Latin America has made significant human capital gains, but more needs to be done to improve learning
BALI, Indonesia, October 11, 2018—New World Bank research released today gives policymakers compelling evidence that delivering better outcomes in children’s health and learning can significantly boost the incomes of people—and of countries—with returns far into the future.
A Human Capital Index, launched today at the WB-IMF Annual Meetings, shows that 56 percent of children born today across the world will lose more than half their potential lifetime earnings because governments are not currently making effective investments in their people to ensure a healthy, educated, and resilient population ready for the workplace of the future.
Human capital—the knowledge, skills, and health that people accumulate over their lives—has been a key factor behind the sustained economic growth and poverty reduction rates of many countries in the 20th century, especially East Asia.
“For the poorest people, human capital is often the only capital they have,” World Bank Group President Jim Yong Kim said. “Human capital is a key driver of sustainable, inclusive economic growth, but investing in health and education has not gotten the attention it deserves. This index creates a direct line between improving outcomes in health and education, productivity, and economic growth. I hope that it drives countries to take urgent action and invest more – and more effectively – in their people.
“The bar is rising for everyone,” Kim added. “Building human capital is critical for all countries, at all income levels, to compete in the economy of the future.”
The research shows that the Latin America and the Caribbean region scores well in indicators measuring health conditions for children and has high adult survival rates and relatively low levels of stunting. Yet, its students underperform across all tested subjects under the Program for International Student Assessment (PISA) collected by the OECD. In addition, 20 percent of young people between 15 to 24 years are out of school or out of work and vulnerable communities, including indigenous population, have higher rates of stunting due to chronic malnutrition. This also underscores the urgency of creating an environment conducive to job creation, especially for youth, women and vulnerable populations.
The Human Capital Index measures the amount of human capital that a child born today can expect to attain by age 18, given the risks of poor health and education that prevail in the country where he or she lives. The Index measures each country’s distance to the frontier of complete education and full health for a child born today. The measure includes:
- Survival – Will children born today survive to school age?
- School – How much schooling will they complete and how much will they learn?
- Health – Will they leave school in good health, ready for further learning and/or work as adults?
The HCI reflects the productivity as a future worker of a child born today, compared with what it could be if he or she had full health and complete, high-quality education, on a scale from zero to one, with 1 as the best possible score. A country score of 0.5, for example, means that individuals – and the country as a whole – are forgoing half their future economic potential. Calculated over 50 years, this translates into deep economic losses: a 1.4 percent annual loss in GDP growth.
The Index ranks where each country is now in terms of productivity of the next generation of workers. Across Latin America and the Caribbean, Chile has made big human capital gains and ranks ahead of other countries in the region: a child born today in Chile will have 67 percent of the labor productivity it could have had if provided with complete education and full health. In countries like Argentina, Colombia, Ecuador, Mexico, Peru or Uruguay, children born today once they grow up, will only be about 60 percent as productive as they could be if they enjoyed complete education and full health.
“Latin America has made significant human development gains over the past 25 years, but more needs to be done to improve the quality of education, provide the right work skills to help the next generations succeed in life and advance female participation in the labor force,” said World Bank Regional Vice President, Jorge Familiar.
Evidence shows that progress is possible. Poland enacted education reforms between 1990 and 2015, and experienced one of the fastest improvements in PISA scores in OECD countries. Vietnam recently topped the OECD average PISA score. Peru succeeded in halving its rate of stunting from 28 percent in 2005 to 14 percent in just eight years. But the index shows much more needs to be done.
The Index is part of the World Bank Group’s Human Capital Project, which recognizes human capital as driver of inclusive growth. In addition to the Index, the Human Capital Project includes a program to strengthen research and measurement on human capital, as well as support to countries to accelerate progress in human capital outcomes.
Some 28 countries* spanning various regions and income levels have expressed advance interest in participating in the Project and have nominated focal points within their governments to work with the World Bank Group. These countries have begun work on elevating human capital policy dialogue across their government line ministries and identifying national priorities for accelerating progress on human capital, based on each country’s own development plans.
The Index is included in the forthcoming World Development Report 2019 on the Changing Nature of Work, which addresses the importance of investing in human capital to prepare for the future of work.
*The 28 early adopter countries are Armenia, Bhutan, Costa Rica, Egypt, Ethiopia, Georgia, Indonesia, Iraq, Jordan, Kenya, Kuwait, Lesotho, Lebanon, Malawi, Morocco, Pakistan, Papua New Guinea, Peru, Philippines, Poland, Rwanda, Saudi Arabia, Senegal, Sierra Leone, Tunisia, Ukraine, United Arab Emirates, Uzbekistan
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Last Updated: Oct 10, 2018