The Human Capital: Challenges and Perspectives: A Romanian Analyse

By Cosmin Stoica, Cristina Balaceanu, Dan Boaja and 8 more

The nowadays society is confronted with some of the most pronounced disparities in the economic system, with direct repercussions on the labor market, borne by both employees and employers. The main deficiencies of the labor market are caused by the low growth rate of the demand for goods, with consequences in terms of employment, the effect of decreasing the purchasing power of the population, the lack of correlation between the growth rates of labor productivity and the price of labor, and also to an insufficient training of a practical nature of the workforce. Labor market is therefore a manifestation of the need to work for both the production act, from the perspective of the firms sector, and the consumer act, from the perspective of the households sector, each of the two sectors having different determinations for the same objective: gaining profit from valuing the work. Therefore, work is analyzed in the terms of profitability: cost for the producer, income for the worker, benefit for the society, in the conditions in which from valuing the work production factor and the human capital it can be created the object of the economic goods market. In the current economic and social-political development context, on the labor market there is an intensification of a series of manifestations that have as substance educational and cultural heterogeneity, the institutional dissolution or the dissolution of authorities in what regards the establishment of some normative elements that would favor work and entrepreneurship, by means of economic strings, mainly fiscal ones, the lack of complementarity between educational policies and occupational ones. Importance of labor market equilibrium resulting from the decisive role of human resources in the economic and social development.

• Language: English
• Publisher: AuthorHouse UK
• Release date: Nov 1, 2013
• ISBN: 9781491878378

Cosmin Stoica

Professor at the Dimitrie Cantemir Christian University, Cristina Balaceanu is a PhD in economics, author of specialized work in the economic field with postdoctoral training courses tailored change in economic science.

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© 2013 by Coordinator: Cristina Balaceanu. All rights reserved.

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Published by AuthorHouse 09/30/2013

Coaothors: Valentina Zaharia, Diana Apostol, Daniela Penu, Elena Cofas, Dan Boaja, Doina Maria Tilea, Gheorghe Marinescu, Cosmin Stoica, Mirela Dogaru, Monica Predonu

ISBN: 978-1-4918-7836-1 (sc)

ISBN: 978-1-4918-7835-4 (hc)

ISBN: 978-1-4918-7837-8 (e)

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CONTENTS

Introduction

Chapter 1.   Analysis of the labor market. Structures of the labor market. Labor resources. Dynamics of the labor market.

Chapter 2.   Considerations regarding Romania’s and European Union’s level of workforce occupancy

Chapter 3.   The development of the concept and content of the specific labor’s market

Chapter 4.   Technology and disparities: a regional perspective

Chapter 5.   The Function of the Planning and the Need to Draw Up The Business Plan

Chapter 6.   Analysis of the population’s participation in the labour force

Chapter 7.   The Correlation of graduate with the skills and knowledge of market demands

•  Questionnaire for the postgraduate professional progress

•  Questionnaire regarding the development of the university professional path

•  Questionnaire on analyzing the degree of satisfaction regarding the professional skills of the graduates as perceived from the employers’ perspective

Conclusions

Final Conclusions

INTRODUCTION

The nowadays society is confronted with some of the most pronounced disparities in the economic system, with direct repercussions on the labor market, borne by both employees and employers. The main deficiencies of the labor market are caused by the low growth rate of the demand for goods, with consequences in terms of employment, the effect of decreasing the purchasing power of the population, the lack of correlation between the growth rates of labor productivity and the price of labor, and also to an insufficient training of a practical nature of the workforce.

This study aims at capturing the main characteristics of the labor market in Romania, by taking into account the structure of the labor market, its dynamics, but also the need for a labor market development in conformity with the social, political, technical and economic future requirements.

Thus emerges the need to give importance to the qualitative side of the labor force training, with strong, applied influences, adapted to the context and dynamics of the labor market in the context of the aggregate market.

The research undertaken here tries to understand the labor market trends while identifying the future workforce profile, but also the needs of the employer. Thus, we can identify within the context of the paper a number of features of the educational curriculum in Romania, vectors of change that can lead to the profile of a motivated worker with entrepreneurial sense, interested in its welfare and the community’s.

CHAPTER 1

Analysis of the labor market.

Structures of the labor market.

Labor resources.

Dynamics of the labor market.

Dan Boaja

1.1. Labor, a primary productive(production) factor

The size of labor supply has a determining role in setting the volume and the structure of the material goods and services which an economy produces from the moment when labor became a productive factor. Of course, labor doesn’t fulfill this role all by itself.

Labor is a primary productive factor. It is often stated that, such an assessment applies only to simple labor, since the complex labor is considered a derived factor, respectively a genuine human capital. Labor is a human specific activity, physical and/or intellectual, through which people use their skills, knowledge and experience, helping themselves, towards this end, with the use of appropriate tools; their purpose is to ensure the required factors which are necessary to ensure their immediate and perspective use.

Labor was and has remained the active and determining productive factor; it is the one that produces the derived productive factors, it trains the other factors, it combines and utilizes them in an efficient manner. Towards this end, Adam Smith stated the fact that the annual labor of each nation constitutes the factor which, since forever, supplies it with all the required goods and makes its living possible. The American economist Lewis Solomon highlights, in turn, that land is only the starting point of production; if there is no one to plant it, to gather the harvest, to mine the coal from the earth, to build wells for oil extraction, the capacity of these resources to be productive factors is close to zero.

In the current conditions, for the different levels of production techniques and technologies, the role of labor needs to be much more appreciated and values. For example, in one way the role of labor is highlighted within a robotized economical unit and in another way within a mechanized farm.

Within a strictly theoretical environment, the productive factor of labor is treated relatively autonomous and within its general coordinates, respectively with the universal behavior demanded by the economical theory. The general premise of the labor factor is population, as an indispensable condition of the existence of society itself, and which’s economical role is materialized into the fact that it is a support for the primordial productive factor, that it represents the addressee and the virtual consumer of the results of each economical activity.

The labor potential of a nation is defined and materialized on the basis of a scheme which starts with the largest demographic structure, which is, the total population; then it continues, in a descending order of the scope, the adult population, the active population, the available active population, the busy population, the employed population.

The dimensions, the general structures and the dynamics of a country’s population depend on the essential demographic processes, general processes (birth rate and mortality), as well as on the balance of international migration, as a result of the report between immigrations.

The absolute size of the adult population, as well as its ratio within the total of the country’s population depend on many demographic, social, educational, political factors. Out of the most significant ones we mention: the previous demographic evolution, respectively the structures of existent genders and ages; the official period of mandatory schooling and the degree of students registered at schools and universities; the regulations regarding the retirement age; the average life span, etc.

The size of the active population is influenced by a series of social factors, economic and health care factors which stand, directly or indirectly, at the basis of the size and dynamics of the number of people who are unable to work. If out of this population category we subtract the people who, based on family decisions, have chosen to remain and take care of the home, as well as pupils, students and enlisted military personnel, we get the available active population, respectively a country’s labor potential. Regardless of the measurement method, the labor time of the individual person has diminished considerably¹.

The main causes of the diminishing of the labor period and of the increase in free time may be formulated as it follows: the prolonging of the schooling period and the reducing of the retirement age; the prolonging of paid vacations and the increase of the non-working days from a year (legal holidays); the reducing of the work week and the extension of a diminished working period (of the incomplete work week).

Studies on this area have shown:

a)   a massive relocation, in the first stage, of the hired population from the primary sector to the secondary sector (during this period, the hired population from the agricultural sector has decreased, in an absolute as well as in a relative expression);

b)   setting the absolute size of those employed in the primary sector, accompanied by the relative decrease of population employed in the secondary sector, also by the absolute and relative increase of population employment from the services sector;

c)   absolute diminish of population from the secondary sector and constant increase of population employed in the tertiary sector.

The transformation of labor into a productive factor is tied to the appearance and existence of merchandise production. Furthermore, such a phenomenon also implied a series of modifications on an institutional level. Basically, labor has become a productive factor in the sense assigned by the theoretical economics at the moment when, based on private property, it passed from labor from a system of slavery and feudal dependency to free craftsmanship labor and farming labor where the farmer had his own land. Then, it evolved as such into the context of private property and private-associative property when it turned, thus, into paid labor (Dobrota, 1997).

The human condition becomes an effective factor of economic growth and development through a complex process managed by the human reasoning and will, which incorporates the education and life experience of generations that exist and develop within a certain natural and social environment, constantly confronted with the limiting of the means available for achieving the objectives previously set. The human factor intervenes in the process of economic growth and development through the increase of the volume of provided labor and its quality, but also through the improvement of its structure materialized through an increase in productivity.

The participation of the human factor to the economic growth and development, has, thus, a quantitative aspect, a qualitative aspect and a structural aspect.

The quantitative aspect is materialized into the volume of labor provided by the employed population during the effective working schedule. The action of the human factor in the process of economic growth and development depends on the dynamics of the employing of the active population. The increase of job openings (jobs, in the language acknowledged by literature of French inspiration) is associated with economic growth and development, although specialists are not unanimous regarding the nature and sense of this dependency. Theoretically, the increase of employment through new job openings (jobs) stimulates the economic growth and development. There is, also, the opinion that the increase in employment is more of a consequence than a premise of the process of growth and development owed to the effect of influencing the increase of the gross national product over the investment resources.

The qualitative aspect is expressed through the quality of the human factor, which is dependent, mainly, to the labor qualification and motivation, and through labor productivity, influenced also by the technical endowment of it. Such evolutions are subsumed, usually, to the idea of qualitative progress of the human factor, under the influence of technical progress, to motivation for labor and to the organizational framework. The importance of this dimension comes from the existence, at its level, of certain theoretically unlimited reserves, which may be mobilized through adequate decisions, partially without investment efforts.

The specificity of the qualitative dimension of the human element as a factor for economic growth and development is revealed by the concept of human capital, which synthesizes the sum of all knowledge, competences and professional skills resulted from the education process and consolidated through the gathering if practical multilateral experience.

The structural dimension of the human potential refers to the structure specific to employment, respectively to the labor market. Within each national economic system there is a hierarchy of sectors, branches or groups of activities depending on the number of employed personnel as well as on the productivity and on the quality specific to the labor from a certain field. Between branches, sectors and organizations there are personnel transfers which occur out of different trends of the labor market which influence the intake of the human factor to the economic growth. An important role in triggering these processes comes, on long and medium term, to the technical-scientific trends reflected by the educational system and by the demand of new job openings for branches and firms situated on advanced technological positions. Here intervene the orientation of development investments, but also the interests of entrepreneurs to place their capital in competitive branches.

The limited character of this factor of economic growth imposes an accentuation of the mobility of the structural and qualitative dimensions with which it manifests within the social life (Ciucur, Gavrilă, Popescu, 2001).

1.2. Human capital

The role of qualifications within the productive process has been highlighted a long time ago. Adam Smith himself pointed out that, within a nation’s wealth, the improvement of knowledge is a factor of economic progress. The idea was adopted by other economists (Marshall, for example). It must be mentioned, however, that until the second half of the previous century there hadn’t been made any systematic analysis of this institution.

From a macroeconomic perspective, the thesis from which the features of labor mattered as much as the quantity of labor was developed during the postwar period, along with the quantitative study of economic growth and development and their source. The quantitative increase of the aggregates productive factors couldn’t explain completely the rates of increase of the aggregate product. The solution evoked was the qualitative improvement of the productive factors, specially of labor; the progression of the general level of knowledge, but also a better care for labor (health, work conditions, etc.) made labor much more productive (Denison, Schultz, 1961).

The concept of human capital has proven to be seriously fecund, but on a microeconomic level. The instruments for economic calculation regarding the issue of forming and acquiring knowledge by the individual have been systematically applied at the beginning of the last century (Becker, 1964).

The qualification of an employee, which constitutes his human capital, is obtained either outside his work place, either at the work place, through professional practice (learning by doing). The first method is represented by the school system (the place of specific forming for labor). The time spent and the effort made during the schooling period by a individual constitutes his investment into the human capital. This results from an inter-temporal choice which’s terms are the sacrifice of the current income and future perspectives of incomes tied to the acquisition of human capital; it may be analyzed with instruments of microeconomic inter-temporal calculation. In the same way the rate of human capital efficiency is calculated. The rate of human capital efficiency, according to the logic of arbitration between different forms of capital, should be of the same order of size with the rate of physical capital efficiency.

Another surprising implication of the simple theory of human capital is that the individuals may be indifferent to the time spent within the school system, because the surplus of income tied to the improvement of their qualification should compensate only for the income sacrifice determined by the period of study. The fact that this claim wasn’t empirically checked (the surplus is much larger than the sacrifice) demonstrates the interest and importance of research into human capital.

Becker’s theory and the studies which he inspired are based on the hypothesis that qualifications are, indeed, productive. Some specialists (Spencer, 1973) have formulated a contrary thesis which generated a second important wave of research into the human capital. To him, the individual who invests into human capital seeks to solve a problem of imperfect informing, more precise the issue that gifted employees (with a high productivity) are looking, thourhg their investment into human capital, to present to potential employers the productive skills which they hold, which the respective employers cannot notice them directly.

In synthesis, it may be said that the perspectives opened by the theories of human capital are important and they point out significant aspect of the labor market. It is imposed to pay special attention to the following three:

a)   The concept of human capital puts in a new light the process of production and search for optimal combinations of factors. Investment into human capital and the diversity of its causes illustrate the complexity of strategies applied by entrepreneurs (producers) as well as by employers. The theory of the signal attests this complexity, even if it may seem extreme. It appears as being possible, in the same order of ideas, the study of alternative systems for forming the human capital;

b)   At an aggregated level and from a long term perspective, as it has been seen, the combined study of economic growth and developed with the study of qualification may point out complex interactions, such as those according to which the human capital may be more or less productive depending on the time, introducing, thus, different growth phases, or, that it may have different sources. The human capital has proven itself to be a privileged factor, specially, for the endogenous economic growth and development;

c)   The development of market economies clearly show that social dividing depends more and more on the level of professional qualifications. One of the significant goals of the theories of human capital which deal with these qualifications is, thus, to determine if they are able to allow for a better understanding between social inequalities. The theories of human capital are based on the structures of employees, and, thus, on the dividing of income and wealth, because they are based on the relative efficiency of investments into qualification².

The analysis of human capital starts from the hypothesis that individuals decide regarding their education and trainings, their medical care and other improvements brought to knowledge and their health, comparing the benefits to the costs (Becker, 1993).

In fact, the field of human capital analysis may be defined by extending the economic analysis to decisions that were not included into its traditional sphere. It is presumed that the individual is rational, he maximizes his well-being throughout his lifetime and has a coherent behavior in time. The starting point for the human capital theory is microeconomic, respective the individual choice of human investment. The benefits of an investment may be financial and non-financial. They reside within the increase of productivity of the individual on the market and outside the market. The costs are financial, direct and indirect, always very important, of time allocated to human