Human Capital Formationand Policy Modeling: a Strategic Study for Bangladesh Economy

Human Capital Formationand Policy Modeling: a Strategic Study for Bangladesh Economy

Human Capital Formationand Policy Modeling: A Strategic Study for Bangladesh Economy

Shahidul,M I*.American International University-Bangladesh, .

Concept paper

Human resource development and quality of life are core issues of Bangladesh economy. The current steps of the government are to make quality education accessible to every one in order to increase useable skills and to reduce poverty .Eventually; economic development is the main goal of developing education system. In the pursuit of this goal, the government is mandated to support education. The government expenditure in this sector is 2.3 percent of the GDP and 14 percent of total national budget. The government is committed to achieve Education for All by 2015and the MillenniumDevelopment Goals (MDGs) of this country. This research focuses on the scope of investment for developing humancapital from Human resources in Bangladesh for contributing to the economic growth.. Research findings can be used as inputs in designing a model(policy as well as theoretical) to be used in future applications as acontribution to the Bangladesh economy.

The growth empirics and growth theories suggest that human capital plays apositive and significant role on the economic growth. And to make planning for producing Human Capital from Human Resources, it is essential to determine the characteristics of existing labor force of the country. Additionally, the variables relating to production of human capital must be identified for strategic planning. Basically, human resource is the main input to Bangladesh economy development.

The GDP growth of Bangladesh is remaining around 6.5 percent since last one decade [GDP≤6.5].The contribution of major sectors to economy is changing a bit but its configuration is almost remainingsame. It is reported that, about 51 percent labor forces are engaged in agriculture and its aggregated contribution to GDP is about 20 percent. The contribution of the manufacturing and service industries in GDP is about 29 percent and 49 percent, respectively; and these sectors also consumed about 17 percent and 23 percent labor force, respectively (BBS, 2007, Labor Force Survey). But it is evident that in Bangladesh, the labor force is frequently migrating and moving across the major economic sectors.

The trend of labor force placement shows that the labor density in agriculture is reducing and it isincreasing in the service sector. It is found out that agriculture is low value added product area and the earning per capita is comparatively less than the other two major sectors. In the manufacturing area the pay scale is comparatively higher because its value added index is over 4. The value added index of service sector is over 2.5 which are better than the agriculture sector but less than the manufacturing sector. However, in both sectors require skilled labor force.Bangladesh is also enjoying global potential of labor market. In 2006-07 fiscal years, about 5.5 millions skilled, semi-skilled and unskilled labors are employed in foreign countries and they have generated national income of about 7.5 billions dollar. Additionally, about 5 million different unskilled graduates remain job less in the country.

BANBEIS Statisticsshows that primary school dropout rate per year is around 33 percent, high school 52.9 percent and at higher secondary level is about 42.7 percent. It is also evident that education in secondary and tertiary level is not adequately linked to the job market. Therefore, a huge amount of unskilled labor force is coming to the labor market which is absorbed in non-formal sectors or has no specific job for them. Statistics also shows that over 60 percent labors have no specific academic skill and for these reasons, they are considered as floating labor.This existing huge amount of unskilled labors can be transformed into semi and/or skilled labor force asHC or intermediate goods. These intermediate goods can be the engine of growth of Bangladesh Economy and it will not be much ambitious to expect Bangladeshwould be a middle-income country within a short-period of time.

Based on the aforementioned situation, this research attempts to ask: how this growing trend of unskilled laborscan be transformed into human capital to absorb by local and global market? To address this issue this research has been under taken.Based on the finding of literature review this research has been designed, HC production process and its related variables were selected.

This study therefore aims to conduct a search to determine;1. the Characterize the current labor forces its market in Bangladesh, 2. To identify the dominant variables of transforming Human Resources to Capital, 3 To find out the mechanics of transformation of Human resources to Human Capital, 4 To setup a model for pilot testing of transforming Human Resources to Capital for Bangladesh Economy.The main tools of this research were literature survey, institutional sample survey and a few case studies in the relevant fields to substantiate the data and information about the study. Surveyed data of research variables was analyzed by using standard statistical tools. Qualitative data was analyzed by adequate software for obtaining the results related to objectives of this research.

Production of Human Capital from Human Resources

Basically, as per most common theory of labor economics, Man-Hr of the labor force is converting to Human capital as an earning tool. Three kinds of goods are produced in the economy: a consumption good (“output"), a human capital good (“experience" or “skill"), and new varieties of intermediate capital goods (“ideas"). As per the productionmodel of Human Capital [Q(t)] can be measured by using the following formula;

, (1)

where 0 <  < 1, h -skill level ( h≥0), x=ƒ(k, Eq,Vs,Pt), k -is the relevant knowledge, Eq-equiment through which unskilled human resource get training and know-how, Vs-moral and social value a unskilled labor need while he work for economy and Pt-is the transformation process from Human resources to Human capital.

Based on the result of the field study, literature review and the mechanics of HC production process, a flow diagram of this model is developed which is shown in Figure 1.

Figure1-HC Production and consumption process

Measurement of Human Capital

The field survey data wereused to analyze and to estimate the production of HC.The filed survey was based on the following shooing system; High School, College, Vocational school, Diploma institutions, General and TechnicalUniversities. Five samples have taken from each group for study to collect the values of the variables.The estimated values are shown in Table 1.

Table-1: HC production matrix.

HC production center / HC production
(Scale 1-15)
Bangladesh / Thailand
High school / 1.5 / 5 in 15
College / 2.25 / 7 in 15
Vocational / 3 / 8 in 15
DiplomaCollege / 4 / 10 in 15
GeneralUniversity / 4.5 / 12 in 15
TechnicalUniversity / 5.5 / 15 in 15

The out put of HC are measured in the scale of 1-15 considering Thailand is Benchmark. Table 1 indicates that the HC production performance in Bangladesh is significantly low.

Preliminary Findings of the study:

  1. At high school level, the main focus of teaching is to develop reading, writing and analytical skills.
  2. At high school level the mini laboratory is the only production center where a part of the schooling time of students is spent todevelop some level of know-how or skills.
  3. In the Vocational, Diploma Colleges and Technical Universities on average 20 percent time of the students spend in the laboratory to develop skills in order to fit themselves into the manufacturing industries. But the equipments using in this process are not competent to meet the current market demand.
  4. In the general Colleges and Universities human resources are produced to fit them into the job markets at aiming to service industries. The HCvalue of these students is also significantly poor.
  5. The inputs values of HC production process is insignificantly poor and skill level of instructors (the main process operator) are not fully competent to fit HC components to education process ( the value of Ptis poor).

Concluding remarks

The on going study on Production of HC from human resource is a very complex one. The present state of this study is at very preliminary stage. Based on the current findings of this research it can be suggested that the programscurrently operating at schools, colleges and universities are mainly focusedon to producedifferent level of human resources. The programs are not fully designed to meet the demand of job markets. The result of this study also shows that the value of skills which is intermediate goods or HC is significantly poor compare to South East Asian countries. In order to have HC as intermediate goods and to sell it in the local and global markets it is essential to reviewthe current academic programs. In the proposed review programs, a strategic plan bust be adopted by the government or by relevant stakeholders to accommodate the HC production variables [x=ƒ( k, Eq,Vs,Pt)] in the academic operation process. The proposed review programcould bring huge benefits for the country. Indeed, HC could contribute further to increase the productivity in manufacturing and service industries which would also increase our global market competitiveness. Additionally, after satisfying the local market demand Bangladesh could export HC to the global markets as intermediate goods in order to increase remittance flow into the country. In the current competitive arena and global concept, our low cost labor force is no more condition to attract FDI, in this regard, HC can contributes to increase FDI flow into country for rapid economy growth.

[Dr.M.Shahidul Islam is a writer, researcher and professor. His filed of interest is operation research of productive system. Currently he is engaged in American International University-Bangladesh in the Department of Operations management]

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