Human Capital and Labour Productivity: An Analytical Study

Abstract

Any business tends to improve its human resources in an attempt to get the most of its employees. The major interests of an entrepreneur include long-term survival and sustainability besides the attainment of the corporate goals. This paper aims to review how human capital contributes to labor productivity with particular respect to Pakistan. The age of employees, training, working time, wages and education you want to define are using to determine the human capital, which is one of the independent variables of our research, whereas the productivity of labour is the dependent one. To analyse this relationship, a cross-sectional study is conducted and 40 businesses in Multan are surveyed to obtain information. The paper applies Generalized Method Moments (GMM) approach in the study of influence of human capital on labor productivity. The results of the study showed that the coefficient in the labour productivity and employee education shows that the relationship between the two is good. The coefficient of Employee Wage is 0.006543 implying that the wages has a positive and significantly influence on labor productivity. The coefficient of training employees informs us that when there is an increase in one percent in the investment in training, results in a 0.10 percent increase in labor productivity. There is a negative relationship far as the variable of age among the employees and productivity of labour is concerned. Based on findings of the study the study recommends that both the government and business need to invest more in human capital to enable workers to exploit their talents and become more productive.