Personality – hard working, harmonious in an office
·         Habits and personality traits
Creativity. Ability to innovate new working practices/products.
·         Fame and brand image of an individual. e.g. celebrities paid to endorse a product.
·         Geography – Social peer pressure of local environment can affect expectations and attitudes.
Human capital can be measured by certain means for example, in primary and secondary sector such as agriculture and manufacturing, human capital was easier to measure. The human capital of an assembly line worker could be measured in simple terms of productivity – e.g. the number of units produced per hour.
But when it came to tertiary sector measuring it was difficult because tertiary/service sector has a greater variety of jobs, which require different skills. These skills and qualities are often more difficult to measure regarding output. For example, the human capital of a teacher, cannot be measured by university degree and A-Levels. The best academics may lack some teaching skills – like empathy, the ability to inspire and command a class.
In other words, as the economy has developed the concept of human capital has also broadened to include a greater variety of skills.
Human capital is very important in various aspects , some of them are listed below aspects:
Structural unemployment. Individuals whose human capital is inappropriate for modern employers may struggle to gain employment. A major issue in modern economies is that rapid deindustrialization has left many manual workers, struggling to thrive in a very different labor market.
Quality of employment. In the modern economy, there is increasing divergence between low-skilled, low-paid temporary jobs and (Gig economy). High-skilled and creative workers have increased opportunities for self-employment or good employment contracts.
Economic growth and productivity. Long-term economic growth depends increasingly on improvements in human capital. Better education, innovative and creative workforce can help increase labor productivity and economic growth.
Human capital flight. An era of globalization and greater movement of workers has enabled skilled workers to move from low-income countries to higher income countries. This can have adverse effects for developing economies who lose their best human capital.
Limited raw materials. Economic growth in countries with limited natural resources, e.g. Japan, Taiwan and South East Asia. Rely on high-skilled, innovative workforce adding value to raw materials in the manufacturing process.
In nutshell Social Capital is the value that comes from social networks, or groupings of people, which allow
individuals to achieve things they couldn’t on their own and human capital is the measure of skills, education, capacity and attributes of labour which influence their productive capacity and earning potential.
An organization is as good as its people – hence, human and social capital have to go hand in hand in order to help an organization reach its maximum productivity as a company is often said to only be as good as its people.
Social capital is necessary for the success of the society and economy. It heavily relies on the trust and establishing relationships. Closure of social networks is critical for the forms of social capital such , particularly norms and trustworthiness to develop. Social capital plays an important role in creation of Human capital.
Tangible= Physical Capital> Human Capital>Social Capital.
·         Coleman, J.S. (1988). Social Capital in the creation of Human Capital.AJS,94, S95-S120.
·         Marsden, P.V. (2005). The sociology of James. S. Coleman. Annu.Rev. Social.,31,1-24.
·         Burt, R.S. (2002). the network Structure of Social Capital. ROB, 22,345-423.
·         Burt, R.S. (2000). Structural hole versus Network Closure as Social Capital.