Read the following statements: Assertion (A) and Reason (R).
Assertion (A): Expenditure on on-the-job training is a source of human capital formation.
Reason (R): The return on expenditure on on-the-job training, in the form of enhanced labour productivity, is more than its cost.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
Assertion (A): Expenditure on on-the-job training is a source of human capital formation. — True. Firms spend on training their workers, in the firm or off-campus.
Reason (R): The return on expenditure on on-the-job training, in the form of enhanced labour productivity, is more than its cost. — True. Trained workers produce more than the training costs.
Why R explains A?
Spending builds human capital when it raises productivity by more than it costs. R shows that training does this, so training spending is a source of human capital.
NCERT (2026-27): “4.3 Sources of Human Capital … Firms spend on giving on-the-job-training to their workers. This may take different forms: one, the workers may be trained in the firm itself under the supervision of a skilled worker; two, the workers may be sent for off-campus training. In both these cases firms incur some expenses. Firms will, thus, insist that the workers should work for a specific period of time, after their on-the-job training, during which it can recover the benefits of the enhanced productivity owing to the training. Expenditure regarding on-the-job training is a source of human capital formation as the return of such expenditure in the form of enhanced labour productivity is more than the cost of it.” |