What is the relationship between human capital and worker well-being?

Responsible researcher: Viviane Pires Ribeiro

Paper Title: A systematic review of human capital and employee well-being: putting human capital back on the track

Authors: Md Shamirul Islam and Muslim Amin

Location of Intervention: Various countries

Sample Size: 69 quantitative research articles

Big topic: Job Market

Variable of Main Interest: Human capital

Type of Intervention: Expand the concept of human capital and worker well-being

Methodology: Literature review

Human capital does not just involve individual competence, but includes acquisition, utilization and development of competence in a broader sense. The literature review carried out by Islam and Amin (2021) seeks to demonstrate a broader perspective on the concept of human capital and worker well-being. The review results suggest that multiple organizational theories, workplace learning, and learning organization perspectives underlie human capital and well-being relationships. The review advises that the high-involvement work model encompasses well-being as part of the development of human capital.

Assessment Context

Human capital and worker well-being, apparently two different concepts, can be considered, on the one hand, an explicit way of recognizing qualitative differences in people, including their qualifications, and, on the other hand, a question of rights to the interests of employees which are often compromised by the external and contextual pressures of the 21st century. In this way, the value of human capital is not limited to the "stock" variables belonging to workers, but to the ability of employees to generate economic results determined by the state of health and factors related to well-being.

Despite the extensive literature on human capital and worker well-being, there are few studies that analyze how the two are connected. The lack of a broader focus on Human Resources (HR) offers little insight into how human capital and well-being are linked. In the Strategic Human Resource Management (HRM) literature, much of the discussion is centered around investing in human capital through the HRM approach. In other words, the existing literature seems to have a narrow view of human capital rather than the path through which it is formed.

Intervention Details

The review carried out by Islam and Amin (2021) seeks to demonstrate a broader perspective on the concept of human capital and employee well-being. In this sense, the authors raised the following research questions to guide the review article: (1) How has human capital been conceptualized and studied? (2) How has employee well-being been conceptualized and studied? (3) What do we know about the theoretical notions that link human capital and well-being? (4) What theoretical notion is necessary to advance research on human capital and well-being?

The study makes several contributions to the literature. First, it provides a comprehensive understanding of the concept of human capital from both an individual and organizational perspective. Secondly, it advances the understanding of the concept of well-being by categorizing happiness, health and financial aspects. Third, it provides a comprehensive understanding of the existing theoretical arguments that underlie the human capital and well-being relationship.

Methodology Details

The review followed the systematic literature search protocols of the Academic Journal Guide 2018 generated by the Chartered Association of Business Schools. The steps of the systematic quantitative approach mainly consist of (a) determining the objective of the review; (b) identify keywords, databases and literature selection criteria; (c) search the literature and evaluate the results in relation to the inclusion and exclusion criteria; (d) evaluate the quality of the literature and structure summary tables; and (e) synthesize and report results.

The review team used the following keywords: "human capital" OR "intellectual capital" OR "individual competence" OR "employee skills" AND "employee well-being" OR "employee happiness" OR "employee health " OR “employee satisfaction” OR “work engagement” OR “job stress”, etc. The authors searched for these words using the filter option in Google Scholar's advanced search.

Only articles that reported empirical results were considered. Therefore, book chapters, theoretical articles, literature reviews, book reviews, qualitative articles and meta-analyses were excluded from the initial analysis. The initial search resulted in 349 articles. Secondary screening was carried out by evaluating several criteria: studies that exclusively discussed human capital or well-being without relating one to the other were not considered; each article needed to discuss at least one aspect of human capital (e.g. competence, formal qualifications, experience, training and development, utilization of competence at work, etc.); and each article needed to discuss at least one aspect of worker well-being (happiness, well-being, health and financial well-being).

Therefore, 69 empirical (quantitative) studies were selected for further review. These were published between 1999 and 2020, with 72% of the studies published between 2010 and 2020.  

Results

The literature review provides a broader view of the concept of human capital and employee well-being and explains theoretical notions underlying the human capital and well-being relationship. The review also highlights that human capital and well-being studies are based on several theories, including Social Exchange Theory (SET), Human Capital Theory (HCT), Signaling Theory (ST), Social Cognitive Theory (SCT) , Conservation of Resources Theory (CORT), Job Demands and Resources model (JD-R), Organizational Support Theory (OST), opportunity-motivation-skill (AMO) theory, Job Characteristics Model (JCM) , Psychological Theory of Contract (PCT) and Social Learning Theory (SLT).

The review highlights some significant differences in the conceptualization and measurement of the human capital construct. Relying exclusively on traditional measures of human capital (e.g., formal qualifications, job position level, and period of experience) undermines the comprehensiveness of the construct. Islam and Amin (2021) argue that the appropriate assessment of human capital encompasses the type of knowledge and skills that employees acquire to perform their work and involves how and from whom they obtain them. In this sense, the multidimensional competence structure (cognitive, functional and behavioral) relevant to an individual's work/occupation provides a better representation of human capital.

The authors extend the concept of human capital beyond individual boundaries, including the acquisition, use and development of skills. In other words, human capital emerges from individuals, but must be developed; otherwise, its value will be exhausted. Much of development depends on organizational efforts. The formal approach to skills acquisition (training and development) plays an essential role in shaping the skills of the workforce. Furthermore, the utilization of competence occurs through the performance of job functions, job enrichment, and individual efforts. The structure of the organization that learns this fact allows for the individual's continuous learning and use of skills. Skills enhancement mechanisms are interrelated and will likely be strengthened when implemented.

Furthermore, the review highlights that the psychological well-being (happiness) and financial health of employees, in the category of subjective and objective well-being, provide some relevant points. Subjective well-being considers that greater employee satisfaction, greater commitment, and fewer negative behaviors (e.g., stress) are the path to increased well-being. In contrast, job characteristics/qualities (e.g., extent of job autonomy, challenging assignment, financial benefits) can achieve well-being because these quality indicators impact the formation of employees' psychological contract and overall perception of the job. work.

Public Policy Lessons

The study carried out by Islam and Amin (2021) offers practical implications for human resource management professionals. The review discusses multidimensional aspects of human capital that can help organizations design optimal human capital development strategies, ultimately leading to better organizational performance. Therefore, companies must pay attention to the analysis of internal needs and the usefulness and applicability of each human capital development mechanism, since evidence suggests significant differences in the application of formal training, work development and learning organization.

Furthermore, the review provides a better understanding of employee well-being and highlights that an organization's investment in human capital will reap the full potential of human resources if employee well-being is considered a rights issue, rather than considering well-being as a means to improve business performance. Companies need to value human capital, allowing their employees to demonstrate their potential and develop their creativity at work. The HR department and HRM professionals must facilitate a type of work culture in which employees have autonomy over work-based decisions, demonstrate responsible behaviors, and value their participation in the company.

References

ISLAM, Md Shamirul; AMIN, Muslim. A systematic review of human capital and employee well-being: putting human capital back on the track. European Journal of Training and Development , 2021.