India’s Missing Human Capital

In his wonderful book, Wealth, Poverty and Politics, Thomas Sowell writes: “Human capital is in fact the biggest difference between ourselves and the caveman.” It is human capital that has led to the economic progress of mankind over the centuries and has put in our homes and lives so many goods and services, which make life comfortable than what it used to be.

So, what is human capital? Economist Gary Becker writes: “Economists regard expenditures on education, training, medical care, and so on as investments in human capital. They are called human capital because people cannot be separated from their knowledge, skills, health, or values in the way they can be
from their financial and physical assets.”

Hence, education is also a form of human capital. So, does this mean that more years an individual spends in a school or a college, the more human capital he develops? Only if it was as simple as that.

As Sowell writes: “While years of education are often used as a rough proxy for human capital in general, not only is much capital gained outside of educational institutions, some education develops little human capital when it produces few, if any, marketable skills… Everything depends on whether more years in schools, colleges and universities actually create meaningful skills, or whether academic credentials create a sense of entitlement beyond what the holders of those credentials actually produce.”

The point being that just because that an individual spent time going to a school or college, doesn’t necessarily make him employable. This is a problem that India is currently facing. In fact, in a speech that President Pranab Mukherjee made in December last year he said: “Our universities and colleges produce a large number of graduates every year but most of them are unemployable.”

Politicians have also made similar comments at different points of time. Ashok Choudhary, the education minister of Bihar, said in July 2016: “India is producing army of “unemployable youths” from its educational institutions and 50% graduates do not have the required skill to do any professional job.”

While, the President as well as Choudhary made a very general comment about the unemployability of India’s graduates, there are specific studies that point out towards this problem citing data. India is producing a huge number of unemployable graduates.

And this creates its own set of problems. As Sowell writes: “Depending on its content, education may sometimes create ideological aversions to working in the private sector or a refusal to do anything that does not seem to qualify as “meaningful work”… But every society has work that simply must be done despite not meeting that standard, work ranging from garbage collection to emptying bed pans in hospitals.”

Another, thing that happens is that people who get educated but don’t have any employable skills essentially feel that some kinds of work are simply beneath them. As Sowell writes: “This includes working with their hands, even as an engineer, where they “recoil from the prospect of physical contact with machines,” preferring a desk job instead.”

This phenomenon plays out in India almost regularly. Every few months there is a news item in the newspapers which says that engineers, PhDs and MBAs, have applied for jobs of peons in government departments. This clearly shows that India’s educated unemployable prefer desk jobs with the government rather than getting their hands dirtied doing any kind of physical work.

This basically means that as a country we are overeducating individuals in comparison to the kind of work we have on offer for them. It also explains why many graduates continue to be jobless and at the same time it is difficult to get hold of a half-decent plumber or an electrician for that matter, at any point of time.

Hence, it is time that vocational training become a very important part of the school and college education across the country. In a country, as poor as India is, if education is not producing any employable skills, it is practically useless.

The column was originally published in the Bangalore Mirror on March 8, 2017

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About vivekkaul
Vivek Kaul is a writer who has worked at senior positions with the Daily News and Analysis(DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System , the latest book in the trilogy has just been published. The first two books in the trilogy were published in November 2013 and July 2014 respectively. Both the books were bestsellers on Amazon.com and Amazon.in. Currently he works as an economic commentator and writes regular columns for www.firstpost.com. He is also the India editor of The Daily Reckoning newsletter published by www.equitymaster.com. His writing has appeared across various other publications in India. These include The Times of India, Business Standard,Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, Quartz.com, DailyO.in, Business World, Huffington Post and Wealth Insight. In the past he has also been a regular columnist for www.rediff.com. He has lectured at IIM Bangalore, IIM Indore, TA PAI Institute of Management and the Alliance University (Bangalore). He has also taught a course titled Indian Economy to the PGPMX batch of IIM Indore. His areas of interest are the intersection between politics and economics, the international financial crisis, personal finance, marketing and branding, and anything to do with cinema and music. He can be reached at vivek.kaul@gmail.com

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