- What is the Human Capital Project?
- What is human capital and why does it matter?
- What is the state of human capital in the world today?
- How is COVID-19 impacting human capital?
- What is the World Bank Group doing to help countries protect human capital?
- What can be done to protect and invest in people beyond the pandemic?
- What is the Human Capital Project expected to achieve?
- What is the Human Capital Index? How is it calculated?
- Why doesn’t the Index cover all countries?
- What does the Human Capital Index show for girls and boys?
- How has the methodology for the Human Capital Index been reviewed?
- How has the Human Capital Index evolved since its launch in 2018?
- How does the Human Capital Index diﬀer from UNDP’s Human Development Index?
- How does the Human Capital Index relate to the Sustainable Development Goals (SDGs)?
- Does the Human Capital Index capture all aspects of human capital?
- How can a country participate in the Human Capital Project?
The Human Capital Project is a global eﬀort to accelerate more and better investments in people for greater equity and economic growth. As of January 2021, 79 countries at all income levels are working with the World Bank Group on strategic approaches to transform their human capital outcomes. We are scaling up human capital investments in Sub-Saharan Africa with a strong focus on women’s empowerment, leveraging technology, and accelerating innovation, among other priorities. In the Middle East and North Africa, we are focusing on areas such as early childhood and building the resilience of vulnerable people.
We have launched a Human Capital Project country network to connect governments that are prioritizing human capital and to channel expertise where it is most needed. Focal points, usually based in the Ministries of Finance, Economy, or Planning (and sometimes in sectoral ministries) connect regularly to exchange knowledge and feedback.
Human capital is at the center of our global strategy for development. Protecting and investing in people is one of three main ways we are working to reach our goals of ending extreme poverty by 2030 and boosting shared prosperity in all countries. It is closely integrated with our eﬀorts to promote sustainable, inclusive growth and build resilience across developing countries. It is also a cross-cutting priority for IDA-19, the current cycle of IDA ﬁnancing covering July 2020 - June 2023, the World Bank Group’s fund for the world’s poorest countries.
Human capital consists of the knowledge, skills, and health that people invest in and accumulate throughout their lives, enabling them to realize their potential as productive members of society. Investing in people through nutrition, health care, quality education, jobs and skills helps develop human capital, and this is key to ending extreme poverty and creating more inclusive societies.
As noted in the World Development Report (WDR) 2019: The Changing Nature of Work, the frontier for skills is moving rapidly, bringing both opportunities and risks. There is mounting evidence that unless they strengthen their human capital, countries cannot achieve sustained, inclusive economic growth, will not have a workforce prepared for the more highly skilled jobs of the future, and will not compete eﬀectively in the global economy. The cost of inaction on human capital development is going up.
Finance Ministers who have been meeting to discuss human capital at recent Spring and Annual Meetings of the World Bank Group have emphasized the importance of human capital to the jobs and economic transformation agenda in countries at all stages of development.
Despite unprecedented human development gains over the past 25 years, serious challenges remain, especially for developing countries.
In 2019, more than 1 in 5 young children were stunted due to under-nutrition (with low height for their age—a red ﬂag indicator for the risk of physical and cognitive deﬁcits) (JME 2020). The current global pandemic may lead to even higher numbers of children stunted.
A learning crisis is holding many countries back. Data show that in some countries, children acquire signiﬁcantly fewer years of learning than in other countries, despite being in school the same length of time. This is exacerbated by the pandemic – with many children out of school and losing out on learning.
People in developing countries spend half a trillion dollars annually — over $80 per person -- out of their own pockets to access health services, and such expenses hit the poor the hardest. COVID-19 is also causing significant disruptions in essential health services including routine vaccinations and child healthcare.
In the world’s poorest countries, four out of ﬁve poor people are not covered by a social safety net, leaving them extremely vulnerable to shocks.
Nearly 300,000 children die every year from diarrhea linked to a lack of access to safe water and sanitation.
The ﬁrst edition of the Human Capital Index (HCI), published by the World Bank Group in October 2018 and updated in 2020, shows that nearly 60% of children born today will be, at best, only half as productive as they could be with complete education and full health (as deﬁned by the index, see question 5). This reﬂects a serious human capital crisis, with strong implications for economic growth and the world’s collective ability to end extreme poverty by 2030.
Gaps in human capital are at risk of widening amid rapid global changes in technology, demography, fragility, and climate. Conﬂict events and pandemics can have a devastating eﬀect on human capital through loss of life, livelihood, nutrition, and the interruption of essential health and education services. Such impacts will likely reverberate throughout many individuals’ lifespan limiting their productivity. Yet investment in people is often neglected. This is despite many examples of rapid national transformation of human capital—including Singapore, the Republic of Korea, and Ireland—and speciﬁc successes in some of the world’s poorest countries.
COVID-19 threatens to wipe out a decade of human capital gains – leaving a generation behind – as countries struggle to contain the virus, save lives, and rebuild their economies.
- Most children – more than 1 billion – have been out of school due to COVID-19.
- Globally $10 trillion of lifetime earnings could be lost for this cohort of students, due to lower levels of learning, school closings, or the risk of dropping out of school.
- Lower- and middle-income countries are reporting significant disruptions in essential health services, like routine vaccinations and child health care.
- The pandemic is exacerbating risks of gender-based violence, child marriage and adolescent pregnancy, all of which further reduce opportunities for learning and empowerment for women and girls.
Without immediate and massive action, such as the those outlined in the analysis Protecting People and Economies, the erosion of health, knowledge, skills and opportunities due to the pandemic today could undermine economic recovery and prosperity for entire nations in the future.
As countries around the world work to contain the spread and impact of COVID-19, the World Bank Group has mounted the fastest and largest crisis response in its history to help developing countries strengthen their pandemic response and health care systems.
With the pandemic’s rapid spread into developing countries, the World Bank Group is delivering record levels of support to clients. It is making available up to $160 billion in financing capacity through June 2021. Our support is tailored to the health, economic, and social shocks that countries are facing, and includes over $50 billion of IDA resources on grant and highly concessional terms.
The Bank Group’s emergency support operations are helping over 100 developing countries save lives and detect, prevent, and respond to the pandemic. We are also helping countries access critically needed medical supplies by reaching out to suppliers on behalf of governments.
In addition to ongoing health support, operations emphasize social protection, especially through cash transfers, as well as poverty alleviation and policy-based financing. The World Bank is also working to restructure, redeploy, and reallocate existing resources in projects it finances.
The World Bank Group’s crisis response comprises three stages – relief, restructuring, and resilient recovery. It focuses on the following main areas:
Saving lives – We are helping countries stop transmission, deliver health services, ensure vulnerable households’ access to medical care, and build readiness for future pandemics. We are committed to making sure that poorer countries have fair and equitable access to vaccines as these become available.
Protecting poor and vulnerable people – We are supporting income and food supplies for the most vulnerable as well as employment for poorer households, informal businesses, and microenterprises. We are helping communities and local governments cope with crisis impacts, improve and expand services, and build resilience for future shocks.
For example, the Bank is helping India scale-up cash transfers and food benefits, using a set of existing national platforms and programs, to provide social protection for essential workers involved in COVID-19 relief efforts. This is benefiting vulnerable groups, particularly migrants and informal workers, who face high risks of exclusion.
Ensuring sustainable business growth and job creation – We are providing policy advice and financial assistance to businesses and financial institutions, to help preserve jobs and ensure that companies, especially small and medium enterprises, can weather the crisis and return to growth.
Strengthening policies, institutions, and investments – With an emphasis on governance and institutions, we are helping countries prepare for a resilient recovery. Working closely with the IMF, we are helping countries manage public debt better, make key reforms in financial management, and identify opportunities for green growth and low-carbon development as they rebuild.
You can read more about the ﬁrst set of health emergency response projects supported by the World Bank Group, and also about the impact of the first 100 days of the overall response.
Going forward, countries should strive to align their COVID-19 responses to longer term Human Capital objectives. Governments, civil society, international financial institutions and the private sector must join forces to deploy ambitious, evidence-driven investments to help equip every person to achieve their potential.
- Boost social expenditures, protecting fiscal space after the debt moratorium, to ensure that essential services and financial support reach the poor & vulnerable.
- Invest in essential service delivery.
- Strengthen social safety nets to protect against shocks and to facilitate reforms
- Sharpen focus on primary health care and pandemic preparedness, nutrition, early child development, learning and essential services across sectors – with the use of technology and improved governance.
Ambitious, evidence-driven policy measures in health, education, and social protection can recover lost ground and pave the way for today’s children to surpass the human capital achievements and quality of life of the generations that preceded them. Fully realizing the creative promise embodied in each child has never been more important.
The Human Capital Project is helping create the political space for national leaders to prioritize transformational investments in health, education, and social protection. The objective is rapid progress toward a world in which all children are well-nourished and ready to learn, can attain real learning in the classroom, and can enter the job market as healthy, skilled, and productive adults.
The project has three pillars:
The Human Capital Index (HCI) quantiﬁes the contribution of health and education to the productivity of the next generation of workers. Countries are using it to assess how much income they forego because of human capital gaps, and how much faster they can turn these losses into gains if they act now. Learn more from this video.
The index was launched in October 2018 and updated in mid-September of 2020. The update leverages new PISA results and includes 17 additional countries to cover 98% of the world’s population. The 2020 HCI also has more complete gender disaggregation.
A robust measurement and research eﬀort is underway to complement the index and help countries take eﬀective action. Within countries, credible measurement of education and health outcomes sheds light on what works and where to target resources. It also increases policy makers’ awareness of the importance of investing in human capital, creating momentum for government action. Globally, comprehensive measurement and novel primary data collection eﬀorts are essential to identify areas of strength and opportunity to improve human capital outcomes. The Human Capital Project will help nourish the research and analytics on what promotes human capital development, for example, by scaling up the Service Delivery Indicators program and the Measuring Early Learning Quality and Outcomes survey.
Country engagement, based on a “whole of government” approach, is helping countries tackle the worst barriers to developing their human capital. This approach encourages high-level leadership across time, connecting the dots between sectoral programs and strengthening the evidence base. Our work with countries emphasizes eﬃciency and quality, policy reforms, and domestic resource mobilization, so that they aren’t just spending more—but spending better.
One example of this approach as seen in World Bank country engagement is Madagascar’s Investing in Human Capital Development Policy Operation series. The first operation aims to support the Government of Madagascar's investment in human capital by improving human resources in health and education, availability and predictability of ﬁnancial resources in the social sectors, and legal protections for women and children. The second is being prepared.
The Human Capital Project is supporting the scale-up of this type of support for policy and institutional reform, and also working on a range of tools and products to help countries achieve their goals, for example, on human capital public expenditure and institutional reviews, and case studies capturing country-level successes and innovations.
The index is a summary measure of the amount of human capital that a child born today can expect to acquire by age 18, given the risks of poor health and poor education that prevail in the country where she lives. A full accounting of the HCI methodology is available on the World Bank’s Open Knowledge Repository, and a helpful video is available here.
A signiﬁcant innovation is that the index measures the contribution of health and education to the productivity of individuals and countries, anchored in rigorous micro-econometric studies.
Ranging between 0 and 1, the index takes the value 1 only if a child born today can expect to achieve full health (deﬁned as no stunting and survival up to at least age 60) and achieve her formal education potential (deﬁned as 14 years of high-quality school by age 18).
A country’s score is its distance to the “frontier” of complete education and full health. If it scores 0.70 in the Human Capital Index, this indicates that the future earnings potential of children born today will be 70% of what they could have been with complete education and full health.
The index can directly be linked to scenarios for the future income of countries as well as individuals. If a country has a score of 0.50, then future GDP per worker could be twice as high if the country reached the benchmark of complete education and full health.
The index is presented as a country average and includes a breakdown by gender for countries where data is available.
The 2018 Human Capital Index covered 156 World Bank Group member countries and their territories, as well as the West Bank and Gaza. The HCI 2020 covers 174 representing over 98% of the world’s population.
The HCI brings together measures of different dimensions of human capital: health (child survival, stunting, and adult survival rates) as well as the quantity and quality of schooling (expected years of school and learning outcomes). Out of these five components, learning outcomes are the most challenging data to gather due to limited country participation in international or regional student achievement testing programs. Participation in one of the major international or regional learning assessments is a prerequisite and is the main bottleneck to calculating the Human Capital Index for some countries.
Sex disaggregation is strengthened in the 2020 HCI. In the 2020 version, the HCI can be calculated separately for boys and girls for 153 of the 174 countries included in the index, compared with 126 of 157 countries in the 2018 index. In addition, the 2020 HCI update calculates HCI for the year 2010 and the HCI can be calculated separately for boys and girls for 90 of the 103 countries included in the 2010 index.
Lack of sex-disaggregated test score data prevents this in the remaining countries. A disproportionate share of these are low-income countries, emphasizing the need to continue to invest in better data systems.
Many countries have made progress in reducing diﬀerences between girls’ and boys’ human capital outcomes. In most countries, the distance to the human capital frontier for children overall is much larger than the remaining gaps between boys and girls. In education, girls in middle- and high-income countries have largely caught up with or even passed boys in enrollment and learning. And in some dimensions of the index related to health, most countries show a slight advantage for girls over boys.
The 2020 edition of the HCI is limited in scope and does not capture some important diﬀerences between girls’ and boys’ human capital outcomes. It does not, for example, measure the prevalence of sex-selective abortion and missing girls. It relies on broad proxies for the disease environment, which by themselves say little about how gender roles and relations between males and females shape that environment. Girls continue to face greater challenges in dimensions not captured by the HCI. Child marriage, household responsibilities, teenage pregnancies, and gender-based violence in schools pose challenges in keeping girls enrolled, especially in low-income settings.
While girls’ enrollment has increased, attendance and completion remain a challenge—especially at the secondary level—for both girls and boys. When girls grow up and enter the labor market, they face additional challenges in realizing the returns to their human capital. These include occupational sex segregation, lack of childcare and adequate leave policies, sexual harassment and unsafe transportation, diﬀerential constraints in access to ﬁnance and markets, and legal/regulatory barriers that hinder women’s ability to start and grow ﬁrms.
These constraints must be addressed for all people to be able to reap the returns to human capital investment. The newly-developed utilization-adjusted HCI delves into this by proposing an adjustment of the HCI that captures labor outcomes.
The HCI methodology is discussed in a Human Capital Project booklet that can be downloaded here. The methodology was ﬁrst presented in the World Development Report 2019: The Changing Nature of Work, which also focuses on skills needed for those entering the labor market, a crucial aspect of human capital.
Some of the analytical underpinnings of the index are also presented in the World Development Report 2018: Learning to Realize Education’s Promise, which highlighted the learning crisis. Both reports involved extensive, global review from a wide range of stakeholders.
Research has also entailed close collaboration with David Weil, a professor and leading expert on development accounting with Brown University.
The HCI was ﬁrst launched at Annual Meetings of the World Bank Group in October 2018, and the methodology used in 2018 remains the same used in the update released in September 2020.
The 2020 update provided more recent data for all the components of the index, expanded the coverage of the index to more countries, provided additional gender disaggregation, and allowed the measurement of progress in human capital over time by comparing 2020 HCI data against past HCI data.
Importantly, the 2020 update of the global HCI serves as a “snapshot” of human capital right up to the COVID-19 pandemic.
In addition to the global update that measures country-level data, HCI data have been further analyzed (disaggregated) i) sub-nationally as well as ii) by socioeconomic status. More information on these exercises can be found in: “Insights from Disaggregating the Human Capital Index”.
Subnational disaggregation of the HCI data has been done for 19 countries and can be calculated at any subnational level with relevant representative data.
For socioeconomically disaggregated data, Policy Research Working Paper 9020 by D’Souza, Gatti, and Kraay is the original paper describing the full methodology. Data is currently available for over 50 countries, mostly LMICs and UMICs. (All SES data.)
UNDP’s pioneering Human Development Index is a summary measure of average achievement along key dimensions of human development—a long and healthy life, being knowledgeable, and having a decent standard of living.
While both indices spotlight human capabilities as central to national development, the Human Capital Index also strengthens the economic case for investing in people. The two are highly complementary but diﬀer in the way they are formulated.
The Human Capital Index links selected human capital outcomes with productivity and income levels. It is a forward-looking measure of how current health and education outcomes (including a new measure of learning-adjusted years of school) will shape productivity for the next generation of workers.
The components of the index (survival, schooling, and health) have direct links with at least three of the global goals that countries around the world have set to achieve by 2030.
Survival to Age 5: By including under-5 mortality, the index links to SDG target 3.2—to reduce neonatal mortality to 12 per 1,000 live births or lower and under-5 mortality to 25 per 1,000 live births or lower.
Learning-Adjusted Years of School: The index introduces this innovative measurement of learning, which supports SDG 4.1—to ensure, among other things, the completion of equitable and good-quality primary and secondary education. By tracking changes in the expected years of quality-adjusted education, countries will be able to monitor their achievement toward this education target.
Health: The index includes the adult survival rate and the prevalence of childhood stunting. The adult survival rate represents the probability that a 15-year-old will survive to age 60. To improve this indicator, countries will have to work on reducing causes of premature mortality, which will also help achieve SDG target 3.4. Prevalence of stunting among children under 5 is one of the key indicators for achievement of SDG target 2.2, which aims to end all forms of malnutrition by 2030.
The index aims to draw attention to a wide range of actions across multiple sectors that can build human capital and accelerate progress towards the SDGs.
Everything captured by the HCI is important, but not everything that is important for human capital development is captured by the HCI. There is scope for improvement and expansion over time.
Beginning in October 2020, the HCI country briefs include a range of carefully selected complementary indicators that present the HCI in a broader regional and country human capital perspective.
For human capital, as in all areas of development data, the World Bank Group is engaging closely with member countries to help build capacity and improve data quality.
All World Bank Group client countries, as well as donor countries, can participate in the Human Capital Project as part of an accelerated, global eﬀort to transform human capital outcomes. This complements our long-standing engagement with countries in the sectors that contribute to human development.
As of June 2021, 82 countries were participating in the Human Capital Project. Each of them has expressed a commitment to improve human capital outcomes.