Proposed Framework for Assessing Human Capital: Derivation of the Human Capital Index and Its Application

Abstract

The measurement of human capital is a challenging task for both researchers and professionals. Numerous studies have been undertaken to formulate a technique which can comprehensively encapsulate the various dimensions of human capital. However, there is a need to develop a technique that measures human capital by capitalizing on its intangibles aspects. The study therefore proposes a framework that captures both the qualitative and quantitative aspects of human capital by assigning weights for different dimensions of human capital. By applying the Analytic Hierarchy Process (AHP) technique to the case of the textiles industry in Pakistan, we have derived a human capital index, consisting of 9 main dimensions and 36 sub-dimensions. Each of the dimensions and sub-dimensions of human capital has been prioritized according to its importance. The results for the textiles industry in Pakistan reveal that the sub-dimensions of experience rank highest, followed by skills and turnover. The framework introduced in this study can be adopted to derive the human capital index for various industries and sectors.

Keywords: human capital dimensions; human capital sub-dimensions; AHP; human capital index; textiles; Pakistan

JEL Classification: J24, B41