Human Capital of the New Generation

By

Jorah Ramlan

ISIS Malaysia

Introduction

• Human capital consists of:

• Knowledge

• Skills

• Abilities

• Integrity

Development of Knowledge

• Support for scientific research,

• Private incentive for R&D and innovation,

• Alternative opportunities for talented individuals

• Learning-by-doing.

(Romer, 1996)

Sources of Knowledge

• Formal education

• Informal education

• Family influence

• Government support

Importance of Human Capital

• Human Capital is very significant to growth/development

• New Generation is the source for human capital• Various types of capital • Human capital = Labour force;

labour force ≠ human capital

Unemployment in Malaysia(Challenge # 1)

• More than 50 per cent of the unemployment total are young population/new generation

(age group 15-29)

(MOHR, 2006)

Malaysia: Selected Employment Statistics 2006

Population 27.2 million

0-14 32.3 %

15-64 63.4 %

65 and above 4.3 %

Employment

Labour force 67 %

Annual growth 2.6 %

Unemployed 3.1 %

New jobs created 1.6 million

Inflation 2.9 %

• 220,000 people join the labour force each year

• 44,000 will possess tertiary qualification

Labour Force Participation 2006

0

500

1000

1500

2000

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

Age group

To

tal

labour force

Quality, Quantity, and Productivity

• Quality and quantity are important for productivity

• Quality of human capital refers to education level, formal and informal education, worldwide marketability

• Quantity of human capital refers to market size, consumer spending

• Productivity refers to output per person, Total Factor Productivity (TFP),

Competitiveness Index(Challenge # 2)

(Most problematic factors for doing business in Malaysia)

0 2 4 6 8 10 12 14 16 18

govmt instability

crime and theft

tax regulations

tax rates

inflation

access to financing

foreign currency regulations

inadequate infrastructure

poor work ethics

restrictive labour regulations

policy instability

inadequately educated workforce

corruption

govmt bureaucracy

Technology and the New Generation

0

2000000

4000000

6000000

8000000

10000000

12000000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Year

Peo

ple

internet subscriber internet user

Labour Force and Productivity(Challenge # 3)

0

20

40

60

80

100

120

Year

Un

its

employed labourforce output per worker

Education and Human Capital

Education levels and totals 2000-2007Increase/decrease; = effect on human capital

0

10

20

30

40

50

60

2001 2002 2003 2004 2005

Year

Per

cen

tag

e

no formal education primary education

secondary education tertiary education

Labour Market Mismatch(Challenge # 4)

• In-demand skills and talents

• Moving up the value chain

• From ‘B’ grade workers to ‘A’ grade workers

• Service on-demand

• Competitiveness

• Human capital flight

Personal and Economic Requirements

• Personal• Self development• Financial independence• Social assimilation• Economic• Leadership development• Strategic investment• Profitability• Productivity

Policy Issues(Challenge # 5)

• Youth development policy• Poor coordination among policies and sectors

that affect youth and limited accountability for youth outcomes

• Weak voice of young people in monitoring and providing feedback on the quality of policy and service delivery

• The paucity of proven successes

• Developing a coherent framework and integrating it with national policy

• A coherent national framework for youth• Integration with national policy planning

and implementation mechanisms• Building capacity• Role of the education system

• Listening to young people

• Maintain an open channel of consultation and feedback between government and young people

• Monitoring and evaluation

• Monitoring

• Evaluation

Conclusion

• Re-evaluation of political, social and economic systems’ incentives and disincentives

• Strengthen formal institutions, social organisations and family institutions

• These are the requirements for the development of human capital of the new generation

Developing Human Capital

Knowledge,Skills,Abilities

Values,Beliefs,Attitudes

Personality,Intelligence,Behaviour

Formal Institutions(Schools, Universities,Workplace)

Social Organisations (Peers Groups, Clubs, Networks

Family Institution (Parental, Sibling & Extended Family)

Political System:Incentives & Disincentives

Social System:Incentives & Disincentives

Economic System:Incentives & Disincentives

• Issues and challenges are dynamic for every generation but need to be met for sustainable economic growth

• The race for human capital will intensify, strategic planning of this resource is essential

• Gestation period for return on human capital investment may be longer that other investments, hence appropriate measures need to be taken promptly

• Human capital and new generation: develop it or lose it!

Thank you for your attention