Human Capital Investment as an Effective Tool for ... - Ijmbs.com

IJMBS Vo l . 3, Is s u e 1, Ja n - Ma r c h 2013 ISSN : 2230-9519 (Online) | ISSN : 2231-2463 (Print)
maintain an effective workforce. Robert (1991) noted that of all
the resources, people are the most important because they are
needed to activate other resources. He said that people are the
main instruments for the attainment of the organization’s goals,
objectives and national building. According to him, the efficiency
with which an organization or economy is operated will depend to
a large extent, on how effectively its human capital are managed
and utilized. All activities of any enterprise are initiated and
determined by the people that make up that institution; the plants,
offices, and computers automated equipments etc. that a modern
firm uses are unproductive except for human effort and direction.
Human beings design or order the equipment; they secure the
capital needed and fiscal procedures to be used.
Every aspect of a firm’s activities is determined by the competence,
moderation and general effectiveness in human organization. The
task of managing the human component is the central and most
important task because all other components depend upon how
well it is done. Human capital of a nation comprises of men and
women, young and old who engage in the production of goods and
services and who are the greatest and indeed the most precious
assets of the nation. Akerele (1991) recognizes that human
capital is the unique element that makes the difference between
one organization and the others. This is a source of distinctive
competence for an organization. The energy, knowledge and skills
of people for purely economic purposes are one dimension of
human endowment which also embraces the thoughts, motives,
beliefs, feelings, aspirations and culture of human beings beyond
and outside the world of work.
Harbison (1973) in his article “Human Resources as the Wealth
of the Nations”, dramatize the importance of human resources
capital development as follows: “human resources, not capital,
income or material resources constitute the ultimate basis for
the wealth of nations. Capital and natural resources are passive
factors of production, while human beings are the active agents
who accumulate capital, exploits natural resources, build social
economic and political organizations and carry forward national
development clearly. A country which is unable to develop the
skills and knowledge of its people and to utilize them effectively in
the national economy will be unable to develop anything else”.
According to Gbosi (2007), there are three types or means of
investing in human beings; they are education and training, health
expenditure and research. He further stated that this aspect of
investment in human capital will lead to an improvement in the
quality of labour in employment. It will also increase the quantity
of labour available for work either by reducing the amount of
working times or by reducing the incidence of death among
workers. A country’s accumulation of human capital is seen
as an investment decision, where the individual gives up some
proportion of their income during the period of education and
training in return for increased future earnings (Blundell, 1999).
While investment in human beings has been a major source of
growth in advanced countries, the amount of human investment
in less developed countries have done little to extend the capacity
of the people to meet the challenges of accelerated development.
It is important to know that human capital investment is aimed
at increasing the productivity of the work force and efficiency of
labour market institutions. In Nigeria, as in other countries, the
government plays a major role in the labour market. Generally,
human capital investment aims at utilizing the full potential of a
nation’s human resources.
A. Conceptual Framework of Economic Growth
The study of economic growth can be traced as far back as the
very beginning of the discipline. This is assumed to have started
in the year 1776 when Adam Smith first published his famous
treaties, “The Wealth of Nations”, which as well can be called
the “Economic Growth of Nations” (Todaro, 1980). The concept
of economic growth have been defined and explained by various
scholars. The definitions and explanations of economic growth
are x-rayed in this section of the review of literature.
Samuelson (1999) noted that economic growth implies the change
in the amount of real output or income in an economy overtime. All
economy grows because it obtains increased goods and services,
increased resources or uses the resources more efficiently. He
further noted that growth is associated with raising the living
standard of the population overtime and increases in the wealth of
the citizens. He also said that the most commonly used measure
of economic growth is the gross national income (GNP) and that
economic growth could be express in two ways: an increase in
per capita real GNP or NNP overtime and an increase in total real
GNP or NNP overtime.
According to Todaro (1980), the major components of economic
growth in any society are capital accumulation including all new
investments in land, human resources, growth in population
although delayed, growth in the labour force, and technological
progress. He continued and said that capital accumulation results
when some proportion of present income are saved and invested
in order to augment future outputs and incomes. New factories,
machineries, equipments and materials increase physical capital
stock of a nation (i.e. the total net real value of all physically
productive capital goods) and make it possible for expanded output
levels to be achieved.
Talking about population growth (with the associated although
delayed increase in the labour force), Todaro (1980) said that it
has traditionally been considered a positive factor in stimulating
economic growth. A larger labour force means more productive
manpower, while a larger overall population increases the potential
size of domestic markets. In explaining technological progress as
a factor in economic growth, Todaro (1980) observes that it is the
most important source of economic growth. In its simplest form
according to him, technological progress can be said to result from
new and improved ways of accomplishing traditional tasks such
as growing maize, making clothing or building houses.
Besides, other economists have defined economic growth rate of
some national accounting aggregates usually the Gross National
Product (GNP). Bradley (1989) also referred to economic growth
as an increase in output level (real GNP). Emmanuel (2000) sees
economic growth as the process of augmenting the productive
forces or expanding productive capacity which is accomplished
through effective mobilization, assemblage and management of
human, material and financial resources. He also said that it is the
process of sustained rise in material output, so that the physiological
or material needs of man can be continually met as they rise.
He further differentiated economic growth from development
economic growth or progress as he said it is essential and indeed
an indispensable component of development, meaning that it is
the only standard for measuring and determining development. He
also said that real development involves a structural transformation
of the economy and society permits the self generating and self
perpetuating use and development of the peoples’ potentials.
8 International Journal of Management & Business Studies
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