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Physical and Human Resources

What are Physical Resources?
§Definition: Man-made structures and equipment constructed to increase the productive capacity of the economy

§Main features:

• §Since they are man-made, they can be increased through the process of capital formation or investment.
• §Capital formation involves both the creation of new structures and equipment that will make it possible to replace old structures which have lost their productive capacity. Repairs and maintenance are not part of capital formation.
• §In time, physical resources lose their productive capacity through depreciation, which is the process of normal wear and tear of a physical capital.

§Main components:

• §Buildings for residential, commercial, industrial and social (health and education) purposes
• §Roads
• §Bridges
• §Power plants to generate electricity
• §Irrigation and water supply plants
• §Commercial and industrial machinery and equipment

§Effects on the economy:

• §A general measure of capital accumulation is included in the national income accounts, including among its components, the construction of buildings, plants, and other structures and the purchase of durable equipment.
• §Housing services, office space and individual plants are provided by the construction of buildings by the government and private sectors. Local governments have added more public buildings and educational buildings to the stock of physical capital than the private sector. Public spending can thus lead to economic growth.
• §Roads and bridges facilitate the movement of people and goods, thereby increasing the rate of urbanization.
• §Power plants that generate electricity and irrigation facilities that provide water to farmers are physical resources, too. They can affect the economy indirectly through the outputs of manufacturing and agriculture.

What are human resources?
§Definition: This is derived from the power of humans to produce goods and services. Traditionally, this is defined as labor, meaning the physical exertion of muscle to produce labor.

§Main features

• §Although the population is an indicator of human resource in the country, it is a crude measure of human resources.
• §The quality of the population in terms of state of health, nutrition, age and education is a more appropriate measure of a nation’s human wealth.
• §One’s education and training makes one productive. Hence, training and education are treated as expenditures in human capital formation, similar to investment in physical capital. Both investments increase and improve the productive capacity of the nation. Health and nutrition are also investments in human capital since they increase the productivity of persons. A dead person is the least productive of the human resources.

§Main components

• §Labor force: The men and women from age 15 and above who are fully employed , partially employed or looking for work. Human resources are the capable and old enough individuals who have the minimal physical strength to be employed to produce commodities and services.
• §Excluded in the labor force are individuals who opted not to engage in economic production. These include students, housewives, the physically handicapped, the mentally challenged, and the aged.
• §Labor force participation rate: the proportion of individuals in the labor force to the potentially economically active age bracket (including those who opted not to participate in work activities)

§Effects on the economy:

• §Most of the labor force are found in agricultural activities, animal husbandry and forestry, and some are engaged in wholesale, and retail occupations. Only a small portion are involved in the manufacturing sector. This suggests that most of the labor force are employed in low productivity jobs. §In terms of educational qualifications, the majority have either have taken or finished primary schooling. This is followed closely by those who have reached secondary. Those who have taken and graduated from tertiary levels constitute the minority of those who have had some years of schooling.
• §Mind power is often more important than muscular power. Human capital is supposed to improve a person’s productivity or muscular power.
• §Filipinos are the most schooled of the peoples in Asia. A significant amount of the people have reached tertiary education, thereby aiming to improve human capital. §Human resources are not only used for domestic production, but are also gainfully employed in the international market. Filipino workers are almost all over the world. It is estimated the remittances of these Overseas Filipino workers (OFWs) contributed to the stability of the Philippine economy. But at the same time, international migration contributes to the brain drain problem since these people are not contributing directly in the local economy.