Human Resources and Economic Development

 Table of contents:

•         Introduction
•       Define Human Resources? Its role development
•             Human capital Formation
•             Factors of Human Capital Formation
•             Human Capital Analysis in Pakistan
•             Importance of Human Capital
•             Human capital formation in other countries
•            Problems of Human Capital Formation in Pakistan
•            Solution and Suggestion 

INTRODUCTION:

“Human resources are like natural resources; they're often buried deep. You have to go looking for them, they're not just lying around on the surface. You have to create the circumstances where they show themselves”― Ken Robinson

Human capital is recognized as an agent of national development in all countries of the world.Providing education and health services to people is one of the major ways of improving the quality of human resources. Apart from being issues of social concern, both provide an economy with healthy trained human resources required for economic development. It is well established evidence that economic development directly depends on quality and quantity of human capital. The initial concept of human capital is based on level of education as a source of skill development through information creation. However, introduction of health and nutrition together with education has led to a broader theory of human capital. This broader concept of human capital has significant implications for economic growth of less developed countries like Pakistan. As majority of the world’s population living in poverty, and it is, therefore, accepted worldwide that economic growth and development is a necessary condition for poverty reduction. Investing in human capital, by creating more productive work force will lead to higher future growth and income.

 “Human resources refer to the size of population of a country along with its efficiency, educational qualities productivity, organization abilities and farsightedness”.

It is considered that capital and natural resources are the slow factors while human capital is an active factor of production. Human beings can increase capital and build up social and economic organizations. We can never develop anything for economic growth, if we cannot develop the skills of our human beings. It is clear that if we want to use other resources effectively then we have to develop the capacity of our human beings through literacy, skill development and by quality enhancement so that we may trim down unemployment and enhance the process of growth.

                      “Every day is a training day and every event is a training event”

Human capital and economic development both are interrelated to each other for some additional basis. Furthermore, it is also necessary for the government to spend additional amounts on education and health sector. By human capital we consider acquired mental and physical ability of human beings through education, skill development, training, health care and activity of some spiritual methods.

Fact and Figures:

• In 2014, Pakistan Population is 188.20 million.
• Pakistan Population growth rate is 1.95% and it is the 6^th most populous country in world.
• The total labour force in Pakistan is 63.5 million.
•  The male participation as labour force is   83%.
• Women work as labour force is 24.1%.
• Employed labour force is 56.6 million.
• Unemployed labor force is 3.8 million.

The Total Labour Force in Pakistan:

Year	Value
1990	31,715,010
1991	32,597,500
1992	33,411,380
1993	33,972,820
1994	35,135,250
1995	35,381,760
1996	36,863,040
1997	38,604,110
1998	39,808,470
1999	41,370,450
2000	43,045,190
2001	44,224,050
2002	45,493,630
2003	47,323,400
2004	49,093,050
2005	51,482,200
2006	53,927,650
2007	54,975,720
2008	56,333,080
2009	58,041,390
2010	59,687,680
2011	61,502,260

The total labour force in Pakistan is very less as population increase on yearly bases.

The less developed countries of the world are now making investment in human persons for increasing their skills abilities ideals health on the job training programmers. These productive investments have a strong bearing upon increasing human capabilities which is called human capital.

Increased female participation in the labour market has been the key impetus boosting growth of the developed economic powers of the world. But in Pakistan the women participation is very less. Women work as labour force only 24.1%. The women cannot work shoulder to shoulder with men in various sector of economy due to multiple reasons. The religious barriers, customs and traditions, early marriages etc.

Human resources constitute the ultimate basis for the wealth of nations. Capital and natural resources are passive factors of production; human beings are the active agents who accumulate capital, exploit natural resources, build social, economic and political organization, and carry forward national development. Clearly, a country which is unable to develop the skills and knowledge of its people and utilize them effectively in the national economy will be unable to develop anything else (Harbison, 1973, p.3).

What is Human Resources?Its Role in Economic Development

According to Michael Parkin:

·         “Human Resources refer to the skill and knowledge of human beings.”

·         “Human capital is the qualities of education, skills, training specialization etc. in population.”

INVESTOPEDIA EXPLAINS 'Human Capital':

Economist Theodore Schultz invented the term in the 1960s to reflect the value of our human capacities. He believed human capital was like any other type of capital; it could be invested in through education, training and enhanced benefits that will lead to an improvement in the quality and level of production.

Human capital formation:

Human capital formation as described by Professor Harrison as ''the process of acquiring and increasing the number of person who have the skills, education and experience which are critical for the economic and political development of a country.'' Human capital formation is the act of increasing the productive qualities of labour force by providing more education and by increasing skills, health and notarization level.

How to develop Human Resources?

According T.W.Schultz, there are five way of developing human capital.

• Privision of health facilities which affect the life 
• expectancy, strength, vigour and vitality of the people.
• Provision of on the job training which enhances the skill of labour force.
• Arranging education at the primary, secondary and higher levels.
• Study and extension programmer for the adults.
• Privision of adequate migration facilities to families to adjust to changing job opportunities.

         .

If human resources is develop GDP per capita is increased

Factors of Human Capital Formation:

The main factor of human capital formation are as follows  
1-   Better Education

                                        Increase in education is the major factor of human capital formation. Education is a major form of investment in human capital, which provides as a key input in human resource development. Education improves the quality of manpower and enables the skilled workers to manage the developing technology of the country.

·    Literacy rate is just 57.7 % in Pakistan, i. e., almost 100 % in developed countries.

·      Expenditure on education sector is just 1.8 % of GDP i. e., lowest in Asia

     

2-  On-the-Job Training

Low literacy rate leads to low efficiency of workforce. Heavy amount of investment is needed to provide       training to the on job employees.Provisions of training facilities, practical applications and refresher
courses will lead to:

• Improvement in the treatment method of a Doctor
• Advanced means of teaching for a Teacher
• Introduction of new inventions and discoveries to engineers
• It makes possible to connect the technicians with modern technology

  3-    Non-material Capital Development

           More attention is given to material capital formation rather than human capital formation in Pakistan.              In fact, more concentration should be given to human capital formation because it improves the                      services of engineers, technicians and administrators, which cause in economic growth and                            development.

 4-      Manpower Planning

   Rapidly growing population and improper manpower planning are resulted in unemployment and                   under-employment.Due to improper labour market, there is brain drain in Pakistan. Availability of                  proper manpower planning is also a main factor of human capital formation.

•          Population growth rate is 2.1 %
•              Unemployment rate is 5.6 %
•               Under-employment rate is 16 %
•               Disguised-unemployment rate is 20%

    5-    Health and Nutrition

Poor population is backward also in Pakistan. Rapidly growing population has not proper health and nutrition facilities. If a worker is not healthy and fully nourished then it is impossible for it to maintain the efficiency.

• Total expenditure on health sector is only 0.23 % of GNP in Pakistan.
• Death rate is 0.73 % and life expectancy is 67.2 years
• One MBBS doctor is available for 1222 persons
• One hospital bed is for 1701 persons
• Per capita food intake is targeted at 2526 calories per day, against the required 2550 calories per day

   6-      Housing Facilities

Appropriate housing facilities are the basic right of the population. It is the basic necessity of life and an important factor of human capital formation. Housing facilities are not in a satisfactory situating in Pakistan. Effective planning of government is required to provide proper houses and shelters to the existing population.

  7-   Water and Electricity Facilities

Drinking water and electricity facilities in Pakistan are insufficient and irregular. There is problem of load-shedding, which inversely affect the productivity level. These facilities are compulsory for the human capital formation in their advanced form.

• 50 % population has to go to outside the house to obtain water in Pakistan
• 65% population has access to clean water
• Only 44 % population has facilities to sewerage and sanitations
• Number of continuous air pollution monitoring stations is only 7

Human Development Index values of south Asia economies for the year 2012. Pakistan HDI values stand around 0.5 which is low in comparison with India and Sri Lanka. Pakistan HDI Rank is 146 which is also very low.

Human Capital Analysis in Pakistan: 

The statistics on human capital index shows that conditions in urban areas are better than those of rural areas. This trend is also present in the initial period and remains persistent during the whole period of the study. The reason is the higher literacy rate in the urban areas, which imparts awareness in the residents about health and education; moreover there is a visible difference in the income as well as expenditure of the residents of urban and rural areas. Both the awareness and opportunity to avail health and education facilities provide better results for urban areas. Statistics on human capital for Pakistan shows this significant difference, where mean human capital for rural areas is 0.46 and for the urban areas it is 0.64.

                                              Human Capital Index

                                      Human Capital for overall region

IMPORTANCE OF HUMAN CAPITAL: 

Human capital is the fundamental source of economic growth. It is a source of both increased productivity and technological advance. In fact the major difference between the developed and developing countries is the rate of progress in human capital. The under developed countries need human capital to staff new and expanding government services to introduce new system of land use and new methods of agriculture, to develop new means of communication to carry forward industrialization and to build the education system. Prof. Galbraith is right in saying that ''we now get larger part of economic growth from investment in men and improvements brought about by improved men.''

 HISTORICAL ASPECTS: 

1- Economy of Japan and Germany

Japan and Germany are the nations which built their economies on the basis of technological advancement, know how and educations.

2- Economy of United States

There is a general agreement among government advisors in US that it will be necessary to increase investments in human capital. They tell us that a dollar invested on education brings a grater increase in national income than a dollar invested on dams, roads and factories.

Video about Human Resources

http://embed.wistia.com/deliveries/eece995949b02d3d23045dd7439beafad7cba3fe/file.mp4

Human Capital formation in other countries:

 China is now becoming the world’s biggest economy. America is the second world’s biggest economy. These countries make progress through better human capital formation. They trained labours through education, training and better facilities.
The increasing globalization and the forces driving it are posing serious challenges to organizations throughout the world, particularly to the third world countries. One of the very important aspects of human resources development is the support of business houses at national and international levels. Only those organizations, which understand the new environment and growing complex competition and have the ability to provide appropriate responses to the challenges will survive and grow. The following is the level of per-capital investment in human capital development in various developing countries of the world.
  

                                                 Country Investment in HRD

                                      Country                                     Investment in HRD

                                        Pakistan                                           US $ 10

                                        India                                                 US $ 31

                                        Indonesia                                          US $ 54

                                        Malaysia                                           US $ 150

                                        South Korea                                     US $ 160

  
Problems of human capital formation in Pakistan:
The main problems of human capital formation in Pakistan are as follows

   ·        Rapidly Growing Population:

Growth rate of population is very fast. Increase in resources is less than increase in population. High population growth rate of above 30 % is a big problem in way of human capital formation.

    

·     Lack of Awareness:

People of Pakistan are not aware of with the role of the available resources. Due to lake of education, people are ignorant and have not enough knowledge to evaluate the hidden benefits.

·     Unequal Distribution of Wealth:

There are various disparities in the country due to unequal distribution of income and wealth. Only rich class can participate in economic activities and in the creation of human capital. A little portion of population can afford the higher education, which is so costly. 20 % poor population has control on only 6 % national resources in Pakistan.

·         Investment in Buildings and Equipments:

People in less developed countries like to invest in building, equipment, gold and silver ornament and other real states. They have little trend to invest in human resources that is also a big problem to develop the human capital.

·         Inappropriate Education:

Education system in developing countries is backward. Literacy rate is 48.7% and expenditure on education is only 1.8 % of GDP in Pakistan.

 In the developing countries of the world, the governments are giving priority to primary education for increasing literacy rate. Secondary education which provides critical skills needed for economic developed remains neglected. Another problem related to investment in education is that in the public and private sectors there is a mushroom growth of universities without trying to improve their standard of education. There are also mass failures at primary, secondary & higher levels of education resulting in wastage of the scarce resources of the countries.

·        Ill-health and Ill-nutrition Facilities:

In the less developed countries of the world there is shortage of trained nurses qualified doctors medical equipment, medicines etc. The less availability of health facilities pose threat to the millions of the people living there. The people are faced with unsatisfactory sanitary conditions, polluted water, high fertility and death rates urban slums, illiteracy etc. All these deficiencies affect the health of the people reduce their life expectancy.

·         No Proper Training for Employees:

On the job training or in service training is very essential for improving or acquiring of new skills to the persons employed in various importance is given on the job training for the employees. The result is that the efficiency and knowledge of the workers remains technicians etc. is therefore of utmost importance for the efficient use of human resources. But there is no availability of training facilities for the employees in Pakistan.

·         Less Promotion for Employees:

Another problem in way of human capital development is that there is high rate of  unemployment and under-employment in developing countries. On the other hand, there is less reward of the hard work and efficiency.

•        No Manpower Planning:
  
  Due to non availability of reliable data there is little manpower planning in less developed countries of the world including of course Pakistan. As a result thereof, there is no matching of demand and supply of different types of skills. The result is that large number of skilled and highly qualified persons remains underemployed. The frustration and discontentment among the unemployed or underemployed graduate and post graduates result in brain drain from the country. It is a huge loss to resources of developing countries.
  ·         Study programme for adults:
  
  Study programme for adults can also be introduced for improving literacy rate. Programme for adults was introduced in many under developed countries of the world including Pakistan for providing basic education. Increasing skills farmers and small industrialists. The scheme has miserably failed as no interest was shown by the adults in getting such training.
  ·         Half hearted measures for promotion of employment:
  
  
  
  

  In most of the world the ratio of unemployed or under employed persons is very large. For increasing employment and reducing under employment proper investment in human capital is required which is visibly lacking in LDC's. The govt. of Pakistan has taken a number of steps for increasing employment opportunities in the country such as establishment of SME Bank for the promotion of self employment at the grass root level, encouraging domestic and foreign investment for increasing employment opening of technical and vocational training centres etc. etc.
  ·         Neglect of agriculture education:
  In LDC's where agriculture is the major sector of the economy., very little attention is paid for educating the farmers to the use of modern agricultural practices. Unless the farmers are provided agricultural education and training on the fields, they will not be able to raise the agricultural the outlook of the farmers.

  
  

  Solution and Suggestion:
  

  The conclusion of this study is that Investment in human capital is also required to raise the general living standards of the people in developing countries. This is possible when education and training make full and rational utilization of surplus manpower by providing larger and better job opportunities in both rural and urban areas. There is more return raise in income and improvement in living standard of the population due to capital formation.If Govt focus on human capital development our country make progress.
  
  
  

  

  
  
   Some policy recommendations are stated as follows:

  Ø  As improved technology and efficiency are the factors essential to economic development so more attention should be given to advanced technology, training and skill development of human capital.

  Ø  Government should increase job opportunities for people so that the increasing population could improve the economic growth of country and become a mean of growth rather than a obstacle in the way of economic development of the country.

  Ø  A large share of government expenditures goes in the way of transaction rather than the development activities. Government should make measures to alleviate poverty so that the fruits of government expenditures could be achieved.

  Ø  Government should increase the enrolment ratio at all education levels. Education contributes to economic development through the production of knowledge and skills. It also increases labour productivity and quality of life, reinforces civil society and encourages democracy.

  Ø  Government should increase opportunities for the education of female. Education of female will develop child health. This will lower infant mortality rate. It contributes in productivity and economic growth not only in recent generation but also in the next generation.
  Ø  Income inequality should be reduced through appropriate government policies for economic development because there is a two-way positive association between a more equal distribution of income and a higher rate of economic development.
  
  
  

  
  

  
  References:

  
  

  ·        http://ahsankhaneco.blogspot.com/2012/04/development-of-human-capital-human.html

  ·   Pakistan Journal of Social Sciences (PJSS) Vol. 32, No. 1 (2012), pp.229-240/human capital formation and economic growth in Pakistan

  ·         http://saif113sb.hubpages.com/hub/HUMAN-RESOURCES-AND-ECONOMIC-
        DEVELOPMENT

  ·        www.eesc.europa.eu/resources/docs/king-fr.pdf

  ·        whrppk.com/_files/SFT-001.pdf

  ·         Pakistan  Economic and Social Review Volume 50, No. 1 (Summer 2012), pp. 57-69