COURSE OUTLINE

ECO 217 – THEORIES OF HUMAN RESOURCES

CREDIT UNIT – 2

1. Introduction

2. The concept of human resources

3. The concept of human resource development

4. Premises for human capital development

5. Commonly held theories of human resource development

6. Criteria for investment in human resources

7. Investment in human resources

8. Brain Drain

9. Approaches to human resource analysis

10. Human resource development planning in developed and developing countries.

11. Human resource planning in Nigeria.

12. Education and human resource development

a. Problems of the Nigerian education system

13. Health and human resource development

a. Problems of the Nigerian health system

READING TEXT

INTRODUCTION
Any country or organization in the world has about 3 types of resources namely; physical, financial
and human resources.
1. Physical Resources – These are those items or equipment’s and materials which the
organization controls of which real estate and machinery are most common. This category
also includes raw materials and natural resources.
2. Financial Resources – In the simplest term, financial resources means money. However, as
economists we know that there are various kinds of money. Therefore, financial resources
 includes hard currency, letters of credit, bonds, treasury bills, account receivables etc.
Financial resources may be generated in a variety of ways namely; sales goods and
services, sales of stocks and bonds, subsidies and even donations or grants.
3. Human Resources – These are people who are part of an organization or a country. They
may be direct employees part-time workers, temporary employees, consultants or people
with a variety of other relationships with the organization. The organization makes
different kinds of demands on these people and has various ways of classifying them.
Without human resources, an organization is nothing but merely factories, expensive
equipment and some impressive balance sheet. When you think of the millions of
organizations that provide us with goods and services, how often do you explicitly consider
that these organizations depend on people to make them operate? Is it only under unusual
circumstances such as when teachers or doctors go on strike that you consider the important
role that employees play in their organization? How were they found and selected? Why
do they come to work on a regular basis? How do they know what to do on their jobs? Will
today’s employees be prepared for the work their organization will require of them in 10 –
30 years? Can the future manpower requirement be estimated today? These are some
important questions which the study of human resource development intends to answer.

THE CONCEPT ON HUMAN RESOURCES

Human resources refers to the human component of a nations resources. It refers to the totalities
of energies, skills, knowledge and experience available in a country. It is made up of managerial,
scientific, engineering, craftsmen and other skills which are employed in creating, designing,
developing, organizing, managing and operating productive and service enterprises for economic
institutions. In another parlance, human resources can be conceptualized as in terms of human
capital. Human capital can be defined to include the productive qualities embodied in the labour
force such as the level of education, skills, health and experiences that are crutial for the economic
and political development of a country. The more nourished the labour force, the more the human
capital is said to be enriched and the greater its productivity. Human capital is therefore seen as a
result of investment in human resources. An important factor in the development efforts of poor
countries is the formation of human capital i.e the process of acquiring and increasing the number
of persons and their skills, education and experiences which are critical to econmis and social
development of the country and which are associated with investment in man for his development
as a creative and productive resource.
To Harbison (1972), ‘human resources constitute the ultimate basis for wealth of nations.capital
and natural resources are passive factors of production; human beings are the active agents who
accumulate capital, exploit natural resources, build social, economic and political organizations
and carry forward national development. Clearly, a country which is unable to develop the skills
and knowledge of its people and to utilize them effectively in the national economy will be unable
to develop anything else’. Therefore, ‘human resources’ often used interchangeably with
‘manpower’ refers to the “totalities of energies, skill, knowledge and experience available in a
country” (Diejomaoh, 1978). It is the managerial, scientific, engineering, technical, craftsmen and
other skills which are employed in creating, designing, developing organizations, managing and
operating productive and service enterprises and economic institutions Yesufu, 1962). They are a
nations most valuable resources. They constitute a nations human capital (Schultz, 1961). Without
the required human capital (that is, stock of skills possessed by human beings), physical capital (in
the form of machineries and other technologies) will not give rise to rapid economic growth.
THE CONCEPT OF HUMAN RESOURCES DEVELOPMENT
Human resources development (HRD) involves the improvement and/or the transformation of a
nations human resources by better medicare, nutrition, accommodation, environment, education
and training. Here, emphasis is placed on education and training. The development of human
resources is achieved through formal and informal means. These could be through education
(primary, secondary and tertiary), skill training (formal or informal), self-development and also
improved health nutrition and health facilities.
The activities of HRD are focused on the area of learning. In other words, human resources are
developed through learning experiences. Simply put, HRD is concerned with an organized series
of learning activities within specified time limits designed to produce behavioral change in the
learner. The purpose of HRD is to increase the capability of employees for continuing growth and
development. HRD has borrowed from several overlapping disciplines such as psychology,
sociology, anthropology, economics, counselling, education management science and behavioral
science. For the purpose of this course, emphasis will be placed on aspects drawn from the
discipline of economics.
PREMISES (CONDITIONS) FOR HUMAN CAPITAL DEVELOPMENT
1. Investment in health
The investment in health and its facities is to improve the total wellbeing of an individual
such that the life expectancy of the individual is guaranteed with a long future. The
individual could invest in his health because it enables the individual to have stamina and
capacities as well as potentials to think and carry out the task of physical capital formation.
2. Investment through on the job training
Human capital can be developed on the job while employed. People acquire new skills
while doing the job through an orientation of the worker on the available opportunities and
job schedules of the firm. The worker is assigned to work closely with an experienced
coach to mentor him through the job.
3. Investment on formal education
Through primary, secondary and tertiary institutions, human capital can be developed.
Investment of an individuals earnings for a lifetime constitutes basis of his human capital
formation. The period under which one stays in school and skills are acquired informs us
that the individuals human capital was developed (or formed) in this process.
4. Study tour
This constitutes an investment in the formation of human capital through the process of
undertaking a program that involves learning new skills on a particular field and
transferring the skills subsequently. Many extension workers and researchers often
 undertake study tours. Their experiences have been translated into skills that are useful in
the development of particular output.
5. Migration
Most people migrate to acquire new skill, information technology and new experiences.
The introduction of an individual to a new process of capital formation makes the
individual more informed than he was before the migration. For example a medical doctor
ca migrate from Nigeria to the USA because he wants to acquire new skills and technology
in his own area of specialization. This is because these skills do not exist in Nigeria.
Specialization can be formed through migration of people beyond frontiers of the
environment to expand the boundaries of knowledge. This makes them more informed than
people who have not undertaken such adventures.

COMMONLY HELD THEORIES OF HUMAN RESOURCES DEVELOPMENT

INVESTMENT IN HUMAN RESOURCES

Investment in human resources is the act of increasing the productive qualities of the labour
force by providing more education and by increasing skills health and nutritional levels.
These however all involve a cost and usually provide a return. The cost and benefit of
human capital investment can be measured by resulting increases in productivity and
higher earnings.
Investment in human resources is ascribed as a process of one undertaking an educational
venture. It includes the cost associated with ones education during the process of
undergoing schooling or training. From another point of view, the opportunity cost
foregone of the process of education instead of one being employed on productive ventures
to earn an income for the family or the individual are being seen as investments. For
instance, the family earnings that are devoted to your education during the course of
acquiring a university degree are considered as the family investment in you.
Investments are carried out because many families and the society expect returns from your
labour. The expected returns from your labour could be at the level of each contribution to
the development of the society. In most societies expenditure on health, education and
nutrition are considered as the prime investment in human resources. This is because the
cost of a student’s education will have a multiplier effect on the output of the economy.
Similarly, an investment in health and nutrition helps or tends to reduce the fertility rate of
the family especially when the mother is educated. Her fertility will be reduced by learning
child spacing through proper family planning and thereby improving the nutrition status of
the mother and the child. This has an implication on the well being of the child as its access
to education would be increased.
Investment in human resources is also the cost forgone in undertaking ones education. This
refers to the cost foregone of physical capital development of resources. Investment in
agriculture for example helps in producing the required food that will give you the needed
per calorie intake which will help to boost your nutrition and as such be able to participate
in educational pursuits. An investment in the social sector like provision of portable water,
 access roads, good housing, electricity etc all have their externalities in improving the
quality of the environment and access to schooling.
Investment in human resources can only be best appreciated as investment on education
and training. However, this is a narrow explanation because other sectorial inputs in health,
agriculture, social services etc all add to the cost of ones education.

CRITERIA (conditions/ reason) FOR INVESTMENT IN HUMAN CAPITAL

1. The rate of return criteria – the two things considered are
a. The future consumption component
b. The future earnings component
The expectation of the individual, the family and the governments decision to invest in
ones education is the expected earnings of the individual over time. An investment in
primary or secondary education would mean that such levels will eventually take up middle
income earnings as compared to investment in tertiary education that is targeted at higher
earnings by professionals that have been produced by the system.
However the future the future consumption component is associated with satisfaction
derived by the individual having attained the level of education he desires.
2. The contribution to gross national income (GNI)
This is determined by the contribution of human capital overtime to GNI. We consider the
quality of professionals and their individual contributions to the economy. Yet we must not
neglect the contributions of other forms of human capital that are not professionals.
3. The residual factor
Here we consider the view of Solow, Kendrick and a host of other economists that attempt
to determine the proportion of increase in GNP over a period of time that could be attributed
to the measurable inputs of capital and labour. Also, to find out what proportion of the
increase in GNP could be ascribed to other factors. All these are frequently grouped as
residual. Going from a number of studies and findings, the most importatnt of these residual
factors revealed are education, research, training, enonmies of scale and other factors
affecting productivity.
4. Composite Index
This is used as the basis for ranking individual countries according to their level of human
development. This concept was developed by Harbison and Myers. They developed a
composite index criterion based on certain human development indicators. They look at
the skills knowledge, capacities, capabilities and experience of human resources through
an array of professionals that exist within the economy. They grouped 75 countries into
four (4) and called the 1st group underdeveloped, the 2nd group partially partially developed,
the 3rd group semi advanced and the 4th group advanced. In their own study, they studied
the relationship between these indicators and the indicators of economic development. This
was for the purpose of determining which composite human resource is contributing to the
GNI.
BRAIN DRAIN
Brain drain refers to the emigration of intellectuals from a given country to another for better
working conditions. The causes or reasons for brain drain can be grouped into “push” and “pull”
causes.
Push causes
1. Lack of promotion prospects.
2. Poor management.
3. Heavy workload.
4. Lack of facilities.
5. Declining health services
6. Inadequate living conditions.
7. High levels of violence and crime
Pull causes
1. Better remuneration
2. Upgrading qualification
3. Gaining experience
4. Safer environment
5. Family related matters.

APPROACHES TO HUMAN RESOURCE ANALYSIS

Human resource analysis can be defined as the study of manpower requirement for growth and
development. It examines available human resources in order to estimate present and future
manpower needs. Such an exercise is necessary for developing nations that are characterized by
shortage of professionals, unskilled manpower surpluses and massive unemployment of graduates
of arts and humanities. Human resource analysis is undertaken to provide policy guidelines for
investing in human resources. These policy guidelines are needed in order to invest the limited
resources of nations as efficiently as possible. There are various approaches to human resource
analysis, which include;
1. The linear programming approach
2. The return to education approach
3. The infinite price elasticity approach
4. The fixed-input-coefficient approach
5. The manpower requirement approach
1. The linear programming approach
This approach starts by determining the skills and educational levels currently used in each
sector for estimating the productivity of each skill and educational level in each sector and
projecting future sectorial output. It then determines the combination of skills and
educational levels which maximizes future GNP. Thus, it could theoretically provide clear
policy guidelines as to which skills and educational level should be expanded. The problem
of this approach is its dependency on the availability of data and as a result, calculations
are based on assumptions leading to conditional conclusions rather than precise policy
guidelines. The linear programming approach is extensively being applied in developing
countries. This is because it allows for preparation of guidelines for expanding specific
occupation and output. Here the labour requirements for output in the different sectors is
taken either from the countries own historical statistics or more likely from those of more
advanced countries whose statistics are more complete. The result is a list comprising of
number of workers by occupation that would be read in the future period.

2. The return to education approach

This estimates the rate of returns to each type of educational investment. Here those
educational levels which have the highest returns are those most needed. This gives the
clear policy guidelines of investing in those educational levels which give returns higher
than investments in material capital subject to similar risk and up to the point where returns
are equalized.

3. The infinite price elasticity approach

This approach prescribes more of those particular skills and educational levels under which
the present wage structure provides the highest returns. The approach also assumes that the
present wage structure correctly reflects relative productivities of various skills and
educational levels. It prescribes providing more more of those skills and educational levels
with the highest wages relative to cost as those most needed for development. This is
however true only if the present wage structure correctly reflects relative productivities.

4. The fixed-input-coefficient approach

This approach applies the present coefficient of educational requirement in each sector of
the economy to project sectorial outputs in order to estimate the future manpower needs
and educational levels required by each sector. This approach specifies as a policy
guideline the provision of gross manpower needs and educational level requirements
needed to produce the projected sectorial outputs. Correct choice of outputs and sectors
lead to maximum present and/or future growth. Hence providing the indicated manpower
needs and educational levels represents the basic possible use of investment in human
capital. This situation is only feasible if the assumption of zero (0) elasticity of substitution
of inputs holds as production expands.

5. The manpower requirement approach

 This approach to educational planning was developed by Backerman and Parnes. They
defined the educational needs of a country in terms of productivity and a given pattern of
growth. This approach identifies the following steps;
i. Analyzing the existing manpower structure
This involves preparing an inventory of employment and short-term requirements
for manpower for each sector of the economy and a general appraisal of the
educational system. Finally, a survey of programmes for on the job training and an
analysis of the structure of incentives and proper utilization of present manpower.
ii. The pattern of output for the various sectors of the economy are projected for the
forecast year. Then total employment for each sector and the economy is estimated
on the basis of some assumptions about productivity.
iii. The total employment for the forecasted year is allocated among the various
occupations for each sector. Then the requirements for each occupational category
are aggregated from the various sectors to arrive at the total manpower stock
required in the forecasted year.
iv. The supply of manpower is estimated for the forecasted year on the basis of present
stock of manpower. Anticipated outflows from the existing educational system as
presently planned and allowances for losses due to death, retirement and other
reasons for withdrawal from the labour force.
v. The estimated output on manpower from the educational sysyem are compared with
the required manpower outputs as determined in (4) above.
vi. The orders of magnitude for expansion of the educational system are then
established to close the gap between anticipated manpower requirements and
presently expected manpower supply.
Weaknesses of the manpower requirement approach
1. Where data on which to base estimates of expected increases in productivity and the effect
of these changes in educational requirement is lacking or inadequate. The productivity
criterion is difficult to employ. In LDCs this weakness is a major characteristic.
2. Determination of required educational qualification of high level of occupation for the
forecast year may depend on the supply structure of educated persons at that time.
3. The forecasts pointed out by this approach are dangerous in LDCs due to complex
economic, political and social events, the future manpower requirements approach based
on productivity analysis is arbitrary.
HUMAN RESOURCE DEVELOPMENT PLANNING IN DEVELOPED AND
DEVELOPING COUNTRIES A.K.A MANPOWER PLANNING
HRD planning relates to the long range development of semi-skilled and skilled manpower
requirements of the economy and to plan educational priorities and investment in human resource
development so as to enlarge employment opportunities in the future. To do this, there are 3
approaches that one can adopt to plan human resources in any economy.
 1. Identify the skilled manpower shortages in each sector of the economy and state reasons
for these shortages.
2. Identify the manpower surpluses and state reasons for such surpluses.
3. Design and lay down strategies of manpower planning both in terms of shortages and
surpluses.
Manpower shortages
1. Current shortages
a. There is shortage of highly skilled proffessionals in less developed countries even though
it also exists I more industrialized countries as well. Such shortages include scientists,
engineers, doctors and veterinarians. Most of them live in urban areas and are opposed to
rural life where there services are required. There shortages increase as a result of relative
immobility of labour.
b. The shortage of sub-professionals is even more acute than proffessionals. They include
electrical mechanical, chemical and agricultural technicians, foremen, spinning, weaving
and finishing masters, nurses, mid-wives and health assistants.
c. Shortages also exist at the top level managerial and administrative personel in the private
and public sector.
d. There are also shortages of personnel with entrepreneurial abilities.
e. There are also shortages of primary, secondary and vocational teachers because of their
low salaries.
f. There are also shortages of craftsmen and technical personnel like welders, moulders,
electricians, motor mechanic and painters and tool makers.
Reasons for their shortages include;
a. Failure to recognize that the requirement for such sub-professionals are many times higher
than proffessionals.
b. The few persons who are qualified to enter the technical institutes prefer university
education in view of status and higher pay attached to university graduates.
c. The seats available in technical institutes are very few compared to universities.

2. Invisible manpower shortages

There are invisible manpower shortages in form of unfilled jobs in LDCs despite the wide
spread unemployment and underemployment.in majority of organizations, workers with
required skills are not available. In this case, a number of posts or positions remain vacant.
Most times, persons with no requisite education and training are required to carryout tasks
in these positions. Productivity of such firms are therefore adversely affected.

3. Frictional shortages
The LDCs recognize frictional shortages due to lack of an organized employment market,
increase in the sudden demand for manpower in labour shortage regions and immobility of
labour.
 4. Replacement of foreign personnel
There are current manpower shortages of highly skilled manpower at the top levels in the
LDCs of Africa, Gulf countries, Caribbean and Pacific countries, Latin America and the
poor countries of Eastern Europe due to the replacement of foreign personnel.

Manpower surpluses
Manpower surpluses relate to both unskilled and skilled workers available for and in search of
gainful employment. They consist of the following;
1. The underemployed
This category includes open and the disguised unemployed. The open unemployed are
those who are working less than the normal working hours while the disguised unemployed
are those whose contributions to output is less than what they can produce by working
normal hours of work per day.
2. The educated unemployed and underemployed
This refers to those persons who have obtained at least a secondary school certificate. In
LDCs structural rigidities and slow rate of growth have failed to increase job opportunities
for them in spite of the increase in educated manpower. Underemployment amongst the
educated is a result of their taking a job below their skilled level.
3. Urban unemployed and underemployed
Urbanization and increased rural education, rural-urban migration creates opportunity for
competing on the available jobs in the industrial sector that cannot absorb the growth of
the labour force.
Strategies of manpower planning
There are 3 broad strategies used in HRD planning in order to correct the imbalances between
surpluses and shortages of manpower in an economy. These strategies include;
1. The development of formal education
In developing formal education we consider all aspects of the educational system that
develop the highly skilled manpower especially at the university level and the sub-
professionals at the colleges of education and the polytechniques and semi-skilled labour
from the secondary nand primary school. Education development at this level should
incorporate skill development through cognitive and psycho-motor skills that the
individual learns on the process of education and applied at the world of work.

2. Training of employed manpower

The HRD strategy should engage in the exercise of improving the qualification and skills
of personnel employed both in private and public sectors towards improving their
performance on strategic occupations, employees can undertake this by embarking on on-
the-job training, in-service training, mid-career training undertaking of workshops,
 seminars, conferences and symposia. Employees under this can only be encouraged by
their employers in implementing these where they are not available.
3. Building of appropriate incentives
People in any economy are out to be motivated and encouraged to participate in productive
activities that are needed to accelerate the process of economic development. In doing this,
priority must be given to skills that are scarce. Where skills are highly rewarded,
productivity tends to be higher and wastages are usually minimized. In planning human
resources we must consider appropriate incentives for the level of skills, knowledge and
capabilities of the labour force.

HUMAN RESOURCE PLANNING IN NIGERIA

Human resource planning is the process of determining the policies and programs which will
develop, distribute and utilize human resources with a view to attaining a nations broader goals of
socio-economic and political development. The principal aim of such planning is to ensure that
the right people are available for the right job at the right time. In this way, manpower shortages
and surpluses are eliminated while labour resources are efficiently allocated beside the
development of suitable educational programmes.
The planning of human resources in Nigeria dates back to 1939 with the federal government setting
up a panel to consider the nations manpower needs in the areas of post-secondary and higher
education over the next two decades. The report of the commission reffered to as the Ashby report
(1960) came up with some projections of enrollment figures in the Nigerian University system for
a decade (1960 – 1970), instead of two decades, mainly due to dearth of data. Even at this, the
estimates contained in the report were based on mere assumptions.
This implies that human resource planning requires accurate data based on demography, education
and labour market mechanisms. The demographic data required include, population size, age and
sex structure. In Nigeria, before the 1991 census, the last officially accepted census was the one
conducted in 1963. This state of affairs led to faulty planning and consequently, faulty execution.
It should be noted that the three important aspects of the machinery for human resource planning
grew out of the recommendations of the Ashby Commission. These are;
1. The National Universities Commision (NUC)
2. The National Manpower Board
3. The regional (now state) manpower committees.
These are involved in human resource planning development and utilization at their respective
levels.
Unfortunately, human resource planning and its machinery in Nigeria has been bedeviled by;
1. Lack of study on planning and manpower utilization
2. Lack of current and comprehensive information on the stock of skills available in Nigeria.
3. Inability to evaluate manpower contents of development projects.
 4. Improper coordination in matters relating to employment, education and manpower
planning.
5. Inability to attract and/or retain competent professional staff.
6. Lack of data.
7. Lack of coordination between manpower planners and the educational system.
8. Lack of coordination among the agencies charged with the responsibility of human
resource planning.
9. Almost all secondary school beneficiaries receive the same type of education, indicating
lack of planning. This has left the output of the system without any demonstrable skills and
as a result, unemployment in most establishments.
10. Also, the non-linkage of the educational of the educational output to labour market remains
the bane of economic problems in the country. This is particularly true when we consider
the larger proportion of the unemployed that is youthful. Their continued unemployment
constitutes a huge waste of human and financial resource investment to both the private
and public sectors. This situation fuels anti-social behavior.
In recognition of the above facts, both federal and state governments have put in place a number
of programmes for the unemployed, particularly the youth. Examples are; the National Directorate
of Employment (NDE), National Poverty Eradication Programme (NAPEP), SURE-P etc. the aim
of these programmes is to equip the unemployed with basic skills for comfortable living in the
society. However, these programmes appear to have planning and implementation problems, in
adequate funding, data, facilities etc.
EDUCATION AND HUMAN RESOURCES DEVELOPMENT
In the 1960s, some researchers showed that education contributes directly to the growth of national
income by improving the skills and productive capacities of the labour force. This important
findings led to a flood of studies on the economic value of education.
The educational sector develops the human resources, a developed human resource increases the
productivity of the physical resource, which implies economic growth and consequently
development. For economic development, it is the quality of labour that is more important.
Unskilled workers even working for long hours will have low per capita income. Education
increases the quality of labour supply and therefore the productive capacity of the nation.
Educational programmes have to be wide and varied. The primary education is necessary because
it provides basic education, with this type of education, children of school going age may receive
compulsory education.
Secondary schools are also needed because here larger educational facilities are provided and they
are expected to provide materials for universities. Training institutes are also needed for producing
nurses, teachers, mechanics, electricians, etc.
Also, higher level of educational such as the universities, research institutes produce all types of
trained personnel such as doctors, administrators etc.
In LDCs, investment in education largely depends on the state. The state therefore has a very
crucial role in producing and/or increasing effective labour supply and therefore the productive
capacity of the nation, since education plays a significant role in the development of human
resources. However, poverty remains a major problem in the provision of educational facilities to
the ever growing population of LDCs.
Problems of the Nigerian Educational System
Policy measures are put in place to enhance the national policy on education. However the policy
environment has been beset not with frequent changes but also policy inconsistencies and lack of
political will to implement accepted policies adequately. Most policies are changed mid-stream
without allowing them to run full cycle and appraise their outcome along with their set objectives.
Besides this, is also the unguided proliferation of education agencies whose functions not only
overlap but are not coordinated.
Educational attainment levels in Nigeria appear to be low by international standards. This is
evident in the critically low levels of key inputs such as instructional materials, manpower and
physical infrastructure. The unduly high teacher/pupil ratio is not due to high enrollment but
because of inadequate supply of teaching staff.
Quality of education is also undermined by inadequate surveillance by inspectorate departments
as the lower level suffers from long lags of inspection, while accreditation of courses at the tertiary
level is long and far between.
Apart from the education hardware (that is, physical infrastructure) that is in suboptimal state, the
software of the system (that is, curriculum) is inappropriate at all levels of education to meet the
manpower requirements of the country.

HEALTH AND HUMAN RESOURCE DEVELOPMENT