Term Paper: Human Capital in Latin American

Pages: 13 (3626 words)  ·  Bibliography Sources: 1+  ·  Level: College Junior  ·  Topic: Economics  ·  Buy This Paper

SAMPLE EXCERPT:

[. . .] Likewise, labor force or manpower is considered as an asset to the economy and its return is their contribution to the economic development.

Defining Development:

The concept of development originates from the notion that people are enjoying improved standards of living. The improved standard of living includes parameters like per capita income, the poverty level in an economy, infrastructure availability and utilization, housing, healthcare, water and sanity services availed, education, spending and consumption which is sometimes classified beyond basic necessities, the sources of entertainment and the list continues. Thus it comprises everything that defines an individual living pattern and the facilities availed by him/her. The concept of health, food education, housing employment, cultural values, and environmental concerns all these are part of welfare of the society which contributes towards society's social and economic development. Therefore, to have development in an economy there has to have the awareness of bringing about change in the parameters contributing towards welfare of the society and the political system should supportive and well structured. If society is exposed to internal and external misbalance, undue influence by some elite groups, lack in the administrative capacity and prevalence of violence in the country then the process of development can't take place.

Human Capital contribution in Latin American Economic Development

Globally the demand for natural resources like oil and gas have spurred the investment in the areas of exploration, production, mining and finding alternative sources of energy like wind and solar energy. New technological advancement has been made in the areas of research and development for the advancement of renewable energy so that business community, investment climate in an economy and population can benefit from it. But the challenge that remains for countries is the scarcity of human capital. The skilled, educated and talented workforce is not easily available in the economies like that of Latin America which can affect the economic development of the country (Kahn & Strauss, 2011).

We all are living in a knowledge driven society where production of goods and services are greatly contributed to the knowledge intensive industries. Therefore, betterment and advancement of knowledge has become an ever increasing concern of the developing countries for their growth sustainability. The modern economists are of the view that investment made on educating workforce will bring more return than dollar invested on the infrastructure and material resources. This doesn't mean that all the material investments are useless rather it exert a pull on the economy towards educational development of its population. As professor Galbraith has said: "we now get the larger part of our industrial growth not from more capital investment but from investment in men and improvement brought about by improved men."

The contribution of human capital toward the economic development of the Latin American countries can be viewed in the following areas:

Human Capital in Creative Solutions: For the nation's economic and social development, developed and developing countries are making capital investment in the areas of construction, agriculture, infrastructure, international trade, financial sectors, energy and mining, consumer goods market, health care etc. More and more industries are developed in these sectors ranging from large, medium to small capacity of production and greater international influence have been experienced. Bricks and mortar buildings and walls are not enough for the economic development. It requires creative ad logical minds behind its functioning. Administrators, engineers, financial advisors, doctors, production crew, teachers and skilled labor is required for the efficient functioning of the system and maintaining quality standards through continuous improvement. Therefore investment in the intellectual capital or human capital has become an increasing element of development never thought of as before.

Efficiency of the human capital for productivity: human capital is regarded as the most reliable source of economic growth. The productivity of the industries are not only increased by increasing the capacity of the machines rather its increased with the addition of creative alternative sources for the efficient utilization of these mechanical instruments and developing the machines to increase its productivity. Investment in human capital through proper education in various fields of economic growth and training to specialize in their respective field makes possible for them to increase marginal efficiency of capital.

Efficiency in resource management: many of the developing countries of Latin America are provided with international assistance from the developed countries in the form of financial assistance and expert opinions. If the developing lacks in its ability to utilize these resources makes the maximum out of it then they are useless and burden to the nation. Therefore through proper skills training, awareness and education to the human capital these resources can be deployed to the maximum level contributing towards the growth of the country and increasing the living standards of its population. For this purpose skills development programs, social welfare programs, women empowerment bodies and human resource development centers have been established on the public and private level to boost investment in human capital and maximize the potential output from them.

Bring about social change in an economy: Investment in human capital has impact on the overall outlook of the nation, which includes economic conditions, social conditions and personal living standards of the individuals. When there is illiteracy, infant mortality, child abuse, social abuse to women, unhygienic living and unemployment in the society then this society can never grow to cope with the global competition. Investment in human capital will have improved education system that will increase literacy rate in an economy with training on skills and development to provide them with alternative sources of income which will reduce unemployment and raise the living standards of the people. Investment in human capital through healthcare, safety and security and endowment of proper hygienic living will increase the welfare of society and make them economically developed. When people are being cared their contribution towards national development will increase and they will be more committed towards country's growth.

Driver of Growth in Human Capital Development

In the Global Competitiveness Report 2005-2006, Lopez-Claros has said that:

"A country's ability to absorb new technologies, to produce goods and services that can reach standards of quality and performance acceptable in international markets, [and] to engage with the rest of the world in ways that are value-creating, is intimately linked to the quality of its schools…"

Importance of quality education is clear from these words. Good and improved education system produces skillful labor which is important for the economic growth, reduction in the poverty level of the country and foundation to the strong institutional development. Education and knowledge society is thus considered as the driver for human capital development and economic growth of the country which creates profound governance, financial and social transparency and increased production level. To survive international competition 'innovation' has become increasingly important for all businesses. Creative solution to the problem and new product and service development is the key to success. Global economy is shrinking and businesses are spreading far and wide. Collaborative measures are being adopted for the conduct of enterprise building and growth. In such a scenario of the human capital of the country are not capable enough to compete and work with the people from diverse backgrounds than the survival for the nation would be at stake. Therefore substantial amount of investment is required in the areas of education and skill development for human capital ( Roosevelt, 2003).

Latin American education system is at vulnerable position because:

Due to low economic condition and high unemployment rate, companies are able to recruit cheap labor. The developing countries of South and East Asian countries like India, Pakistan and China has made the labor market of other international countries like Latin America highly competitive with unskilled labor. Therefore in the domestic market unskilled labor is being hired on lower wages.

There is a difference in the education and quality of education. In today's knowledge intensive era quality of education is very important. This is analyzed by the students' abilities in the area of scientific reasoning and mathematical capabilities. The level of schools in majority of Latin American countries lack in both these capabilities. Therefore top quality graduates have not been produced to take up the challenge of changing economic and social environment. The local market provides lesser opportunities to these individuals so quality graduates migrate to more financially attractive countries.

Income inequality in the Latin American countries is a major economic concern. It is greatly contributed by the weak education system prevailing in the region. Under-utilization of the labor force augments social problems and policy concerns. Due to the high level of income inequality people doesn't have financial resources to access primary, secondary and higher level of education through proper schooling? Only the rich class gets the opportunity to educate them. Out of which very few % of graduates are willing to stay in the region and give their positive contribution towards the social and economic development of the country. Thus lack of education and income inequality creates a vicious circle of… [END OF PREVIEW]

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