Human capital inadequacies

Question 1

Introduction

Answer 1

Introduction: Human capital is the stock of competencies, knowledge and skills embodied in the ability to perform labour so as to produce economic value. It correlates heavily with the high levels of education and training provided over time within an economy. Many LEDCs demonstrate low mean number of years of education per person (part of the HDI), low levels of adult literacy, and problems recruiting and funding qualified teaching staff. One out of 10 children that do not attend school live in Pakistan, and the potential loss of their skill development inhibits the growth of the Pakistan economy.

Question 2

Three points

Answer 2

Restricts competitiveness in international markets

Inhibits FDI

Forces Primary Product Dependency

Other points could include:
- Impacts poorly on health provision and life expectancy

Question 3

Competitiveness point

Answer 3

Restricts competitiveness in international markets: Poor education provision, school attendance and adult literacy rates reduce the efficiency and productivity of the labour force. This increases costs of production, leading to reduced international competitiveness. This could lead to reduced income from exports, which could limit the availability of foreign currency, leading to reduced ability to buy foreign capital, which could further inhibit development.

Question 4

Competitiveness evaluation

Answer 4

Evaluation: This is a particularly significant barrier because it has such long term implications. A lack of other factors of production such as capital, or poor infrastructure can be improved in a shorter period of time. However improvement to the skills of the labour force take so much longer to rectify. Recruitment of teaching staff, implementation of courses etc can take years before a significant impact on the workforce’s productivity is achieved.

Question 5

FDI point

Answer 5

Inhibits FDI: Lack of skills and training amongst the labour market could make a country less attractive for a foreign firm to invest in a country. This is because it will mean that foreign firms would have to budget more for investing in their workforce. This investment could take the form of purchase of shares, building a factory, or taking over a company within the LEDC. This potential loss of FDI could prove detrimental for development because foreign firms bring finance, employment, management know-how and potential tax revenue with them.

Question 6

FDI evaluation

Answer 6

Evaluation: However a loss of FDI is not always problematic for the host country. Often the advantage of this investment is exaggerated. For example, whilst FDI can lead to increased employment, it is often fairly low level, low skilled jobs that are made for workers within the host country. Often management opportunities are only available to nationals from the FDI’s country of original.

Question 7

PPD point

Answer 7

Forces Primary Product Dependency: Structural change models suggest that development required movement away from production of primary products to manufacturing or the tertiary sector. Those countries that have seen significant development (such as India and Brazil for example) have achieved this through utilising a increasingly skilled workforce. However movement to these types of markets relies upon increased skills in the workforce. Without them, unskilled labour is more likely to be forced into primary product production.

Question 8

PPD evaluation

Answer 8

Evaluation: Is a focus on the production of primary products so problematic LEDCs may maintain a comparative advantage in these products. Some products also exhibit higher YED (such as blueberries produced in Chile) which suggest that revenues will rise as global incomes rise. Therefore specialisation in these products may still make economic sense and allow these countries to maximise foreign currency income.