The Impact of Human Capital Attainment on Output and Labor Productivity of Malay Firms

Human capital attainment among workers plays an important role in determining firm’s output and labor productivity, hence enhances firm’s competitiveness. More educated workers are believed to be more efficient and productive, reduce cost of production and raise the capability of firms to compete especially in the global market.. The intention of the Malaysian government to create the Bumiputera Commerce and Industrial Community (BCIC) (where the Malays are the majority) as spelt out in the New Economic Policy (NEP) requires the Malays to enhance their competitiveness in undertaking business. This paper attempts to analyze the impact of human capital attainment among workers for the Malay owned manufacturing and services enterprises on output and labor productivity. The analysis is based on 574 Malay firms surveyed in 2001/2002, which covers 264 manufacturing enterprises and 310 services enterprises in Peninsular Malaysia. The sample is selected from the Malay firms registered with the Malaysian Malay Chamber of Commerce (MMCC). The output and labor productivity of the firms are regressed against the human capital variables like education and training together with physical capital stock. The study shows that for the manufacturing enterprises an effective labor plays a higher and significant role on output and labor productivity growth. The capitallabor ratio is an important determinant of labor productivity.