Human capital policy for India

By Karuna Gopal

With the world faced with increasing human capital shortages, countries can get creative and engage just-retired in interesting ways and the formats from hiring them as part-time or full-time freelance skilled force to even setting up businesses suggests the author.


CATCH THEM OLD’ was a campaign for recruiting retired yet resourceful people in the US almost a decade ago. Today, thanks to the 4th industrial revolution that disrupted labour markets substantially, what was then explorative became a decisive path for engaging senior citizens.

By 2022, it’s estimated that around 31.9% of people between the ages of 65 and 74 will remain in the workplace, as opposed to a 20.4% in 2002! Today nations around the world are trying to enhance their GDP by fulfilling people’s potential but those that ‘deployed talent at all stages' of the human life cycle always won.

A case in point
‘Japan’s Economy grows longest streak in 11 Years!' reported newspapers recently. An ageing economy like Japan, among other things, deployed talent at all stages. ‘Abenomics’ ensured that the talent of 75% of those above 65 years has been utilised efficiently. In the US, 106 million people over the age of 50 collectively are responsible for $7.6 trillion in annual economic activity.

Finns aged 55 and over have the highest rate of tertiary education with highest opportunity to engage in economic activities. Needless to say, Finland has been named as the best country in the world in leveraging its human capital potential.

The World Economic Forum (WEF) and the World Bank researched on the topic and published their reports recently. A peek into them will give an idea on where India stands vis a vis human capital creation.

Assessment of nation’s wealth
Demonstrating that the GDP is a deceptive gauge of progress, the World Bank published a report measuring economies by wealth. Wealth includes all assets, which means human capital (the value of earnings over a person’s lifetime), natural capital (energy, minerals, agricultural land), produced capital (machinery, buildings, urban land), and net foreign assets.

The World Bank’s argument is that by merely looking at GDP instead of wealth is like looking exclusively at a company’s income statements without considering the assets on its balance sheet.

In many rich countries, human capital tends to be the largest component of wealth. Global wealth increased 66%, to $1,143 trillion, between 1995 to 2014.

Human capital accounts for roughly two-thirds of that global wealth.

India vs Brazil
Based on the World Bank's report, let me compare India and Brazil. Brazil’s physical, natural and human capital assets happen to be 17%, 19% and 65% respectively, while India’s are 29%, 25% and 48%! One can straight away see that despite being better off in physical and natural assets, our country has not built human capital adequately!

Unequal deployment of human capital
This year’s Human Capital Report of the WEF quantifies how 130 countries are developing and deploying their human capital.

To measure the 'human capital' rank of a country, WEF takes into account "the knowledge and skills people possess that enable them to create value in the global economic system."

Now, this data is very interesting. The data highlights the unequal development and deployment of human capital across the age-group spectrum. It also puts spotlight on age-specific patterns of labour market exclusion and untapped human capital potential.

It appears that on an average, the world has developed 81% of the human capital potential of the youngest members between 0–14 age group significantly more than others. India was ranked 105th on this list. While India’s youth literacy rate is 89%, its engagement of seniors is just at 33%.

From both the reports one can see that India has a great potential to build human capital by articulating a policy for seniors.

Experience as an asset
BMW in 2007 realised that over the next 10 years the average age of its workforce would increase from 39 to 47. Instead of panicking, it decided to figure out how best to incorporate older workers into all aspects of production. The company chose one production line to model what they called the “2017 project” – a workforce that accurately reflected demographics for that year.

Though younger workers on the line initially feared the influx of elderly workers would lower their productivity, the 70 management tweaks that BMW made – from introducing part-time work to providing workers with shoes designed to reduce the pains of standing – which amounted to a €20,000 investment, brought about a 7% increase in productivity. Contrary to the younger workers’ concerns, integrating an older workforce benefited all.
The fact that science has basically doubled lifespans in the past century is, maybe, the most extraordinary accomplishment in the history of mankind. But, unless we shift our attitudes and responses to aging, it will go from being a miracle to a crisis. 

Need for policy on human capital

The global human capital landscape is becoming ever more complex.

Approximately 25,000 new workers will enter the labour market in the developing world every day until 2020, and more than 200 million people globally continue to be out of a job; yet, there is an expected shortage of some 50 million high-skilled job applicants over the coming decade.

But interestingly, there is one set of skills that will be in high demand in the future and that is related to Science, Technology, Engineering and Mathematics (STEM). These being the traditional forte of seniors, they will surely have an edge in the skills landscape.

Call it “contingent workforce,” “on-demand workforce,” “online platform economy,” “alternative work arrangements” and “gig economy.” Give the arrangement any name but engage them for value creation.

Countries can get creative and engage them in interesting ways and the formats can vary from moonlighting to full-time freelance work, as well as, in some cases, helping them build businesses. India can even think of Senior HUBs – business incubators on the lines of Women HUBs.

The fact that science has basically doubled lifespans in the past century is, maybe, the most extraordinary accomplishment in the history of mankind. But, unless we shift our attitudes and responses to aging, it will go from being a miracle to a crisis.

Human Capital, the most overlooked ‘Asset Class’ has to be treasured and it’s high time India sang a policy serenade to senior citizens.

(This article first appeared in the Hans India Hyderabad edition and can be accessed here. )

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