INVESTING IN HUMAN CAPITAL: INVESTMENT OR EXPENSE?

For a long time, investments in human resources had been seen as a cost. If capitalists had not achieved enough profit, they would have blamed their workers and reduced their rents. In economic theory, at one time the ruling theory was inflation of cost. Proponents of this theory held that the workers and their high rents were guilty for economic stagnation and rising costs of production. So they were looking for different ways to reduce workers salaries, ie. rents. The workers were unorganized while employers were organized, so they had a great advantage in the negotiations. Increase in production costs leads to higher prices, and hence to inflation. In this case, investment in human resources is the cost. Is it really so? In modern economic theory, investment in human capital is not seen as a cost but as an investment. Educated and competent labor force provides greater productivity and efficiency. The main factor of competition on contemporary market are innovations, and bearers of innovation are people. Educated and skilled employees provide strategic advantage to the company. Education increases qualifications and consequently the expertise. Education also leads to the selection and specialization of workers. Therefore, investment in human resources must have a significant role in the budget of each country. Serbia invests little in human resources. This mainly applies to countries in the region. For scientific research work, it is allocated less than 1% of gross domestic product. European Council in Lisbon appealed to Southeast Europe countries to increase spending on scientific research and education. Allocations from the budget have increased, but this is still not sufficient. Bearers of progress and prosperity are people, not machines. People construct machines and manage them. Machines work to satisfy human needs. So, it is expected that in the future investments in human capital will be nearly as important as investing in the funds.