Human Capital Theory: Implications for HR Managers



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    • *School of Education, Stanford University. This paper was originally prepared for presentation at a symposium on The Economic Approach to Human Resource Management and Industrail Relations at the Annual Meetings of the Indsustrial Relations Research Association (IRRA), New York City, December 27–30, 1988.


This paper reviews some of the contributions of and challenges to human capital theory. It focuses on the alleged link between earings and education and experience and on competing explanations for observed earning differentis by race and by gender. The review concludes that while human capital theory provides some central insights about the supply side of the labor market, the challenges to this theory suggest that the demand side od the market, i.e., the actions of human resource managers, also play a key role in detemining earnings and employment. Moreover, these challenges suggest that government policies can be instrmental in effecting a more efficient and equitable use of human resources.