Human capital development: a catalyst for change

According to UNESCO, for every US dollar spent on education anywhere in the world, as much as $10 to $15 can be generated in economic growth.

Human capital is the most distinctive feature of any economic system and encompasses the skills, knowledge and experience held by an individual or a group. It differentiates organisations and nations from each other and it can even be said that the future growth of any country is dependent on it.

Pakistan, the 5th largest young nation in the world, with around 63% population between the age of 15 and 33, has great potential to benefit from this phenomenon, provided that right vision is developed and policies are implemented with a resolve and commitment.

A knowledge-based economy is one model that in fact empowers the national workforce to directly contribute to this human capital. In a world where times are hectic and change is rampant, Pakistan must readily adapt to the environment lest it be engulfed by the more prepared competitors in economic terms.

Economic growth is dependent on the quantity, quality, and accessibility of knowledge which requires thorough planning and a long term vision.

The first and foremost step towards developing the Human Capital of Pakistan relies on the roots of our society: education. According to the World Economic Forum, education is a critical component of a country’s human capital and it has direct impact on economy in 3 possible ways:

• It improves the efficiency of an individual worker, resulting in collective production efficiency around the country
• It facilitates the transfer of knowledge, created by others about new information, products and techniques to become more competitive
• It facilitates creativity which results in generation of new knowledge, products and techniques, resulting in more progress

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At times, governments, including Pakistan, boast about the increase in number of children being sent to schools and forget about the quality of education being achieved. Knowledge is of no use where it cannot be properly imparted onto another, or be applied in real life.

A study conducted over a period of 40 years modelled the impact of attainment in 50 countries found that every additional year of schooling can increase a person’s earnings by 10% and average GDP by 0.37% annually

Education is not a number crunching game where we simply look at statistics of how many children are going to primary or secondary schools and how many graduates are coming into the market. It is the skills and experience they bring with them that are of importance and that actually contributes to economic growth.

Without improving the school and education quality, the numbers really do not bridge the gap between developing and developed nations. They do not contribute to long term economic growth either. Pakistan must consider development of curriculum that develops skills at all levels, amongst all relevant fields and branches of education.

Education can take many forms, from formal education in schools to running vocational training centres, and from the use of social and electronic media to develop cognitive skills to developing bespoke programs for the relevant economic sectors in the country.

Again, it must be emphasised that what matters are the useful skills developed that can contribute to the prospectus of economic growth rather than the qualification factories. In fact, there is strong evidence that the development of cognitive skills of the population, rather than just the formal school or university education, is related to long term economic growth.

At times, too much emphasis is given to formal educational attainments when they hold little value or rapidly decrease in value compared to some other vocational skills. It is no surprise that even the developed countries are moving towards more vocational and technology-based skills at schools and at universities.

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A study conducted over a period of 40 years modelled the impact of attainment in 50 countries found that every additional year of schooling can increase a person’s earnings by 10% and average GDP by 0.37% annually. This shows the impact of education on economy but this is not only about schooling, a combination of broad-based secondary education and higher education is likely to give developing countries the human capital boost necessary to bring large segments of the population out of poverty.

To create a strategic approach to developing this knowledge economy, one must return to a basic template of design and development. The SMART (Specific, Measurable, Achievable, Relevant, Time-bound) plan allows one to focus on the task at hand and create realistic and organised goals so that progress can be observed and measured clearly. With a SMART plan in hand, a very focused and directional development plan can be put in place to achieve specific knowledge-based targets, which could revolve around agriculture, industry, academia or any specific niche that could best utilise the available national resources.

As part of the knowledge economy, development of professional skills is vital, especially in services and IT sector where a person can find clientele from any corner of the world and provide services without leaving their home. Pakistan has excellent IT infrastructure which can be used to boost and promote such kinds of professional skills.

Due to Covid-19, there is significant economic downturn around the world. Economists have shown that investment in knowledge-based economy leads to economic returns despite difficult times.

More skilled workers provide more economic drive, not only in developing countries but also in more advanced countries as well. For strategic gains in Pakistan, education requires investment and a strategic vision. At national and provincial levels, the policy makers in Pakistan should make it ‘the top priority’ for the economic development.

The competition is only going to get fiercer and the economies of developing countries that do not take immediate action on this front will only deteriorate.

The article does not necessarily reflect the opinion of Business Recorder or its owners