Skill development and labour productivity in the selected manufacturing industries in India

The quality of human resources in a given country is a pre-requisite for country's economic development.. As we speak of capital formation and its accumulation as a result of investment on machinery and equipment, we can speak of investment on human capital and accumulation of human resources. In the Indian context skilled and educated labour is very important as Indian economy is ridden with predominance of semi-educated and unskilled labour. Hence, the presence of quality workforce will greatly influence labour productivity. ‘An economy, with a better-educated and better trained workforce is expected to produce more efficiently. If a labour market swells with low quality labour force and constantly pours into the industry, it does not augur well to the industrial development of any country. As such education and training skills play a vital role in contributing to increase in productivity of the workforce. The objective of this paper is to test the hypothesis that the quality of workforce and labour productivity are positively correlated. Education being the most important parameter of human capital index, educational status of the worker is exclusively taken to represent the qualitative improvement of the worker. The High Quality Workers (HQW) is taken as proxy for higher level of human capital. It is decided to take value added per worker as proxy to labour productivity (VAPW). To examine the relationship between higher level of human capital and labour productivity over the last two decades two normal years 1985 and 2005 are deliberately selected. The fourteen manufacturing industries are chosen for the present exercise. To test the hypothesis that industries with higher quality workers are also the industries with higher labour productivity, rank correlation co-efficient between the percentage of high quality workers and the value added per worker for the selected manufacturing industries has been calculated. The hypothesis that high quality workers and labour productivity are positively correlated is validated by the statistical results. The rank correlation co-efficient between the rates of changes in HQW and VAPW is high and found to be statistically significant, showing that the rates of changes in the two variables are positively related to each other. Thus, from the above analysis it may be inferred that the industries with higher quality workers not only enjoy higher labour productivity, but similar relationship also exists between rates of growth of HQW and labour productivity. Hence, it is concluded that the industries which increase employment of higher quality worker are ensured of higher productivity improvements. Thus, an economy with better educated work force can be a variable of great strategic importance in the process of economic development.