Over the past decade, many countries have made important progress in improving human capital

The Human Capital Index (HCI) is an international metric that benchmarks key components of human capital across countries. Measuring the human capital that a child born today can expect to attain by her 18th birthday, the HCI highlights how current health and education outcomes shape the productivity of the next generation of workers. In this way, it underscores the importance for governments and societies of investing in the human capital of their citizens. The HCI was launched in 2018 as part of the Human Capital Project (HCP), a global effort to accelerate progress towards a world where all children can achieve their full potential.
Over the past decade, many countries have made important progress in improving human capital.
Today, however, the COVID-19 pandemic threatens to reverse many of those gains. Urgent action is needed to protect hard-won advances in human capital, particularly among the poor vulnerable. Designing the needed interventions, targeting them to achieve the highest effectiveness, and navigating difficult trade-offs in times of reduced fiscal space, makes investing in better measurement of human capital more important than ever.
Human capital consists of the knowledge, skills, and health that people accumulate over their lives. People’s health and education have undeniable intrinsic value, and human capital also enables people to realize their potential as productive members of society. More human capital is associated with higher earnings for people, higher income for countries, and stronger cohesion in societies. It is a central driver of sustainable growth and poverty reduction.
This report accompanies the release of 2020 data on the HCI. Building on momentum from the first edition in 2018, the 2020 issue updates the index using new and expanded data for each of the HCI components, through March 2020. As such, the report provides a snapshot of the state of human capital before COVID-19 and a baseline to track the pandemic’s impacts on human capital.
COVID-19 struck at a time when the world was healthier and more educated than ever. Yet, data presented in this report reveal that substantial human-capital shortfalls and equity gaps existed before the crisis. Worldwide, a child born just before the advent of COVID-19 could expect to achieve on average just 56 percent of her potential productivity as a future worker. Gaps in human capital remain especially deep in low-income countries and those affected by violence, armed conflict, and institutional fragility. Expanded sex-disaggregated data show that girls currently enjoy a slight edge over boys in human capital accumulation in most countries, reflecting in part a female biological advantage early in life. However women continue to be at a substantial disadvantage in many dimensions of human capital that are not captured by the HCI’s components, including participation in economic life.
X Executive Summary
In addition to describing HCI data and methodology, this report documents the evolution of human capital over the last decade. Human capital outcomes progressed in almost all countries by about 4 percent on average during this period, thanks primarily to better health and increased access to schooling.
However, many countries struggled to improve learning outcomes, as educational quality often failed to keep pace with gains in enrollment. The various dimensions of human capital improved with economic development, and they did so at a surprisingly similar pace across country income groups. Progress was only slightly faster in low-income countries, which are further away from the frontier of full health and education.
The trajectories of individual countries differed considerably, including in how human-capital gains were distributed across the socio-economic spectrum within each country. In some contexts, the most disadvantaged groups scored the greatest gains. In others, poorer and richer families benefitted equally.
Along with broad economic development, specific policies contributed to some countries’ progress in human capital. Effective policies included expanding the population coverage of health services, notably for maternal and child health; bolstering nutrition and access to sanitation; making school more affordable;
and providing financial support to vulnerable families through mechanisms such as cash transfer programs and insurance. Strong gains were more likely in countries that were able to maintain commitment to reform across political cycles and to adopt an evidence-based, whole-of-society approach to policymaking.
These same elements will be essential to protect human capital in the face of the COVID-19 crisis. While data on COVID-19’s impacts on human-capital outcomes are only beginning to emerge, simulations conducted for this report suggest that school closures combined with family hardship are significantly affecting the accumulation of human capital for the current generation of school-age children. The impacts appear comparable in magnitude to the gains that many countries achieved during the previous decade, suggesting that the pandemic may roll back many years’ worth of human-capital progress. In parallel, COVID-19’s disruption of health services, losses in income, and worsened nutrition are expected to increase child mortality and stunting, with effects that will be felt for decades to come.
The HCI can be a useful tool to track such losses and guide policy to counter them, since the index is based on robust markers for key stages of human-capital accumulation in the growth trajectory of a child. However, the five components of the HCI do not cover all the important aspects of the accumulation and productive
use of human capital. In particular, the index is silent on the opportunities to use accumulated human capital in adulthood through meaningful work. In many countries, a sizable fraction of today’s young people may not be employed when they become adults. Even if they find employment, they may not hold jobs where they can use their skills and cognitive abilities to increase their productivity. Recognizing the salience of such patterns for how human capital gains are translated into economic progress and shared prosperity, this report analyzes two measures that augment the HCI to account for the utilization of human capital.
These measures provide insight on further margins that countries can explore to boost their long-term growth and productivity. Both utilization measures suggest that human capital is particularly underutilized in middle-income countries. A key message is that human capital is also strikingly underutilized for women in many settings: the gender gap in employment rates (a basic measure of utilization) is 20 percentage points on average worldwide, but exceeds 40 percentage points in South Asia and the Middle East and North Africa.
THE HUMAN CAPITAL INDEX 2020 UPDATE: HUMAN CAPITAL IN THE TIME OF COVID-19 XI
By bringing salience to the productivity implications of shortfalls in health and education, the HCI has not only clarified the importance of investing in human capital, but also highlighted the role that measurement can play in catalyzing consensus for reform. Better measurement enables policy makers to design effective interventions and target support to those who are most in need, which is often where interventions yield the highest payoffs. Investing in better measurement and data use now is a necessity, not a luxury. In the immediate, it will guide pandemic containment strategies and support for the most affected. In the medium term, better curation and use of administrative, survey, and identification data will be essential to guide policy choices in an environment of limited fiscal space and competing priorities.
Today, hard-won human capital gains in many countries are at risk. But countries can do more than just work to recover the lost ground. Ambitious, evidence-driven policy measures in health, education, and, social protection can pave the way for today’s children to surpass the human-capital achievements and quality of life of the generations that preceded them.
To protect and extend earlier human-capital gains, policymakers need to expand health service coverage and quality among marginalized communities, boost learning outcomes together with school enrollments, and support vulnerable families with social protection measures adapted to the scale of the COVID-19 crisis. Informed by rigorous measurement, bold policies can drive a resilient recovery from the pandemic and open a future in which rising generations will be able to develop their full potential and use it to tackle the vast challenges that still lie ahead for countries and the world: from ending poverty to preventing armed conflict to controlling climate change. COVID-19 has underscored the shared
vulnerability and common responsibility that today link all nations. Fully realizing the creative promise embodied in each child has never been more important.
The Human Capital Index (HCI) measures the human capital that a child born today can expect to attain by her 18th birthday, given the risks of poor health and poor education prevailing in her country.1 The index incorporates measures of different dimensions of human capital: health (child survival, stunting and adult survival rates) and the quantity and quality of schooling (expected years of schooling and international test scores). Human capital has intrinsic value that is undeniably important, but difficult to quantify. This in turn makes it challenging to combine its different components into a single measure. The HCI uses global estimates of the economic returns to education and health to create an integrated index that captures the expected productivity of a child born today as a future worker, relative to a benchmark – the same for all countries – of complete education and full health.