What is defined as 'human capital' in economic terms?

Human capital refers to the skills, knowledge, and experience possessed by individuals that contribute to their ability to perform work and produce goods and services. This concept underscores the importance of education and training in driving productivity and economic growth. In essence, human capital enhances an individual's value in the job market and increases potential earnings, benefiting both the individual and the economy as a whole.

While physical resources and financial capital play significant roles in production and business operations, they do not capture the essence of human capabilities and contributions. The total amount of goods produced by a workforce is a measure of output but does not account for the knowledge and skills that individuals bring to their roles, which is precisely what human capital encapsulates. Therefore, emphasizing the skills and knowledge of individuals correctly identifies human capital in economic terms.