Which of the following is NOT a benefit of human capital formation?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → It increases the cost of production.

Human capital raises what people can produce. Its gains reach both the owner and society.

Option (1) It creates ability to absorb new technologies. — True. Educated, skilled workers can take up new technology.

Option (2) It increases labour productivity. — True. This is the main gain of human capital.

Option (3) It benefits not only the owner but also the society in general. — True. This is its external benefit.

Option (4) It increases the cost of production. — False. Higher productivity means more output from the same workers. A cost increase is not a benefit at all.

NCERT (2026-27): “Human Capital and Economic Growth: … Thus, both education and health, along with many other factors like on-the-job training, job market information and migration, increase an individual’s income generating capacity. This enhanced productivity of human beings or human capital contributes substantially not only towards increasing labour productivity but also stimulates innovations and creates ability to absorb new technologies. Education provides knowledge to understand changes in society and scientific advancements, thus, facilitate inventions and innovations. Similarly, the availability of educated labour force facilitates adaptation to new technologies.”

“Box 4.1: Physical and Human Capital … Nature of benefits flowing from human capital are different from that of physical capital. Human capital benefits not only the owner but also the society in general. This is called external benefit. …”