Late secretary general Dag Hammarskjold, a Swedish economist, once stated, “Fundamentally, man is the key to all problems, not money. Funds are valuable only when used by trained, experienced, and devoted men and women. Such people, on the other hand, can work miracles even with small resources and draw wealth out of a barren land.”

Human capital is one of the key drivers for sustained economic growth. This refers to skills, education, health and training of the individuals as they serve as an instrument for economic productivity.

Investing in human capital is often perceived as high-cost with indeterminate returns. A major human capital investment is under-appreciated as it is difficult to quantify Return of Investment (ROI) in these cases.

How do we correlate low human capital with the cycle of malnutrition?

Lack of nourishment causes malnutrition. The cycle of malnutrition is self-perpetuating, i.e. the stunted growth and development of an individual can lower his/her productivity, which can facilitate malnutrition, further.

Similarly, low human capital can limit growth and development opportunities, especially for a developing economy like India. This can restrict a large amount of workforce from entering into the formal sector (organized sector that constitutes GDP). Underutilized workforce limits the productivity of the economy.

Of late, the economies have realized the gravity of investing in human capital. To benefit from a young, dynamic and a highly productive population, improvement in human capital is necessary.

Ways to bridge the gap between formal and informal sector by improving human capital

International Labor Organization (ILO) states that informal economy comprises more than half of the global labor force and more than 90% of Micro and Small Enterprises (MSE) worldwide. Most of the people have less access to formal certifications due to lack of education, financial resources and sometimes, awareness.

Governments should ensure that workers learn basic skills and they have opportunities to continuously adapt their skills. Quality improvements are critical for the youngest cohorts as they conform to a large part of the workforce and their productivity is essential for the sustainability of economic growth.

Most of the employers cite lack of competent qualified personnel with relevant cognitive and technical skills as a limiting factor for their ability to hire workers. For this, continual learning to acquire new skills and hone practical skills is a must. One can consider DACUM process to push the informal sector towards the formal.

DACUM methodology (Developing a Curriculum) of occupational profiling is a process that uses technique of teamwork, formed by trade experts who have in-depth experience in the occupation. This can describe skills and knowledge required by a job title in a clear and precise way.

The ‘DACUM’ chart, product of the process, can also identify essential soft-skills such as general knowledge such as new technology trends, equipment and materials used in the market and work behavior. This is a facilitation process that can produce repeated cycles of action and reward.

Overvaluing theory and undervaluing practical training can hardly reflect market demands. Improvement in the provision of counselling and introducing the workers to labor market can serve as an alignment between the formal content and practical skills.

Enhancement in active labor market programs and job placement services are needed to provide better job counselling, facilitate upskilling of workers and ease entry to the market.