Taking Economic Growth To Next Level: Role of Human Capital 



Human capital plays a pivotal role in furthering growth of an economy. Service oriented industry, in particular, hugely depends on human capital for its success. It is the human capital in an organisation that uses various components of economic activity viz capital, land, machines, plays the role of an entrepreneur, implements policies and deals with customers, etc. Our Prime Minister, Shri Narendra Modi,  eagerly desires to take our Indian economy to the level of USD 5 trillions by 2024-25, human capital has to play its key role in achieving the said ambitious goal.


Business models, worldwide, are changing very fast today hence human capital has to be proficient in accepting the new wave of technology. Around a century and half ago, when machines were being installed in factories, there were widespread fears that these machines will render our people jobless, but productivity rose, quality improved, cost of products came down sharply and more quality jobs were created. John Maynard Keynes had warned in 1930 that as a result of        implementation of new technology, there will be huge job losses in the world. But new technology and innovations resulted in improvements in basic health care, life expectancy, education standards, living standards and rise in incomes. According to World Development Report 2019, technology will benefit society and improve their quality of life even further. However, many people world over still  are     anxious about sweeping impact of technology on employment. Inequality is rising and advent of gig economy (in which organisations contract with independent workers for short-term engagements) is encouraging a race towards bottoming out the working conditions for workers.  


Recent wave of digital technology allows firms to blur the boundaries and       challenges the traditional production patterns. New business models are evolving local start-ups and global behemoths with few  employees or without heavy      tangible assets. This is posing new challenges before the Governments in the areas like privacy, competition, taxation, revenue generation, etc. Individuals and firms today need only a  broadband connection to trade goods and services on online platform. This brings economic opportunity to millions of    people who live at far off places and are not even physically present in industrialised countries or even industrial areas and markets. The human capital to handle this changed scenario of today need to have high order cognitive skills like complex problem solving and socio behavioural, skill combinations that are predictive of adaptability, etc.  Therefore, it should become the priority of various governments and organisations to make huge investments in human capital to enable their employees to handle such complex issues.  


Ideal goal for governments in various countries would be to create  formal jobs for its workers so that they have social protection including insurance facility. But, in India 90 percent of workers are engaged in low productivity informal jobs, as such they are deprived of major social benefits. Even they don't get minimum wages that too not distributed to them in time. Lack of skills force even highly qualified talented young people to accept low productivity informal jobs. 8 out of 10      employees do not get social benefits in developing countries and 6 out of 10     employees do not even get insurance protection. Next wave of jobs requires social protection to employees. It should be kept in mind that workers who get minimum wages in time along with social benefits can potentially be converted into middle income group, who will ultimately create demand for economic activities in the country. 


There is need to enhance social protection to employees. A solid guaranteed social minimum and strengthened social insurance will have to be provided to all       employees. Traditional provisions of social protection based on steady wage     employment, clear definitions of employers and employees, and a fixed point of retirement are becoming increasingly obsolete.  A Universal Basic Income is one more scheme,  but it has not got success in other countries and it requires huge funds requirements which may not be arranged by emerging economies.

Education and medical services are two important areas, where workers are    compromising in many developing countries. Special attention, therefore, is      required to be given by governments. Corporates under CSR may be assigned the responsibility of setting up new schools and hospitals with state of the art       technology, where education and medical facilities are provided.  


The Govt. of India has now started paying its attention towards this so far          neglected area. As such, the Indian Parliament has recently passed the Code of Wages Bill 2019. The Bill will subsume four labour laws - Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act and Equal Remuneration Act. The floor wage will be computed based on minimum living conditions, benefitting about 50 crore workers across the country. However, its implementation should be done in a manner so that all workers are shifted towards formal economy and they get minimum wages paid to them in time, along with other social benefits like   insurance, etc. It will become a game changer for attaining the goal of Indian Economy becoming USD 5 trillion dollars by 2024-25. Central Government is  taking other steps also and as such  according to an estimation, around 60 lacs to 70 lacs formal jobs are now being created in Indian economy every year. But, this speed of creating formal jobs needs an acceleration.