Chapter Notes

People as Resource

Overview: Population as an Asset

This chapter explains that a country's population can be a powerful asset for the economy, not just a liability. When we look at people in terms of their skills and ability to produce, we call them a human resource.

Human Capital is the collection of skills and productive knowledge that people possess. A population becomes human capital when there is investment in it through:

• Education
• Training
• Medical care

This process of developing the skills and health of the population is called human capital formation. It is similar to physical capital formation (like building factories or buying machines) because it increases the country's productive power.

Investment in Human Capital and its Returns

Just like investing in a factory yields profits, investing in people yields returns. These returns can be seen directly and indirectly.

• Direct Returns: More educated or better-trained individuals are often more productive, which leads to higher incomes. Healthier people are also more productive and can work more efficiently.
• Indirect Returns: The benefits of a more educated and healthier population spread to everyone in society, even those who didn't receive the education or healthcare directly.

A key difference between human capital and other resources like land or physical capital is that human resources can actively use land and capital. Land and capital cannot become useful on their own.

The Virtuous and Vicious Cycle: Stories of Sakal and Vilas

The stories of two friends, Sakal and Vilas, illustrate how investment in human capital can change a person's life.

Story of Sakal: The Virtuous Cycle

Sakal's parents were keen on his education. They sent him to the village school, and he later completed his higher secondary examination. His father took a loan for him to study a vocational course in computers.

• Investment: Education and vocational training.
• Outcome: Sakal got a good job in a private firm, designed new software, and earned a promotion. His education increased his productivity, which contributed to the economy and earned him a good salary.

Sakal's story is an example of a virtuous cycle. Educated parents understand the value of education and invest in their children's health and schooling. This creates a cycle where future generations are also well-equipped to be productive assets.

Story of Vilas: The Vicious Cycle

Vilas's father, a fisherman, passed away when he was young. His mother sold fish to support the family. Vilas suffered from arthritis, but his mother could not afford medical care. He did not go to school and was not interested in studies.

• Lack of Investment: No education and no healthcare.
• Outcome: When his mother fell sick, Vilas was forced to take up her work of selling fish, earning a meagre income just like her. He remained an unskilled labourer.

Vilas's story is an example of a vicious cycle. Disadvantaged parents, who are themselves uneducated and lack resources, may be unable to invest in their children's education and health, keeping them in a similar state of disadvantage.

Economic Activities by Men and Women

People are engaged in various activities that add value to the national income. These are called economic activities and are classified into three sectors.

Three Sectors of the Economy

1. Primary Sector: Activities related to natural resources. This includes agriculture, forestry, animal husbandry, fishing, poultry farming, mining, and quarrying.
2. Secondary Sector: Activities that involve manufacturing and processing raw materials.
3. Tertiary Sector: Activities that provide services. This includes trade, transport, communication, banking, education, health, tourism, and insurance.

Types of Economic Activities

Economic activities have two parts:

• Market Activities: These are performed for pay or profit. They involve remuneration for the person performing the activity. Examples include producing goods or services, and government service.
• Non-market Activities: These are activities for self-consumption, such as processing a primary product for your own use or producing your own fixed assets.

Division of Labour and Women's Role

Due to historical and cultural reasons, there is often a division of labour within families.

• Women generally look after domestic chores like cooking, cleaning, and childcare.
• Men typically work in the fields or earn money for the family.

The household work done by women, like Sakal's mother Sheela, is not paid for and is not recognised in the National Income. However, when women enter the labour market, like Vilas's mother Geeta who sold fish, they are paid for their work.

Education and skill are the main factors that determine an individual's earnings. A majority of women have low education and skill levels, which often results in:

• Lower pay compared to men.
• Jobs with no security, low income, and irregular work.
• Lack of basic facilities like maternity leave, childcare, and social security.

However, women with high education and skills are often paid on par with men and enter professions like teaching, medicine, and administrative services.

Quality of Population

The quality of a country's population is what ultimately determines its growth rate. A literate and healthy population is an asset. The quality of the population depends on:

• Literacy Rate
• Health (indicated by life expectancy)
• Skill Formation

Education

Education is a crucial input for individual and societal growth. For Sakal, it led to a good job and salary. For society, it enhances national income, cultural richness, and the efficiency of governance.

The government has taken several steps to promote education:

• Providing universal access, retention, and quality in elementary education, with a special focus on girls.
• Establishing schools like Navodaya Vidyalaya in each district.
• Developing vocational streams to equip students with job-related skills.
• Implementing the Samagra Shiksha scheme to improve school effectiveness from pre-school to Class XII.
• The Mid-day meal scheme has been implemented to encourage attendance and improve the nutritional status of children.

Despite these efforts, challenges remain, such as the poor quality of schooling and high dropout rates. There are also significant differences in literacy rates across different sections of the population. Literacy among males is nearly 16.1% higher than females, and it is higher in urban areas than in rural areas.

Health

A person's health is essential for them to realize their potential and be productive. An unhealthy person cannot work efficiently and contribute to the growth of an organization.

Improving the health status of the population has been a priority for the country. India has built a vast health infrastructure over the decades. These efforts have led to significant improvements:

• Life expectancy increased to over 67.2 years in 2021.
• Infant mortality rate (IMR), the death of a child below one year of age, has come down from 147 in 1951 to 28 in 2020.
• Crude birth rates and death rates have also dropped.

Despite this progress, many places in India still lack basic health facilities.

Unemployment

Unemployment is a situation where people who are willing to work at the going wages cannot find jobs.

To be counted as unemployed, a person must be part of the workforce population, which includes people from 15 years to 59 years.

Types of Unemployment in India

The nature of unemployment differs between rural and urban areas.

Unemployment in Rural Areas

1. Seasonal Unemployment: This occurs when people cannot find jobs during certain months of the year. It is common for those dependent on agriculture, as work is only available during busy seasons like sowing, harvesting, weeding, and threshing.
2. Disguised Unemployment: This happens when people appear to be employed, but their contribution is not actually needed. For example, if a farm requires the work of five people but eight family members are working on it, the three extra people are in disguised unemployment. If they were removed, the farm's productivity would not decline.

Unemployment in Urban Areas

• Educated Unemployment: This has become a common problem in cities, where many young people with matriculation, graduation, and post-graduation degrees are unable to find jobs. There is often a mismatch where there is a surplus of qualified people in some categories but a shortage of the specific technical skills needed for economic growth.

Consequences of Unemployment

Unemployment has a negative impact on the economy and society:

• It leads to the wastage of manpower resources. People who could be an asset become a liability.
• It increases the economic overload, as the unemployed depend on the working population.
• It can lead to feelings of hopelessness and despair among the youth.
• It adversely affects the quality of life, as families struggle to survive, leading to a decline in health and withdrawal from the school system.
• An increase in unemployment is an indicator of a depressed economy.

Story of a Village: Human Capital in Action

A story of a village illustrates how human capital can lead to prosperity.

1. The Beginning: A village where each family was self-sufficient, making their own clothes and teaching their own children.
2. The Investment: One family sent their son to an agriculture college. He returned as a qualified agro-engineer.
3. The Innovation: He designed an improved plough that increased the wheat yield. This created a new job (agro-engineer) and a surplus of produce that could be sold.
4. Community Growth: Inspired by this, the village opened a school. A girl was trained in tailoring, creating another new job.
5. The Result: The farmers saved time and became more productive. The village, which once had no job opportunities, evolved to have a teacher, tailor, agro-engineer, and more. It became a place with complex and modern economic activities.