Human Capital Role of Education and Health in Human Development

October 4, 2012 October 2012, Study Kit Leave a comment

Health is a prerequisite for increases in productivity, while successful education relies on adequate health as well. Thus, health and education are considered as vital components of growth and development. These two human capital issues have to be treated together because of their close relationship and the fundamental fact that when we talk about investing in a person’s health or investing in a person’s education, we are after all talking about the same person.

Human capital is the term economists often use for education, health and other human capacities that can raise productivity when increased.  Human development involves not only economic uplift but also raising educational attainment and improving health. Health and education are fundamental to the broader notion of expanded human capabilities that lie at the heart of the meaning of development. Health is central to well-being and education is important for a satisfying and rewarding life.

The importance of education for a developing country to absorb modern technological advancements and to develop the capacity for self-sustaining growth and development can hardly be over-emphasised. Education is not just a contributor to human development but may also have positive bearing on increasing per capita income. A country that attains reasonable level of education for its population moves up the ladder from production and export of less to more capital intensive goods. Moreover, health is a prerequisite for increases in productivity, while successful education relies on adequate health as well. Thus, health and education are considered as vital components of growth and development. These two human capital issues have to be treated together because of their close relationship and the fundamental fact that when we talk about investing in a person’s health or investing in a person’s education, we are after all talking about the same person.

The developing countries of the world  face huge challenges as they seek to continue to improve their health and educational systems. Development economists agree that distribution of health and education within countries is as important as income distribution. Life expectancy for better off people, in developing countries, is usually higher than the poorer sections. Child mortality rates in developing countries remain alarming as compared to the developed world as many of these deaths generally occur from easily treatable conditions including that of dehydration caused by diarrhea.

The state of affairs in education is also not different. On an average, a child in Europe, North America or Japan can expect to receive more than twelve years of schooling as compared to his counterpart in sub-Saharan Africa or South Asia where a child spends less than four years in school. Despite a close relationship between income on one hand and health and education on the other, evidence shows that higher household income does not automatically guarantee improved health and education. Human capital must be given top priority even in economies that are growing rapidly.

 Child mortality rates in developing countries remain alarming as compared to the developed world as many of these deaths generally occur from easily treatable conditions including that of dehydration caused by diarrhea.
 There are THREE views about the contribution of education to economic growth.

FIRST:  We can think of uneducated and educated workers as perfectly substitutable inputs to production. Labour is homogenous and can be measured in terms of efficiency units. Holding constant the number of actual workers, an increase in the level of education in the labour force increases the size of the labour force measured in efficiency units. This increase in the number of efficiency units per worker generates greater output per worker since labour is an input to production. Growth in the average years of schooling per worker is thus associated with growth in output per worker.

SECOND: Uneducated and educated workers can be seen as imperfectly substitutable inputs to production. While constructing a motorway, three workers with primary school education cannot replace one civil engineer. Educated and uneducated labour are treated as different inputs and different production processes can be thought of as making more or less intensive use of educated relative to uneducated labour.

THIRD:  Educated workforce is in a better position to absorb foreign technology. An industry’s production process could make intensive use of educated labour because it requires sophisticated monitoring and quality control or because technology is rapidly changing and highly educated workers are needed to learn it. The role of educated labour in any production process can be seen as learning or creating technology that generates more output holding levels of inputs constant.

In the international trade literature there is considerable evidence that as less developed countries catch up to the education levels of more developed countries, they start shifting from exports of products that intensively use uneducated workers to exports of products that intensively use educated workers.

The continued expansion of low-quality schools often thought to be a step on the path both to high access and to high-quality schools may actually be a self-defeating strategy.
 If education is indeed important for development, how should countries go about it? Governments face an important policy tradeoff between quality and access. Given limited budgets for schools, and the twin objectives of expanding access and improving quality, policymakers find themselves on the horns of a very unpleasant dilemma. They need to make a choice between expanding the access to education or to provide high-quality schools. High-quality schools raise student achievement and speed students through primary school, thus saving costs. Normally, students respond to higher school quality with lower drop-out rates as they tend to stay in good schools and drop-out of poor ones. Research conclusively demonstrates inefficiency in the current organisation of schools in the underdeveloped countries. The policy makers in the relatively poorer countries are not making prudent use of the meager resources available by employing unproductive ways of spending the money. This approach is not contributing towards improving student performance. Correcting the inefficiencies is not simple. A blueprint of a model school cannot be reproduced and handed over to those at the helm of affairs. It must be understood that we must turn to new organisation and new incentives to improve schools for achieving sustainable development.
Introduction of performance incentives has been dealt extensively in the literature. Introduction of these incentives is the most likely path to improvement of schools. Research scholars have suggested several ways to introduce these incentives but none has been tried extensively. There is strong evidence available in favour of establishing good schools although translating this goal into policy is not so easy. I personally believe that providing quality schools should be very high on the policy agenda of any government. The continued expansion of low-quality schools often thought to be a step on the path both to high access and to high-quality schools may actually be a self-defeating strategy.
By: Athar Mansoor

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