How Do Businesses Measure Human Capital?

Human capital evaluation can use the cost method, that is, from the perspective of human capital formation, the various costs of human capital investment are directly added up to calculate the value of human capital.

Human capital assessment

The measurement of human capital value can be based on the cost method.

The replacement cost of human capital value refers to the cost of updating and reshaping with a certain degree of education or professional and technical qualifications and putting it in use or standby under the current price and molding standards. The replacement cost can be divided into two stages: study and work. In addition, in the replacement value of the cost method, the investment profit of human capital should also be considered; and the opportunity cost of funds will be generated by putting funds into human capital, so the cost of funds also needs to be considered. That is, the current replacement value of the value of human capital = the current replacement cost of the academic education phase + the replacement cost of the current qualification work phase + capital cost + investment profit. People's investment in the schooling stage mainly includes: (1) national, social and corporate education expenditures, calculated on a per capita basis; (2) scholars and their families' living expenses and tuition and fees. The author proposes a relatively simple calculation method here. The investment projects in the working phase mainly include the following three aspects. Among them, the investment in education and training includes: (1) follow-up education investment; (2) special expenditures on living when individuals participate in studies; (3) corporate investment in various types of collective cultural life and security of employees; (4) various types of Expenses for pre-job, mid-job and transfer training organized by the enterprise itself. The requirements for obtaining the above data are: first, authority, that is, the authority of the channel from which the data originates, which can be accepted by the appraisal client or the appraiser; second, legitimacy, the calculation based on legal data is a realistic amount; Third, the rationality, that is, both the value in the sense of economics and the value in accounting should be considered; fourth, the operability, that is, the result can be reflected through the general calculation process. The capital cost of human capital cost value can be calculated based on the total investment amount (calculated above) from school and employment to the evaluation base date and the one-year bank deposit interest rate for the same period on the evaluation base date. Cost of funds = total investment amount × interest rate Human capital cost value of investment profit can be calculated as follows: Investment profit = total investment amount × human capital investment profit rate Human capital investment profit rate generally includes risk-free return, risk return and inflation rate. The risk-free rate of return data generally includes the interest rates on bank deposits and the interest rates on medium and long-term government bonds during the same period on the evaluation base date. The risk-return ratio relates to changes in government policies, changes in technological progress or technological application effects related to enterprises, corporate income, the scale, form, cost and possible impact of corporate financing, corporate reputation, and market demand for corporate products , Price changes, the possibility of changes in production costs, etc.