The Role of HEIs to Supply Human Capital and Investment Employment Opportunity Demand to Meet the Five Years Ethiopian Growth and Transformation Plan

Abstract

Higher education institutions play great roles for the economic development in supplying trained human capital so as to feed the employment demand, especially in labor intensive economy of developing countries. Adam Smith, father of modern economy, defined human capital as follows: “Of the acquired and useful abilities of all the inhabitants or members of the society. The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in his person. Those talents, as they make a part of his fortune, so do the likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor, and which, though it costs a certain expense, repays that expense with a profit.” The definition of “human capital” recognizes that people in organizations and businesses are important and essential assets who contribute for development and growth, in a similar way of physical assets such as machines and money. The collective attitudes, skills and abilities of people contribute to organizational performance and productivity. Any expenditure in training, development, health and support is an investment, not just an expense. The basic structure of R. Solow economic growth model explains that human capital, along with the physical capital, is a factor of production, and human resources are both the instrument and goal of economic development. According to Luis, David and Robert (2003), development which refers to learning opportunities should not be limited to improving employees’ performance on the current job, but focus on the long run to help employees preparation for future work demands,(Benardin, 2003, p. 164). According to history of unemployment put by the classical economists, in traditional societies, salaried jobs did not exist as money was not in use. These cultures lived off the land directly, and the land belonged to the tribe or to no one. Everyone knew how to build shelter and make food. When these cultures invented currency and moved to the cities, they began to depend on money to buy food from a middle man, instead of growing, gathering, or hunting the food directly from nature. Dependence on jobs to make money to buy food and shelter was the beginning of unemployment, too. Population growth has a two edge relationship with the economic growth. Large population both stimulate and hinder growth depending on the country’s capacity to allocate its population properly as a skilled labor force or not. Thus, human resources are both instrumental and goal of economic development, especially for developing states whose economy is more labor intensive than others.