I: Employment and manpower planning techniques. Introduction How to determine the future training needs of the labor market in developing countries is a question that has confronted manpower analysts and educational planners for decades. There is no easy solution simply because no- one can forecast the future and, therefore, what labor demands are likely anymore than one can predict stock market movements or future economic growth rates.
This has not stopped people from trying. However, models to perform manpower analyses have been subject to such scathing criticism that, as will be seen in this chapter, manpower practitioners have shied away from modelling techniques and as such there is a gap to be filled. As now a combination of techniques under the general heading of . However, few countries have created a system to do this and there is much theorizing but little action.
Labour market models are useful both for labour market analysis and to help to design labour market information systems. Normally, the argument goes, models cannot be built without an underlying labour market information system. But this is chicken and egg, and both are dependent on each other. The chapter also looks at a number of techniques that can be used for employment and manpower planning. Employment planning is concerned with the macro policy instruments that create employment. The activity is mainly carried out in Ministries of Planning or Economy in developing countries.
There, questions such as how to employ the 5. In Central Banks, for example, decisions to change interest rates, alter the money supply or revise credit regulations all affect the decision of entrepreneurs whether to hire or fire labour.
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Rarely, however, do such bodies take a major interest in the effects of their policy on employment. Nevertheless, the planning of employment touches on all these concerns. Note that employment planning is concerned more with the demand for jobs than with the supply side of the employment equation. Thus it is interested in such questions as how many people are coming onto the labour market, what are their education and training levels levels, what is their age etc. It is largely concerned in determining what training needs there are so that the labour supply can be shaped to meet the demands of the economy. This activity is largely confined to the Ministry of Labour and/or Education in developing countries plus some isolated outposts concerned with human resource planning in the Ministries of Planning or Finance. The focus on the supply side of the equation is probably the reason that the demand for labour has been treated inadequately in most manpower planning activities to date.
However, there is increasing recognition of the need for a skilled workforce as a basis for future development (Lall, 1. On the other hand, that part of macroeconomics that is interested in creating jobs cannot ignore who the jobs are for in terms of the skill, sex and age base of the population. This is because the determinants of economic growth are strongly related to the characteristics of the labour force in terms of its skill, education, flexibility etc. As Bertrand Russell (Russell, 1. Modern methods of production have given us the possibility of ease and security for all; we have chosen, instead, to have overwork for some and starvation for the others.
Hitherto we have continued to be as energetic as we were before there were machines; in this we have been foolish, but there is no reason to go on being foolish for ever.' In this chapter, therefore, techniques that look at both the supply and demand side of the employment and manpower planning puzzle are presented and then critically examined. The manpower requirements approach (MRA)2. The dominant model The dominant model of manpower planning (according to Youdi, 1. It first came to widespread prominence in the OECD's Mediterranean Regional Project (MRP) in the early 1.
The three major steps in manpower forecasting are: (a) projecting the demand for educated manpower, (b) projecting the supply of educated manpower, and (c) balancing supply and demand. Each is next taken in turn, following Youdi. The demand side There are five main steps to assess the number of workers by educational level over time 2 (following the MRP methodology): Note: i=economic sector, j=occupation, k=educational level, a=age, s=sex. Estimating the future level of GDP or output (X). Estimating the structural transformation of the economy as expressed by the distribution of output by economic sector (Xi/X)as it evolves over time.
The supply side There are four basic steps. Estimating the population Pa,s,k by age, sex and educational level.
Balancing labour supply to demand This adjustment, according to Youdi, is normally done in two ways. First, if LD. j. For example, too much optimimism on labour productivity could reduce the demand for labour while too much optimism on labour force participation rates could increase the supply of labour. Clearly, if reconciliation is not possible then this has significant implications for policy action to narrow the gap between educated labour supply and its demand. The critics Many authors are very skeptical of manpower planning as expressed through this dominant model with the criticism being most typified by such statements as: 'The art of manpower planning is certainly in disarray. After decades of manpower forecasting practice, it has come under repeated and sustained criticism. Those still practicising the art might rightly be confused as to the mandate, methodology and overall usefulness of what they are doing.' (Psacharopoulos, 1. The main criticisms have come from Psacharopoulos as well as Blaug (1.
Ahamad and Blaug (1. Canada, the United States, UK, France, Thailand, Nigeria, India and Sweden. Their main criticisms were. Considerable forecast errors were associated with projections of employment by occupation using the MRP (Mediterranean Regional Project) or manpower requirements approach methodology. Therefore, it is wrong to argue that forecasting always improves policy decisions, or that some view of future developments is better than none. The elasticity of substitution is: e = - d Log (Lk. Lk. 2) d Log (Wk.
Wk. 2) where k. W the level of their wages determined during the forecast period. Yet, it is clear that the elasticity of substitution cannot be zero and would vary according to the degree of substitutibility of one type of job for another. This will also depend on the amount of training or additional education required. In the MACBETH model, described in Chapter IV, these elasticities are simulated using an algorithm of choice for possible substitutions. Hollister,1. 98. 6) argue that given the state of the art of manpower planning and the characteristics of developing countries' economies, such countries would be best served by a manpower planning and analysis program which puts less emphasis on manpower projections and more emphasis on analysis of the operation of various aspects of the labour market at all skill levels. This is difficult to disagree with, yet he is more contentious when he states 'if labour markets in developing economies are relatively flexible then the need for long term manpower projections of demand and supply is relatively limited'.
This vein is insisted upon by Psacharopoulos (1. He continues: 'Given the failure of manpower planning and in spite of the efforts of many countries to plan their manpower needs for the future, unemployment among school- leavers has become worse over the years. Indeed, such unemployment might have been lower if no attempt at manpower forecasting has ever been made.' ! Training and informal education, they say, were never as fully incorporated into the calculations as were the more easily quantified outputs of the formal education system. Surprisingly, a relatively balanced view given his later vehement critiques, comes from Psacharopoulos (1. Indonesia, he examined both the advantages and limitations of the manpower requirements approach. The main advantage is that it produces point estimates of the number of required manpower in the future, especially in narrow technical specialties that cannot be easily substituted by other types of labour.
On the other hand, he continues, in a rapidly growing economy one cannot produce 'x' number of accountants earmarked for the energy sector. If such accountants are produced they might well drift out to other 'pull sectors' of the economy.
Or, they might not have to be produced in the first place, as they could be drawn to the energy sector from other parts of the economy. Also, firms might consider alternative ways of filling the reported vacancies by redesigning the formal educational qualifications of given job titles, or by onthejob training of existing personnel. As Moura- Castro (1.
Psacharopoulos concludes that no planning for human resources is warranted, that instead of planning, all that needs to be done is to monitor the reactions and trends of the labour market, then I think he is wrong. In most fields, the training process has a short cycle. Why try to guess the demand for plumbers or welders ten years from now? But to use Psacharopoulos' own example, it takes ten years to prepare a nuclear engineer, on top of the time required to create and develop the teaching programmes that provide the training. A country that has to wait for the salaries of nuclear engineers to shoot up before deciding on the creation of training facilities would be in trouble.'3. Rate of return approach Radically different from the MRA approach, is that known as the Rate of Return (Ro. R) approach. This is based on the calculation of the net returns on educational expenditure (ILO, 1.
Those programmes which show positive returns should be promoted, while those showing zero or negative net present value should be reduced or possibly abandoned.