Demographic assets or liabilities

LAHORE: Human resource is an asset or a curse depending on the way it is nurtured by a nation. Highly skilled, educated and healthy human resources take countries to a new level; an illiterate, unskilled and unhealthy population is an unbearable liability.

Economies prosper in this age on the basis of knowledge and innovation. These two virtues reduce the cost, increase the efficiency and eliminate wastage.

Developed economies are operating with a handicap of aged population and acute shortage of young and energetic workforce. To overcome this disadvantage, developed nations in the world are hunting educated skill forces from around the globe.

Pakistan’s demographic divide is both a threat and an opportunity as much would depend on how our planners nurture its 63 percent human resource that is less than 25 years old.

Most of the time, the efforts of the state to enrich the human resource are defeated as our educated and skilled human resource is poached by economically advanced economies.

This results in an increasing stock of non-productive and illiterate human resources and depleted skilled workforce. Non-transparent policies have also contributed to the flight of competent human capital, leaving the less productive and relatively less competent workforce in the country.

Enriching human capital is vital for economic growth. We are left far behind many countries that were much weaker economically than us about six decades back.

East Asian economies that were not endowed with natural resources like ours were much poorer than us. They surpassed us by miles as their huge human capital endowments, both in terms of education and health were the main reason for this growth.

Our per capita income was double that of South Korea in 1960. Today Korean per capita income is amongst the highest in the world, while Pakistan is bracketed among the poorest countries.

The reason for this divergence is that literacy rates in the 1960s were as high as 71 percent for the Republic of Korea, and 68 percent for Thailand, while Malaysia achieved a rate of over 50 percent. In the South Asian developing countries, the literacy rate was low; only 9 percent for Nepal and 16 percent for Pakistan.

After almost five decades, the literacy rate has improved officially to around 60 percent in Pakistan that is still lower than the literacy rate of Korea in 1961.

The literacy rate in South Korea reached 98 percent and Malaysia managed a rate of about 90 percent.

Expenditures on education, training, medical care, and so on are investments in human capital. Schooling, a computer training course, expenditures on medical care, and lectures on the virtues of punctuality and honesty also enrich capital. These virtues raise earnings, improve health, or add to a person’s good habits over much of his/her lifetime.

In the 1960s, life expectancy at birth was below 45 years in South Asian countries. On the other hand, the East Asian developing countries had life expectancies well over 50 years, with the Republic of Korea achieving a figure of over 54 years. It was followed by a life expectancy of 53 years in Malaysia and 51 years in Thailand.

In Pakistan, life expectancy has increased to 66 years. In Malaysia and Korea, life expectancy is now more than 78 years, with Thailand reaching a figure of 72 years.

The demand for human capital is derived from the production function and profit maximising behaviour, but the supply of human capital is typically dominated by non-profit organisations, especially the state.

Pakistan is fortunate that the proportion of the working age population is increasing in the country with a decline in the dependent age population. It is the reverse in most developed economies.

If the available human capital of the country is not empowered with knowledge-based education and health care we would remain a low-income country even after another 50 years.

Evidence covering many years is now available from more than a hundred countries with different cultures and economic systems that shows high school and college education coupled with adequate state provided health care facilities greatly raise a person’s income, even after netting out direct and indirect costs of schooling, and even after adjusting for the fact that people with more education tend to have higher IQs and better-educated, richer parents.

The earnings of more-educated people are almost always well above average, although the gains are generally larger in less-developed countries.