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Human capital is one of the basic resources of production in addition to raw materials, entrepreneurship and financial resources. Human capital is the knowledge that people acquire in life and utilize in production of goods and services or ideas for market and non-market situations (Miller, 1996). This paper examines the role of human capital in production as well as its relevance in the economic development of any country.
The processes of production in an economy as well as its competitiveness rely on the effectiveness of its human capital. The human capital plays a critical role in the labor market and society in general. There is need for well trained and educated individuals to foster creativity and productivity which allows an economy to gain competitive advantage in global markets (Organization, 2004).
There has also been a shift from traditional production of goods to production of services coupled with need to improve technology which need highly skilled and mobile workforce. The higher the education level achieved translates to strong creativity and ability to produce thus achieving strong human capital (Organization, 2004). Thus the human capital ensures that an economy is able to run effectively, efficiently and able to produce.
The other role of human capital is that it has direct relation to the growth rate of any economy. A person with a higher level of education is likely to receive extra knowledge (Leeuwen, 2007). This results of extra knowledge increases innovation which eventually improves the production levels. Thus the superior skills in production ensure that a country is able to produce goods and services competitively so that its international trade is enhanced. The ultimate achievement of this human capital is growth in the economy.
Despite its important role in economic development, there has been a looming shortage in human capital as seen in Canada which is headed to skills crisis. The governments need to invest their taxes on post secondary education to alleviate this crisis. This is because with shortage of skilled workers, it becomes difficult for the economy to remain competitive in global market.
The shortage is sometimes caused by the inability of those not privileged to pursue further education and enter labor markets. Also, the governments, Universities and Colleges contribute to the shortage by not ensuring cooperation to achieve the right human capital required for the economy growth of their countries. Moreover, the demographic change in the population which has given rise to a high population of baby boomers is causing the shortage of workers in the labor market.
The governments need to invest more resources in the University and Colleges research programs so as to develop the best human capital required for the economy. These research programs should be undertaken in collaboration with the businessmen who engage the graduates in various economic projects. The aim is to achieve a formal schooling as well as on the job training which improves productivity (Gonzalez, 2008).
The other method of addressing this challenge is investing in technology. The distance is increasingly becoming irrelevant as the several countries engage in various international businesses which have been made possible by technology. Thus for a country like Canada faced with shortage of human capital, improvement of technology could enhance its trade and thus enable it to maintain the competitive advantage. The idea here is to utilize the existing human capital to absorb foreign technology and eventual assimilation (Messinis & Ahmed, 2008). The technology reduces the human capital needed to a few key staff to carry out automated tasks. Therefore the country can utilize technology depending on the existing human capital ability to absorb new technology and social capability.
The other important issue is to educate more nationals as well as attracting the best and brightest students from abroad. This is because increased pool of educated students entering the labor market is able to maintain the economic prosperity as seen in Canada. The ability to attract those foreign students who are bright with eventual absorption to its labor market is a sure way of improving future number of skilled workers for economic development. Also, there should be assistance to those unprivileged in the society to access education.
Moreover, the trainings should be accompanied by provisions of strong research and analytical skills coupled with opportunities to gain experience in the real labor market. According to Becker (1993), the training of human capital is the most important investment. Therefore like in Canada, provision of quality training equipments as well as enough exposure to working environments enables students to be the best workers for future economic development.
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Furthermore, to encourage research in educational institutional, there should be proper mechanisms to commercialize the research discoveries. The utilization of discoveries will improve economy due to increased sources of production. Moreover, it encourages researchers to build on further improvement of their discoveries. Also, giving graduates opportunities to develop private sector research goes a long way in ensuring that quality human resources are developed in private sector which is important in economic growth.
Despite the spirited effort put up to increase the number of workers in Canada, there are barriers that prevent the achievement of this goal. Firstly, there is under-production of degree and doctorate graduates. Unlike other countries which produce several graduates, it becomes difficult for some nations to have enough workers.
Moreover, immigration rules are too strict thus preventing the immigration process of skilled workers. To eliminate this barrier there must be streamlining of the immigration procedures.
The human capital is important to the growth of any economy and should be given priority by countries so as to maintain global competitiveness. With the best human capital, the countries including Canada will exceed its production expectations.