Investing in human capital is an urgent task

By Jim Yong Kim

Today, we launch the Human Capital Index, which ranks countries on how effectively they are preparing their citizens for the future. We did this knowing that countries find rankings uncomfortable, but we are certain that this is a discussion that cannot wait. An index puts crucial information squarely in front of leaders — especially heads of state and ministers of finance — and makes it hard to ignore.
Investing in human capital is an urgent task. Over the years, countless development reports and academic studies have made the case for investing in people. We now know more than we ever have about how to build human capital, and World Bank Group research shows a strong correlation with economic growth. In the complex, increasingly digital future, those correlations will grow even stronger.
Over many years, governments have chosen to build hard infrastructure — roads, bridges and airports — ahead of investing in their people. The economic and political benefits of physical capital are often apparent straight away, while the positive impact of investments in human capital can take years or even decades to become apparent. Neither the appropriate incentives nor the clear evidence that we are providing now have been in place.
Our index shows the gap between where countries are now and where they would be if those entering the workforce had full health and complete, high-quality education. It measures common sense, but critical, outcomes:
First, will children born today survive beyond their first five years? This is a struggle in many low-income countries, especially in fragile areas suffering from conflict, and violence.
Second, will young people stay in school and, more importantly, learn and be able to demonstrate proficiency? The quantity and quality of education both matter.
Third, will workers have the skills they need for today’s jobs, and a foundation for life-long learning so they can compete in the economy of the future?
In the first 1,000 days of life, if children have proper nutrition and healthcare and benefit from plenty of mental and social stimulation they will acquire the foundation for advanced education, skills training, and life-long learning. They are far more likely to live healthy lives and to be more productive decades into the future.
How much more productive? In countries such as Azerbaijan, Ecuador, Mexico, and Thailand — 40 per cent more. In countries such as Morocco, El Salvador, Tunisia, and Kenya — 50 per cent more.
A quarter of the world’s young people are unlikely to achieve their full potential because of chronic malnutrition, illness, and lack of stimulation that lead to childhood stunting. When children are stunted, their brains don’t develop properly; they don’t learn as well as adolescents or earn as much as adults. Our research found an economic “stunting penalty” across entire regions.

If a country’s population is not able to compete in the workforce of the future, that country will find itself incapable of employing its people, unable to increase its output, and utterly unprepared to compete economically.
Before coming to the World Bank, I spent most of my adult life delivering healthcare in some of the poorest places on earth. I saw first-hand how malnutrition and stunting were sentencing generations of children to a lifetime of disadvantage because of a lack of investment. I was part of a social movement that loudly encouraged donors to contribute for health and education in developing countries. And there have been spectacular successes: the growth of HIV treatment in developing countries, for example. But the current needs for human capital investment are much larger than can be supported through foreign assistance. It is imperative that developing country heads of state and ministers of finance take the lead.
Waiting for more donations is simply not a viable strategy. Countries with large gaps in human capital need to radically rethink how they are preparing their people for what lies ahead. Countries need a range of investments that improve outcomes, including clean air and water, safe transportation to get children to school, health clinics, and social protection to ensure that no one is left behind.
Over the past decade, several countries have made investments that are helping reduce their human capital gap. Poland enacted education reforms between 1990 and 2015 that led to one of the fastest improvements in test scores in OECD countries. Vietnam also achieved a rapid rise in learning — it recently topped the OECD average score. Malawi succeeded in reducing its rate of stunting by nearly 20 percentage points in under two decades.
Progress is possible, but with the pace of innovation accelerating, countries have to get serious about investing in their people.
The writer is president of the World Bank Group