ESTIMATING THE EFFECTS OF THE AGGREGATED HUMAN CAPITAL ON LABOUR PRODUCTIVITY OF MANUFACTURING SECTOR

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ESTIMATING THE EFFECTS OF THE AGGREGATED HUMAN CAPITAL ON LABOUR PRODUCTIVITY OF MANUFACTURING SECTOR

ABSTRACT

This work discusses the effect of human capital on labour productivity of manufacturing sector in Nigeria. The study applied the ordinary least squares regression analysis in the estimation. The evaluation result shows that human capital has a positive effect on the sectoral labour productivity level of the manufacturing firms. The study found that government expenditure on education maintained a positive relationship with the dependent variable, government expenditure on health has a positive relationship with the dependent variable but statistical insignificant while manufacturing capacity index has a negative relationship with labour productivity . Consequently, it was recommended among others that more stock of physical capital needed to be acquired, to facilitate more investment in human capital and thereby enhance productivity capacity in Nigeria

1.1     BACKGROUND TO THE STUDY

In the past 50 years, human capital theory (Schuttz 1961; Becker, 1964; Mincer, 1974) has attracted much attention by confirming the causal relationship between education and economic growth. This is because the human capital theory maintains that economic development can be achieved and sustained by an educated and productive workforce. The relationship between human capital and labour productivity has always been the focus in all economy’s sector (Agriculture, Industry and Services) of each country. Regarding the importance of industries in Nigeria and their contributions to economic Growth, this study investigates the effect of human capital on labour productivity in the manufacturing sector. Human capital theory also suggests that education or training raises the productivity of workers by future income increasing their lifetime earnings (Becker, 1962014

In the past 20 years there have been several attempts to investigate the role of human capital on labour productivity Mc-Mahon (1984) considered the relation of education and scientific and technical knowledge developed through research and development with labour productivity growth within the medium term. Hall and Mairesse(1995) investigated research and development investment of individual French manufacturing firms  for the 1980’s. Similarly health is fundamental to economic growth and development and is one of the key determinants of economic and labour performance both at the micro and macro levels. This derives from the fact that health is both a direct component of human well-being and a form of human capital that increases an individual’s capabilities (Bloom and Canning 2003). Meeting the commendable United Nation  Health  Millennium Development Goals (MDGS) of a reduction by two-thirds of the under 5 mortality ratio and a reduction by three-quarter in maternal mortality, halting and beginning to reverse the spread of HIV/AIDS, Malaria and other major diseases by 2015 will be completely elusive for Sub-sahara African countries like Nigeria if sufficient attention is not paid to health sector.

According to Bureau of labour statistics, Labour productivity is the quantity of real GDP produced by one hour of labour. Labour productivity = (Real GDP)  (Aggregate hours). Rearranging, Real GDP = (Aggregate hours)  (Labour productivity) so growth in real GDP can be divided into growth in aggregate hours and growth in labour productivity. Three factors influence the growth of  labour productivity, savings  and investment in physical capital, expansion of human capital, discovery of new technologies.