Today’s best managers know about the importance of human capital on wages. Employees develop their knowledge, skills, and abilities, called human capital, then sell these to the organization that will pay them the highest wages. Employees can increase their human capital through work experience and time on the job. Unfortunately, time away from the job, such as for having and raising children, and when unemployed, can cause employee skills to depreciate. When employees lose skills, then they also lose human capital, and that tends to result in a loss of wages.
Source: Edn, P.-A., & Gustavsson, M. 2008, January. Time out of work and skill depreciation. Industrial and Labor Relations Review, 61, 163-180.
