FEM 4204HUMAN CAPITAL AND THE ECONOMY

Nama Pensyarah:Prof Madya Dr. Sharifah Azizah

HaronJabatan Pengurusan Sumber dan

Pengajian Penguna, Fakulti Ekologi Manusia, UPM

E-mail: sh.azizah@putra.upm.edu.mysharifah_haron@yahoo.com

Ph: 03-8946-7108Hp:012-370-5098

Faks: 03-8943-6157/ 8946-7108

Penilaian Kursus:Ujian 1 : 30% Tugasan : 30%Peperiksaan Akhir : 40%

Peperiksaan :Ujian 1:

• Topik 1 HINGGA Topik 4• Soalan Subjektif dan ObjektifPeperiksaan Akhir:

• Topik 1 HINGGA Topik 8• Soalan subjektif dan objektif

Topic 1:INTRODUCTION

References:

1. Human Development Report, UNDP http://hdr.undp.org/hd

2. Human Development Report 1990, UNDP http://hdr.undp.org/reports/global/1990

3. Anand, S. and Sen, A. K (199) Human Development Index: Methodology and Measurement, Human Development Report Office

4. Rahmah Ismail (1996) Modal Manusia dan Perolehan Buruh, Dewan Bahasa & Pustaka

Concepts

Labor ~ The human effort used in the

production; Return to labor is wages

Human Resources ~ Traditionally called labor (FOP), but unlike other commodity resources which are controlled by contract, human contribution goes beyond “labor” to a society and civilization.

Thus, “human capital” has evolved to contain the complexities

Human resource aka “firm specific human capital”

Concepts…cont

Human capital ~ The characteristic

(e.g. knowledge, personality, skill etc) possessed by an employee that make him/her more productive

aka Human wealth

It is not transferable, but can be shared with others without preventing its use by the original holder

HUMAN CAPITAL

HUMAN RESOURCE

(Firm specific Human Capital)

Human Development

Definition: “Process of enlarging people’s

choice and enhancing their capabilities in leading their lives…”

Topic 2:The importance of

developing human capital

References

1. Asnarulkhadi, A.S (2003) Pengenalan Pembangunan Komuniti, Serdang, Selangor: Percetakan selaseh

2. Begg, D., Fischer, S., and Dornbusch, R. (1987) Economics, McGraw Hill

3. Rahmah Ismail (1996) Modal Manusia dan Perolehan Buruh, Dewan Bahasa & Pustaka

Wealth of a Nation

“Ordinary people are the center of knowledge creations and innovations. Our

people are truly our greatest resources and assets….people are the building block of all we do…Machine can be fixed, systems and

policies may be revamped and organizations can be restructured.

However, the success or failure of any endeavor is still largely dependent on the

people

(Tun Abdullah Ahmad Badawi)

HK & economic dev

In short;The quality of the human

capital in a particular country determine the nation’s econ growth & devWhy? Human capital mobilizes

(i.e. operates, organize etc) other factors e.g. physical & raw material in prod process

As such, it influences the nation’s productivity and economic competitiveness

HK & economic dev

In knowledge environment, where economic activities are taken one step further and that knowledge changes all the time, “wealth’ is determine by how you use your brain, and how fast you gain, manage and apply knowledge.

THUS,“The present illiterate are those who cannot read and write, but the future illiterate will most likely be those who cannot learn, unlearn and relearn”

HK & economic dev

Consequently: Effective human

development strategy must be implemented to sustain economic growth and development

HK and organizations

• Human capital ~ the abilities, behaviors and energies of workers is the chief engine of prosperity for most organization

• Organization involve in HRD to:– Improved business results

• Gain competitive advantage• Increase profit/financial performance

– Increase productivity– Prevent obsolescence of skill at all level– Preparation for higher level tasks

HK & Households

Can increase individual/household income

Producing “the right” (attitude, skills, personality etc) individuals/members – e.g. empowered, resilient and self reliant family, community, labors and

citizensUpward mobilityAs a strategy to eradicate poverty

Topic 3Human Capital

Development in Malaysia

References• Begg, D., Fischer, S., and Dornbusch, R.

(1987) Economics, McGraw Hill• Rahmah Ismail (1996) Modal Manusia

dan Perolehan Buruh, Dewan Bahasa & Pustaka

• Millennium Development Goal (MDG)• Tenth Malaysia Plan – 2011-2015• Ninth Malaysia Plan – 2006-2010• Eighth Malaysia Plan 2001-2005• Seventh Malaysia Plan 1995-2000

Forms of HKI

Formal schooling OJT and experience

Take time out from one’s market job or in household activity in order to learn how to do it better

Health i.e spending time and money in maintaining

and augmenting one’s health – e.g aerobic class, dental check ups, gd nutritions

Migration -- in search of better job or different lifestyle One forsake the opportunity in one location in

order to exploit those in another Having children and raising them in

certain ways Provide economic security in old age

DEMOGRAPHY SOCIAL

The Framework ….

Birth rate; Mortality rate; Family Planning

Health; Nutrition; Poverty; urban dev

POPULATION

LABOR

Employment

EDUCATION

Labor Force

Preparation; Allocation; Use

Econ aspects (formal & informal)

Non econ aspects

Production capabilities; Per capita Income; Income distribution

HK Dev Planning

HR/Capital Planning & Dev

• In short, the process of improving human capital: – Begin at the early stage of child

development. How?• Through children’s nutrition intake and health

– The process continue when the children obtain formal and informal education

– When the children finished schooling, they receive training to improve their human capital.

Topic 4Human Capital Theory

References

1. Begg, D., Fischer, S., and Dornbusch, R. (1987) Economics, McGraw Hill

2. Bryant, W. K (1990) The Economic Organization of the Household, Cambridge Univ Press

3. Rahmah Ismail (1996) Modal Manusia dan Perolehan Buruh, Dewan Bahasa & Pustaka

Human Capital Theory• (Inter temporal choice) utility max• The Economists: Schultz (1961) & Backer

(1962) • The Theory:

– Deals with individual utility maximization over time• Choice between current vs. future consumption • I.e. if Uc < Uf then, individual will forego current

consumption

• Note: Forgone current consumption = direct cost (e.g. cost of schooling) + opportunity cost + other non monetary cost (emotional cost of leaving the family etc) of investment

Human Capital Theory

• Depending on HH time preferences, HH will put aside a fraction of its current income as saving

• The question is – what form will the saving take? Bonds, stocks, buy a house or investing in oneself/family members?

• The theory says:– Human capital can be added, built and

produce return like other types of capital (i.e. financial capital)

Human Capital Theory• Consider an individual concerned only

with monetary payoff to formal schooling– S/he will only invest in added schooling if payoff

of added schooling ≥ payoff of the alternative invest (e.g. stocks, bonds, saving accounts etc) at the going market interest rate of r.

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