What is the difference between Human Capital and Physical Capital?

Human capital can simply be put as the skill sets, capabilities, and experience that employees invite into a business organization. These skill sets, capabilities, and experience add to the employee's productivity. In short, the human capital of a particular organization is the economic values that are added by the employee to that organization.

On the other hand, physical capital can be defined as all man-made, tangible, and nonhuman resources that are used in the processes of production of goods and services. Examples of physical capital include vehicles, machines, plants, and buildings.

What makes up the human capital are past educational background, employee networks, certificate, and ongoing professional related training. In addition, human capital is not tangible, while physical capitals are tangible. It is also easier to calculate capital, but a bit more complex to measure human capital.

Human capital refers to the experience, capabilities, skill sets that employees bring to the business organization while physical capital refers to the tangible, man-made, or non-human resources that are used in the production of goods and services.

When it comes to their composition, human capital refers to the combined value of an entity human components, while physical capital is comprised of non-human resources utilized in the production of goods.

Human capital is customized and personal, while physical capital is mostly non-personal and generic. Physical capital is tangible and concrete. You can touch and feel it, while human capital is the talent and skills of an individual.

Lastly, physical capital depreciates with times due to the constant use leading to wear and tear, while human capital appreciates with time especially by additional education or training.

Human capital and physical capital are important in running a business. They are both types of capital resources. Human capital takes knowledge and skills that a person has, which is useful in helping the business. It helps determine how valuable an employee is to the business.

Human capital helps guides the vision of the company along and helps in ensuring the business stays productive. Physical capital is the assets that the company has.

It is what the company is producing in terms of goods and services. The human capital aspect helps in creating the physical capital, and both are what make a company remain productive.

Human capital and physical capital are both types of capital resources that are crucial to running a productive business. Human capital encompasses the education, experience, knowledge, training, and skills that a person provides for a business. It can be described as the overall value of an employee for a company. Human capital is a significant variable in production and guiding the company’s vision through the employee’s education and training, which can improve proficiency.

Physical capital, on the other hand, is the real assets that have been produced and are utilized for goods and services. It refers to the resources created by people and is used in the manufacturing process. A couple of examples of this include equipment t used for the productivity of the company and buildings that are used in business operations.