WHY IS THE HUMAN CAPITAL SO IMPORTANT FOR THE ECONOMIC DEVELOPMENT OF MAURITIUS?

Introduction
This assignment aims to look at the special importance of human capital to the economy of Mauritius.
First, we go about defining the concept of human capital.
Afterwards, there will be a section which talks a bit about the history of the economy of Mauritius.
Then we will move on to another section which tries to explore the different factors as to why and how human capital is important to Mauritius.
We will then have a concluding remark.
We will end by some possible recommendations.

What is human capital?
Adam Smith defined human capital as follows: “Fourthly, of Justin Slay’s types of capital which is of the acquired and useful abilities of all the inhabitants or members of the education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in his person. Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour, and which, though it costs a certain expense which certainly repays afterwards.
The use of the term in the modern neoclassical economic literature dates back to Jacob Mincer's article "Investment in Human Capital and Personal Income Distribution" in the Journal of Political Economy in 1958. Theorists also found that, human capital is a means of production, into which additional investment yields additional output. Human capital is substitutable, but not transferable like land, labor, or fixed capital.
In some way, the idea of "human capital" is similar to Karl Marx's concept of labor power: he thought in capitalism workers sold their labor power in order to receive income (wages and salaries). But long before Mincer or Becker wrote, Marx pointed to "two disagreeably frustrating facts" with theories that equate wages or salaries with the interest on human capital. The worker must actually work, exert his or her mind and body, to earn this "interest." Marx strongly distinguished between one's capacity to work, Labor power, and the activity of working.
A free worker cannot sell his human capital in one go; it is far from being a liquid asset, even more illiquid than shares and land. He does not sell his skills, but contracts to utilize those skills, in the same way that an industrialist sells his produce, not his machinery. The exception here are slaves, whose human capital can be sold, though the slave does not earn an income himself.
According to Marx, an employer must be receiving a profit from his operations, so that workers must be producing (under the labor theory of value) perceived as surplus-value, i.e., doing work beyond that necessary to maintain their labor power. Though having "human capital" gives workers some benefits, they are still dependent on the owners of non-human wealth for their livelihood.

The term appears in Marx's article in the New-York Daily Tribune article "The Emancipation Question," January 17 and 22, 1859, although there the term is used to describe humans who act like a capital to the producers, rather than in the modern sense of "knowledge capital" endowed to or acquired by humans.
Simkovic (2013), states that neo-Marxist economists such as Bowles have argued that education does not lead to higher wages by increasing human capital, but rather by making workers more compliant and reliable in a corporate environment.
Alternatively, Human capital is a collection of resources—all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom possessed individually and collectively by individuals in a population. These resources are the total capacity of the people that represents a form of wealth which can be directed to accomplish the goals of the nation or state or a portion thereof.
However, "Human capital" has been and continues to be criticized in numerous ways. Spence (1973, 2002) offers signaling theory as an alternative to human capital. Pierre Bourdieu offers a nuanced conceptual alternative to human capital that includes cultural capital, social capital, economic capital, and symbolic capital. These critiques, and other debates, suggest that "human capital" is a reified concept without sufficient explanatory power.
Today, most theorists like Magrassi (2002) and Erik (1997) attempt to break down human capital into one or more components for analysis usually called "intangibles". Most commonly, social capital, the sum of social bonds and relationships, has come to be recognized, along with many synonyms such as goodwill or brand value or social cohesion or social resilience and related concepts like celebrity or fame, as distinct from the talent that an individual (such as an athlete has uniquely) has developed that cannot be passed on to others regardless of effort, and those aspects that can be transferred or taught: instructional capital. Less commonly, some analyses conflate good instructions for health with health itself, or good knowledge management habits or systems with the instructions they compile and manage, or the "intellectual capital" of teams – a reflection of their social and instructional capacities, with some assumptions about their individual uniqueness in the context in which they work. In general these analyses acknowledge that individual trained bodies, teachable ideas or skills, and social influence or persuasion power, are different. Economic history of Mauritius
Historically, Mauritius has been known to have developed from a low-income, agriculturally based economy to a middle-income diversified economy with growing industrial, financial, and tourist sectors. However, the economy is increasingly diversified, with significant private-sector activity in sugar, tourism, economic processing zones, and financial services, particularly in offshore enterprises.

The Government is trying to modernize the sugar and textile industries, which in the past were overly dependent on trade preferences, while promoting diversification into such areas as information and communications technology, financial and business services, seafood processing and exports, and free trade zones. Agriculture and industry have become less important to the economy, and services, especially tourism, accounted for over 72 percent of GDP.

Importance of human capital to economic development of Mauritius
Many people working in the declining sectors like Agriculture and textile were made redundant. Unfortunately, the policies implemented by the Government to help these workers get back to work did not succeed to a large extent. Policies focused more on the creation of businesses for women especially. This was done so that the creation of new niche markets would create a demand a supply in the economy and would also help the people to be more productive for the economy of Mauritius. However, not many of them were successful due to lack of knowledge, appropriate skills and training and also continuous support.

So, only a very minor number of the small percentage of redundant workers who actually managed to start up an enterprise were actually able to continue their business in a very profitable and sustainable manner. The remaining were immersed one more time into unemployment.

To add to that is the rising trend of youth unemployment in the country. More and more companies have been complaining about the lack of soft skills of college and University leavers needed for the smooth and efficient running of the company.

Moreover, the problem of mismatch of skills keeps on rising. A lot of fresh graduates are entering or rather trying to enter the job market but are unsuccessful because of the fact that their filed of apprenticeship is already saturated. Growth in the economy of Mauritius is there according to statistical figures shown next: agriculture (4.5%), industry (22.4%), services (73.2%)(2014 estimate) CSO, 2014. However, the rising number of people who are not contributing to the formal financial economy remains an untapped resource which could have been very productive and beneficial of proper policies were implemented to incorporate them into the working economy.

Ludger (2008), contemporary growth theorist, sees human capital as an important economic growth factor. Schultz demonstrated that the social rate of return on investment in human capital in the US economy was larger than that based on physical capital such as new plant and machinery.

Professor Becker (1994), built on the ideas put forward by Schultz, explaining that expenditure on education, training and medical care could all be considered as investment in human capital. Professor Becker wrote, “people cannot be separated from their knowledge, skills, health or values in the way they can be separated from their financial and physical assets."
According to Michael Milken, “The macro view sees the 21st century defined by global competition for the world's most valuable asset, human capital. Nations build this by strengthening education, healthcare, and access to scientific knowledge, opportunities for women and incentives that attract skilled immigrants."
Continually improving human capital is vital for economic growth and Milken points out that China's continuing and projected prosperity is derived, in large part, by an evolving middle class driven by a “continuous focus on education". He goes on to demonstrate the importance of education by comparing Singapore and Jamaica: both former British colonies, with populations of 1.6m and a similar GDP/capita ($2,200, roughly). Whilst Jamaica chose invest its resources in the agricultural and mining industries (along with tourism) Singapore chose a different route. It focused on the importance of education and developed advanced technology. The two outcomes, in terms of prosperity and standard of living, show which route was best. Today Singapore's GDP per capita is over seven times the level of Jamaica's.
The concept of Human capital has relatively more importance in labour-surplus countries. These countries are naturally endowed with more of labour due to high birth rate under the given climatic conditions. The surplus labour in these countries is the human resource available in more abundance than the tangible capital resource. This human resource can be transformed into Human capital with effective inputs of education, health and moral values. The transformation of raw human resource into highly productive human resource with these inputs is the process of human capital formation.

The problem of scarcity of tangible capital in the labour surplus countries can be resolved by accelerating the rate of human capital formation with both private and public investment in education and health sectors of their National economies. Mauritius has labour as one of its main resource and capital. Thus, it would be beneficial for the economy to tap in this resource and transform the human resource available into productive human capital.
Furthermore, the intangible human capital is an instrument of promoting comprehensive development of the nation because human capital is directly related to human development, and when there is human development, the qualitative and quantitative progress of the nation is inevitable. HDI is indicator of positive correlation between human capital formation and economic development. If HDI increases, there is higher rate of human capital formation in response to higher standard of education and health. Similarly, if HDI increases, per capita income of the nation also increases. Implicitly, HDI reveals that higher the human capital formation due to good standard of health and education, higher is the per capita income of the nation. As a consequence, qualitative and quantitative development for the Mauritius would ensure both a rise in the standard of living and also a growth in the economy. Poverty, which remains one of the big issue would be alleviated eventually if not eradicated. Another good consequence of the qualitative and quantitative development of the nation is that Millennium goals become more easily achievable thereby rendering the expansion of equity throughout the different stratas of the society.

Moreover, this significance of the concept of Human capital in generating long-term economic development of the nation cannot be neglected. It is expected that the Macroeconomic policies of all the nations are focussed towards promotion of human development and subsequently economic development. Human Capital is the backbone of Human Development and economic development in every nation. Mahroum (2007) suggested that at the macro-level, human capital management is about three key capacities, the capacity to develop talent, the capacity to deploy talent, and the capacity to draw talent from elsewhere. Collectively, these three capacities form the backbone of any country's human capital competitiveness. According to the report from Brookings Institution, Investing in the Human Capital of Immigrants, Strengthening Regional Economies, September 2012, recent U.S. research shows that geographic regions that invest in the human capital and economic advancement of immigrants who are already living in their jurisdictions help boost their short- and long-term economic growth. There is also strong evidence that organizations that possess and cultivate their human capital outperform other organizations lacking human capital (Crook, Todd, Combs, Woehr, and Ketchen, 2011). However, in the case of Mauritius, the immigrants are in two different categories, migrants who come to work and immigrants who came to settle down mainly after retirement. The first category of workers are concentrated mainly in construction or textile industries. Little to no training is given to them and their potential as a productive human capital is not fully tapped in. On the contrary, they are mostly forced to work extra hours and exploited on other basis. Despite, the fact that they bring about their own human capital when they come in -since they already have some skills or knowledge- the enhancement of that human capital is not a reality yet. Since, the working migrants are present in an important number in the economy, Mauritius should think about and plan for the long term economic development considering the frivolous nature of the global economy.

Investopedia states Human capital is distinctly different from the tangible monetary capital due to the extraordinary characteristic of human capital to grow cumulatively over a long period of time. Becker (1994), says human capital has uniformly rising rate of growth over a long period of time because the foundation of this human capital is laid down by the educational and health inputs. Lee (1970), claims that the current generation is qualitatively developed by the effective inputs of education and health. The future generation is more benefited by the advanced research in the field of education and health, undertaken by the current generation. Therefore, rate of human capital formation in the future generation happens to be more than the rate of human capital formation in the current generation. This is the cumulative growth of human capital formation generated by superior quality of manpower in the succeeding generation as compared to the preceding generation. In Mauritius, the scenario is not the same.

We do have a good input of education and health system easily accessible to each and everyone. But, the fact remains that a lot of people from the very low strata of the society live in very bad conditions due to poverty and in the same time have poor health and some of the children do not even attend school. The Government has tried many approaches to encourage these children to go to school because education is considered as the main way out of poverty. However, these measures have not always resulted in the wanted ways as the children still do not go to school. The problem is with the follow up. The children get copybooks to go to school but once home, they do not have anyone helping them morally, psychologically or even physically with their homeworks or other school related things. At the end, these children remain in the last batch and most of them fail the CPE which is the main gateway for further education. They can’t find jobs in the formal sector and coupled with inflation rate of the country they get trapped in a cycle of poverty. This example shows how when rendering access to the health and education system, some people still do not benefit in the same way as other people and do not manage to come out of poverty. However, the work these people do in the informal sector is of good quality most of the time, it is just not recognised. The Government should find a way to tap in this capital and enhance it in ways that it becomes beneficial to the people themselves, the society at large and the economy of the country.

Another problem with defective pattern of investment in education is that the Government is giving priority to primary education for increasing literacy rate. Secondary education which provides critical skills needed for economic developed remains neglected. Another problem related to investment in education is that in the public and private sectors there is a mushroom growth of universities without trying to improve their standard of education. There are also mass failures at primary, secondary & higher levels of education resulting in wastage of the scarce resources of the countries.

The assumption that labour or workforces could be easily modelled in aggregate began to be challenged in 1950s when the tertiary sector, which demanded creativity, begun to produce more than the secondary sector was producing at the time in the most developed countries in the world. Accordingly, much more attention was paid to factors that led to success versus failure where human management was concerned. The role of leadership, talent, even celebrity was explored. And as we move deeper and deeper into a knowledge-based economy that depends on information, knowledge and high-level skills, human capital will become increasingly important.

Less developed countries have not established a set of institutions favoring equality and role of education for the masses and therefore have been incapable of investing in human capital stock necessary for technological growth. The same cannot be said for Mauritius, despite the fact that we have people opting out of school and the rising trend of CPE failures. The labour power of Mauritius is one of the very resourceful labour resource throughout the world due to its multilingual capabilities. English, being the official language worldwide is very easily spoken, understood and written in Mauritius.

Offshore companies have really benefitted a lot with this. However, the Government of Mauritius has not yet completely tapped the huge potential of online and technological related services. One example can be the small amount of companies in Mauritius who offer linguistic services. Due to the fact that the labour resource in Mauritius is multi lingual, some companies offer language courses online to people around the world. A lot of people around the world are looking for people who can teach them English because they need it for their business purposes.

In this scenario, if Mauritius could devise strategies to offer these courses we could have a lot of different sections like Professional Business English, General English conversations, Grammar courses, specialisation in TOEIC TOEFL which are recognised worldwide and needed by a lot of people. However, the main problem remains that the human capital of Mauritius is being exploited in the sense that only a small percentage of the finance come to Mauritius and the big remaining percentage go back to the headquarters in different countries abroad. In this case, the resources like electricity, internet and the labour resource itself of Mauritius is tapped in by foreigners with a big profit.

Furthermore there is growing trend of an increase in population. The population is increasing faster than rate of accumulation of human capital. As a result thereof, Mauritius is not being able to make the satisfactory returns from sector expenditure on education for example. As discussed above, there is a dilemma that investment on education is being done on a very high basis but the returns are not getting higher especially with the increase of failure rates annually.

Also, there is more stress on the provision of building and equipments. Politicians and administrators lay more stress on the construction of buildings and provision of equipments than on the provision of qualified staff. Corruption remains one of the main culprit in this area. With the advent of new buildings, equipments, roads and motorways etc a lot of politicians benefit from a percentage of monetary return. Thus, in many places, human capital enhancement is less favoured than provision of the above mentioned things.

In Mauritius, we do not have a system of facilities of on job training. On the job training or in service training is very essential for improving or acquiring of new skills to the persons employed and various importance is given on the job training for the employees. The result is that the efficiency and knowledge of the workers remains technicians etc. is therefore of utmost importance for the efficient use of human resources.

In France, for example, companies need to provide at least 20 hours of training to their employees in sections they prefer. In this way, human resource is always transformed into productive human capital and people are always coming up with new skills and knowledge with would have been very beneficial to the economy of Mauritius since as discussed above, a lot of employers complain of the fact of a lack of soft skills of graduates or even a complete mismatch.

Due to non availability of reliable data there is little manpower planning in Mauritius. As a result thereof, there is no matching of demand and supply of different types of skills. The result is that large number of skilled and highly qualified persons remain underemployed. The frustration and discontentment among the unemployed or underemployed graduate and post graduates result in brain drain from the country. It is a huge loss to resources of developing countries.
One of the problems also associated with brain drain is the inefficiency of the country incorporate the skills and knowledge of circular migrants. Human capital as such was planned to be accumulated and enhanced as a result but it has not really been a reality.

A last point to note is that where agriculture is one of the productive sector of the economy, very little attention is paid for educating the farmers to the use of modern agricultural practices. Unless the farmers are provided agricultural education and training on the fields, we will not be able to raise the agricultural the outlook of the farmers. Farming is one of the other related issue in Mauritius. A lot of people in Mauritius are into farming and agriculture for their own subsistence. The skills and knowledge they have get passed on to their children and eventually die out as more often the children get into other ventures. To tap this filed as resource would have been very beneficial to the economy and this type of human capital would definitely improve the situation of many. People could go back to producing small things for their subsistence and even sell the other products to nearby people in their community. Also, to have human capital in this sector would ensure proper and efficient handling of crops or animals for export as well which could bring in foreign capital.

Simkovic (2013), claims that studies of structural unemployment have increasingly focused on a mismatch between the stock of job-specific human capital and the needs of employers. In other words, there is increasingly a recognition that human capital may be specific to particular jobs or tasks and not general and readily transferable. Recent work has attempted to improve the linkages between education and the needs of the labor market by linking labor market data to education loan pricing.

Conclusion
Human capital is the quality of labour: one of four factors of production. It is not a question of the quantity of labour, but rather the skills that a worker can bring, and is thus another way of saying productivity (although an important part of human capital may the flexibility to adapt to new jobs - so the two are not quite so similar).
As we have seen from this assignment, several factors have been explored as to why human capital is important in Mauritius and how can it help in the continuous and long term economic growth which is important for any country.
There were several sectors mapped out in which the importance of human capital was mapped out.
However, the current situation in Mauritius is not very adaptable to the promotion of human capital as such. The importance of it has been recognised by a lot of leaders but the large scale implementation of it has not really taken place.
Following are some possible recommendations which must of course be documented in and researched a lot.

Recommendations
-Many theories explicitly connect investment in human capital development to education, and the role of human capital in economic development, productivity growth, and innovation has frequently been cited as a justification for government subsidies for education and job skills training. On the job training and other training agencies should be made more easily accessible. Furthermore, the culture of training itself should be campaigned for since not many people are willing to get trained into another sector and they are reluctant to leave their own field of study.

-In 2010, the OECD (the Organization of Economic Co-operation and Development) encouraged the governments of advanced economies to embrace policies to increase innovation and knowledge in products and services as an economical path to continued prosperity. Even Mauritius should try to do this.

- International policies also often address human capital flight, which is the loss of talented or trained persons from a country that invested in them, to another country which benefits from their arrival without investing in them. To address this issue, Mauritius embarked on a circular migration policy. Proper policies must be found out and implemented to address the issue of not being able to turn the experience and skills acquired by these migrants into productive human capital.

-We have seen that education and health services are easily accessible to the population. However, extra care should be taken for the people from the lowest strata to improve their health condition which will in turn result in higher life expectancy in the long run and a better health could provide more opportunities for these people. However, policies implemented should be in a sense that it doesn’t create a dependency culture as is the case mostly for the time being.

References
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Brookings Institution, Investing in the Human Capital of Immigrants, Strengthening Regional Economies, September 2012
Crook, T. R., Todd, S. Y., Combs, J. G., Woehr, D. J., & Ketchen, D. J. 2011. Does human capital matter? A meta-analysis of the relationship between human capital and firm performance. Journal of Applied Psychology, 96(3): 443–456.
Hansen, W. Lee (1970). Education, Income and Human Capital.
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