Fundamentals of Business

7.1.3 Literacy

The traditional definition of literacy is considered to be the ability to read and write, (basic literacy) or the ability to use language to read, write, listen, and speak. In modern contexts, is more of a (functional literacy), the word refers to reading and writing at a level adequate for communication, or at a level that lets one understand and communicate ideas in a literate society, so as to take part in that society. The United Nations Educational, Scientific and Cultural Organization (UNESCO) has drafted the following definition: "Literacy is the ability to identify, understand, interpret, create, communicate and compute, using printed and written materials associated with varying contexts. Literacy involves a continuous learning to enable an individual to achieve his or her goals, to develop his or her knowledge and potential, and to participate fully in the wider society".

Basically, someone who is well educated in one language and go to work at another country, can’t communicate in the language of a host county, is functionally illiterate.

For example In UK, there are many educated and experienced people from Eastern European countries like Poland, Czech Republic but can’t speak English, as a result they end up doing menial jobs.

Knowledge capital The introduction of the term is explained and justified by the unique characteristics of knowledge. Unlike physical labour (and the other factors of production), knowledge is:

√ Expandable and self generating with use: as doctors get more experience; their knowledge base will increase, as will their endowment of human capital. The economics of scarcity is replaced by the economics of self generation.
√ Transportable and shareable: knowledge is easily moved and shared. This transfer does not prevent its use by the original holder. However, the transfer of knowledge may reduce its scarcity value to its original possessor.

Human capital refers to the stock of productive skills and technical knowledge embodied in labour. Labour competences are what make a nation more competitive and innovative.

For example, extract from Economist Intelligence Unit (EIU)

Japan is the world's most innovative nation, followed by Switzerland, the US and Sweden, according to a new report from the Economist Intelligence Unit, sponsored by Cisco.

The Economist Intelligence Unit compiled a ranking of 82 economies based on their level of innovation in 2002-06 and, predicted how the ranking would change in 2007-11. The top four will maintain their positions, according to the forecast, while China will move up five places to 54th and Mexico will climb six places to 39th.

"The message for governments is that there is no substitute for good education education, nor for policies that encourage investment in IT and communications infrastructure", says Nigel Holloway, the editor of the report.