World Bank’s Human Capital Index Released

The World Bank released a Human Capital Index (HCI) as part of the World Development Report 2019.

India was ranked 115 among 157 countries, much below its Asian peers, including China ranked 46, Indonesia (87), Malaysia (55). Singapore was ranked number one in the world followed by Japan, Hong Kong and Finland.

Broader theme of the World Development Report (WDR) this year is “The Changing Nature of Work”. As part of this report, the World Bank has launched a Human Capital Project (HCP). The HCP programme is claimed to be a program of advocacy, measurement, and analytical work to raise awareness and increase demand for interventions to build human capital.

There are three components of HCP– a cross-country human capital measurement metric called the Human Capital Index (HCI), a programme of measurement and research to inform policy action, and a programme of support for country strategies to accelerate investment in human capital.

The HCI has been constructed for 157 countries. It claims to seek to measure the amount of human capital that a child born today can expect to attain by age 18. The HCI index values are contended to convey the productivity of the next generation of workers, compared to a benchmark of complete standard education and full health.

The HCI has three components:

  1. Survival, as measured by under-5 mortality rates;
  2. Expected years of Quality-Adjusted School which combines information on the quantity and quality of education (quality is measured by harmonizing test scores from major international student achievement testing programs and quantity from number of years of school that a child can expect to obtain by age 18 given the prevailing pattern of enrolment rates across grades in respective countries); and
  3. Health environment using two proxies of (a) adult survival rates and (b) the rate of stunting for children under age 5.

UNDP constructs Human Development Index (HDI) for several years. The HCI uses survival rates and stunting rate instead of life expectancy as measure of health, and quality-adjusted learning instead of merely years of schooling as measure of education. HCI also excludes per capita income whereas the HDI uses it.

Two significant changes from HDI are exclusion of income component and introduction of quality adjustment in learning. Exclusion of income element and introduction of quality adjustment makes HCI far less representative of Human Capital Development than the Index claims it to be.

The first HCI published at the Annual Meetings of the Fund Bank comes with a conclusion that for 56% of the world’s population the HCI is at or below 0.50; and for 92% it is at or below 0.75. Hence only 8% of the population can expect to be 75% as productive as they could be.

The HCI measures the Index outcomes for each country as a fraction of maximum value of 1. As expected the advanced economies such as North America and Europe mostly have HCI value of above 0.75, while South Asia and Sub Saharan Africa have the lowest HCI among the regions. The HCI for India has been estimated at 0.44. The quality adjusted learning has been measured in case of India by using the data as old as 2009.

The key observations regarding HCI for India in the Report are as under:

Human Capital Index: A child born in India today will be only 44% as productive when she grows up as she could be if she enjoyed complete education and full health.

The HCI in India for females is marginally better than that for males.

Further, there has been marked improvement in the HCI components in India  over the last five years.

Probability of Survival to Age 5: 96 out of 100 children born in India survive to age 5.

Expected Years of School: In India, a child who starts school at age 4 can expect to complete 10.2 years of school by her 18th birthday.

Harmonized Test Scores: Students in India score 355 on a scale where 625 represents advanced attainment and 300 represents minimum attainment.

Learning-adjusted Years of School: Factoring in what children actually learn, expected years of school is only 5.8 years.

Adult Survival Rate: Across India, 83% of 15-year olds will survive until age 60.

Healthy Growth (Not Stunted Rate): 62 out of 100 children are not stunted. 38 out of 100 children are stunted, and so at risk of cognitive and physical limitations that can last a lifetime.

Gender Differences: In India, HCI for girls is marginally higher than for boys.

The use of PISA and TIMSS scores raises questions of possible conflict of interest as the methodology for testing is largely controlled by non UN agencies and is not globalized unlike the methodology of UNICEF and WHO that are used for health and survival indicators.