Chart of the Day: The World Bank Ranks Each County Based on Its “Human Capital”

How well are governments setting up their people for success? According to a new set of rankings by the World Bank – not so well.

The Human Capital Index (HCI), launched last week at the World Bank-International Monetary Fund (IMF) annual meeting in Bali, estimates that 56 percent of children born today around the world will miss out on more than half of their potential lifetime earnings, just because governments are not making sufficient or good investments into their education and health.

The index ranks 157 countries by how much economic potential they’re losing in the long-term by not fully investing in human capital – “the knowledge, skills, and health that people accumulate over their lives,” as the World Bank defines it. It does so by looking at five health and education indicators: child survival, school enrollment, quality of learning, healthy growth and adult survival. In other words, will a child make it to school age? How many years of school will a child complete? How much will they learn? By the time they leave school, will they be healthy, ready to learn more and able to work?

Based on these indicators, the World Bank calculated a score between zero and one for each of the countries it looked at. If a country scores 0.76, like the U.S., that means the earning potential of its youngest generation over their lifetime is only 76 percent of what it could be, if they had complete education and good health. In other words, the U.S. is losing 24 percent of its productivity by not fully investing in human capital.

“The bar is rising for everyone,” World Bank President Jim Yong Kim said in a press release. “Building human capital is critical for all countries, at all income levels, to compete in the economy of the future.”

At the top of the rankings were East Asian countries/territories, including Singapore, South Korea, Japan and Hong Kong, which scored 0.88, 0.84, 0.84 and 0.82 respectively. The World Bank points to these countries’ focus on education in particular as the main driver of their rapid development in the 20th century.

Low-income African countries made up the bottom of the rankings, including Chad (0.29) and South Sudan (0.30), as well as Niger, Mali and Liberia – all three of which scored 0.32. But Kim says that poverty shouldn’t preclude education and health from being a priority now.

“For the poorest people, human capital is often the only capital they have,” he 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.”

The World Bank’s index is not the first human capital ranking. For nearly half a century, the World Bank and other Western foreign development institutions have been shifting their focus from building infrastructure to building human capital. This index is the bank’s latest push to ramp up that commitment as part of the Human Capital Project that it launched last year.

“I hope that [the index] drives countries to take urgent action and invest more – and more effectively – in their people,” Kim said.

But some countries have already publicly dismissed it. The government of India, which scored 0.44 and ranked 115th, questioned the index’s methodology and said it failed to take into account other measures that India’s undertaken to improve school enrollment, health and financial inclusion.

“HCI uses metric of industrial era to measure the status of human capital for digital age and its production system,” the finance ministry said in a statement. “…A better metric is needed.”

Other groups, like the UK-based think tank Overseas Development Institute (ODI), say the World Bank’s push for more investment in human capital is “welcome and a signal that this is now accepted as mainstream economic thinking and practice,” but there really needs to be more of a focus on reducing inequality within countries.

Singapore, for example, ranked first on the HCI, but was among the bottom 10 of another ranking last week by British charity group Oxfam of countries’ efforts to reduce inequality.

“Our research has shown that too often finance goes to places where people are already relatively better-off, and where there are already schools and health facilities,” Elizabeth Stuart, head of the Growth, Poverty and Inequality Program at ODI, said in a statement. “The Bank, donors and other investors must do more to reach the poorest and most vulnerable in areas that have been left behind.”