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LABOUR PRODUCTIVITY ANALYSIS USING MULTI-VARIABLE LINEAR REGRESSION TECHNIQUE

CHAPTER ONE

INTRODUCTION

 1.1   Background of the Study

It is now a generally accepted view that human capital plays a key role in the development of any nation. In fact, the differences in the level of socio – economic development across nations is attributed not so much to natural resource endowment and the stock of physical capital but to the quality and quantity of human capital. Human resource development tends to improve the quality and productivity of labour, which in turn, leads to economic growth. Besides, acting as an important vehicle of achieving equitable income distribution, human capital is also a potent means of addressing the problem of poverty. In the words of Nwaobi, (1996) “human resources constitute the ultimate basis for the wealth of the nations. Capital and natural resources are passive factors of production”.

Human beings are the active agents who accumulate capital, exploit 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. Economists had long realized the importance of human resource development in the development process. For instance, besides emphasizing the importance of education at various points in The Wealth of Nations, Adams Smith specifically includes the acquired and useful abilities of all the inhabitants or members of the society in his concept to fixed capital. Alfred Marshal also emphasizes the importance of education as a national investment and, in his view, “the most valuable of all capital is that invested in human beings. In spite of this awareness, most early economists still regard physical capital as the main component of a country’s productive wealth; they still relegate natural and human capital to the background. It took the effort of Schultz (1961a) and others to rediscover the importance of human capital, which has in a more recent effort to incorporate investment in education into the mainstream of economic analysis.  In its very general form, human capital refers to the aggregate stock of a nation’s population that can be drawn upon for present and future production and distribution of goods and services. It comprises the essential variables (i.e. knowledge, skills and attitude) available within each unit of a nation’s human resource stock. The United Nations Economic Commission for Africa (UNECA: 1990) describes human capital as the knowledge, skills, attitudes, physical and managerial effort required to manipulate capital, technology, and land among other things to produce goods and services for human consumption. In other words, human capital is the totality of human potentials (knowledge, skills, attitude, energy and technology), inherent within a nation’s human capital stock. This, if properly developed and harnessed, would yield a high level of labour productivity. Human capital can therefore be conceived as a developed skill, knowledge and the capabilities of all the people of the society and which are needed in the labour market for the production of goods and services. In economic terms, it could be described as the accumulation of knowledge and its effective investment in the development of an economy (Harbison and Mayer 1964). Generally, human capital is developed in several ways. The first is through formal education, involving pre-primary, primary, secondary and higher education. The second is “in–service or on the job” training, which is a systematic or informal training programme in employing institutions in adult education programme and through membership of various political, social, religious and cultural groups. The third way is individual, self-development. This occurs when individuals seek to acquire greater knowledge, skills or