Nondiversifiability of human capital

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Nondiversifiability of human capital

The difficulty of hedging one's human capital (the unique capabilities and expertise of individuals) and employment effort.

Nondiversifiability of Human Capital

A term describing the fact that it is difficult or impossible to reduce the risk associated with one's employees. That is, given a set of employees, some will be good workers and some will not. While the employer can fire those employees who do not perform up to task, the fact that they are on staff at all exposes the employer to the risk that he/she will lose money from these employees' performance.