New World Bank Human Capital Index measures how much countries could boost economic productivity by investing in people
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 World Bank-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 in 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 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?
In terms of the overall Index, the Philippines performs better than the average for its income group but below the average for the East Asia and Pacific region. The index finds that children born in the Philippines will be only 55 percent as productive when they grow up as they could be if they enjoyed complete education and full health.
The Index also highlights that malnutrition is a major challenge in the Philippines. One in three Filipino children under age 5 is stunted, a key marker for malnutrition, which limits brain development. Children who are malnourished at a young age will face challenges in learning, are more likely to drop out of school early, and are less likely to hold good jobs as adults.
“The Government of Philippines recognizes these challenges and has initiated critical reforms to improve human capital in the country,” said Mara K. Warwick, World Bank Country Director for Brunei Darussalam, Malaysia, Philippines and Thailand. “Policymakers have introduced universal kindergarten, created senior high school, provided greater funding for basic education, and expanded the Pantawid Pamilya Program, which has boosted school attendance among the poor. Going forward, key policy priorities in the Philippines should be improving the effectiveness of teachers to boost learning and reducing stunting.”
Sex-disaggregated data is available for 126 of the Index’s 157 countries. For this subset of countries, both boys’ and girls’ human capital is still far from the frontier of potential human capital accumulation. In most countries, the human capital gap for both boys and girls from the frontier is larger than the gap between boys and girls. In the Philippines, the HCI for girls is higher than for boys.
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. Malawi succeeded in reducing its rate of stunting by nearly 20 percentage points in under two decades. 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.
The Philippines is one of 28 countries* across the globe that 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. Secretary Ernesto Pernia of the National Economic and Development Agency (NEDA) is the Philippines’ official focal point for this global initiative.
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