In today's competitive business landscape, companies are constantly searching for ways to maximize their efficiency and profitability. One often overlooked aspect of this quest is the value that human capital brings to an organization. Human Economic Value Added (HEVA) is a concept that sheds light on this crucial element, allowing companies to understand and enhance the true worth of their employees. Human Economic Value Added (HEVA) measures the economic contribution of human capital to a company. It goes beyond the traditional financial metrics and recognizes the impact that employees have on the organization's overall performance. HEVA takes into account factors such as skills, knowledge, experience, and productivity, providing a more comprehensive evaluation of the value employees bring to the table. Calculating and enhancing Human Economic Value Added is crucial for several reasons. Firstly, it allows companies to accurately evaluate the contribution of their employees, e
Since the end of 2014, as a result of the rapid drop in oil prices, there has been a decrease in the gross domestic product of our country, and the GDP of 2014, which was 75.2 billion dollars, has decreased in the following years to the level of 37.49 billion dollars in 2016. At the end of 2016, a 3.8% decrease in GDP was observed compared to last year. (see chart 1)
Chart 1
According to the information provided by the Statistics Committee, 66% of the GDP was formed by the non-oil and gas sector, and 34% by the oil and gas sector. A 27.6% decline in the construction sector was noted as the biggest impact on the decline of GDP.
The analysis of GDP by sector structure shows that the growth rates of the oil and gas industry are weakening and the share of the oil sector in GDP is decreasing year by year. This is mainly due to two reasons. The main reason is the decrease in oil production from 2011 to the present. The second is related to the price movement of oil in world markets.
Due to the negative increase in GDP, the amount of GDP per capita also decreased. Thus, in 2014, the GDP indicator per person was $6122.9, in 2015 it was $6115.7, and in 2016 it was $3889.
Of course, the decrease in GDP did not leave the population's well-being and the labor market unaffected. Thus, the salary of $596.6 in 2014 was calculated as $296.3 in 2015, and $313.7 in 2016. Although there is an 8.7% increase in the total income of the population in terms of manat, the increase in this indicator in terms of foreign currency is also in a negative direction.
Based on the above-mentioned statistics, it is possible to calculate that the employed part of the population receives wages at the rate of 97% of the created value (GDP per capita) (and based on the statistics on the authoritative website tradingeconomics.com, this indicator is calculated at the rate of 85%). Analogously, when we compare neighboring countries Georgia and Turkey, we see that this indicator is 118% for Georgia and 127% for Turkey. (see table 1). This indicator shows that the salary threshold is low compared to the GDP created in our country. (see chart 2)
Chart 2
The main reason for this situation is the high level of employment of the population in Azerbaijan. So, according to statistics, 4.67 million (48%) of the 9.7 million population in our country are employed. 0.6 million (16%) of the 3.72 million population in Georgia, 27.06 million (34%) of the 79.81 million population in Turkey are considered employed. This means that Azerbaijan has a GDP per capita of $3,889 with a labor force of 48%, Georgia has a GDP per capita of $121 more than us with a labor force of 16%, and Turkey has a GDP per capita of $92.5 less than us with a labor force of 34%. produces with (see table 2).
When we divide GDP by the number of employed population, not by the total population, that is, when we calculate the value created by the working population, a different picture emerges. Thus, if the GDP per 1 employed person in Azerbaijan is $8,008, in Georgia this indicator is 3 times more than ours, that is, $23,283. This means that one worker working in Georgia creates about 3 times more value than one worker working in Azerbaijan. A similar indicator is $80,918 for Israel, that is, more than 10 times more than us, and $118,273 for the United States, that is, about 15 times more than us.
There can be two main reasons for this situation. The first is that labor force is used inefficiently in our country. That is, if any work can be performed with less labor force, more workers than necessary are involved in that work. At the same time, the low use of modern technologies in the production process of products and services increases the demand for labor force. Thus, although there is no increase in GDP, there is an increase in the number of employed people. This factor also reduces the GDP indicator created by the employed population.
The second is that labor is used in less productive and mostly low-skilled jobs, the products and services produced are of low value, and intelligence and technology are not applied in their production. If we look at the distribution of GDP in Azerbaijan by types of economic activity, we see that the largest share in GDP (29%) belongs to the mining industry. (see chart 3)
Chart 3
As an example, it can be noted that if the income created by 1 worker in SOCAR is about $630,000, then the French company Total S.A., which operates in the same sector, is similar. the value created by its employee is 2.1 times higher than that of Socar, and in Apple Inc., an American technology company, this indicator is 3 times higher than that of Socar.
In such a situation, the most important step that can be taken to increase the profitability of labor is the creation or development of more profitable economic areas in accordance with the economic, political, social and other conditions of the country. Also, it is felt that it is necessary to look at labor from an economic perspective rather than a social one at the state level, and to take concrete measures related to increasing the efficiency of labor.
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