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Human Capital Report 2017

Pakistan has been ranked almost at the bottom (125) of a list of 130 that were tested against four key areas of human capital development; Capacity, largely determined by past investment in formal education; Deployment, the application and accumulation of skills through work; Development, the formal education of the next generation workforce and continued up-skilling and re-skilling of existing workers; and know-how, the breadth and depth of specialized skills-use at work.

The performance of these countries is also measured across five distinct age groups or generations: 0-14 years; 15-24 years; 25-54 years; 55-64 years; and 65 years and over.

The World Economic Forum’s Human Capital Report 2017 published last Wednesday contains the details of the study. The following are some highly pertinent excerpts from the Report:

According to the report’s Human Capital Index, 62% of human capital has now been developed globally. Only 25 nations have tapped 70% of their people’s human capital or more. With the majority of countries leveraging between 50% and 70% of their human capital, 14 countries remain below 50%.

A fundamental tenet of the report is that accumulation of skills does not end at a formal education, and the continuous application and accumulation of skills through work is part of human capital development. All too often economies already possess the required talent but fail to deploy it.

While much is often made of intergenerational inequalities when it comes to the realization of human capital, the report finds that every generation faces considerable challenges when it comes to realizing individual potential.

For example, while younger people are consistently better off than older generations when it comes to the initial investment in their education, their skills are not always deployed effectively and too many employers continue to look for ready-made talent.

The problem of under-deployment of skills among the young also affects those coming towards the end of their working life. Meanwhile, few among those currently in employment – across all age groups -are gaining access to higher skilled work and opportunities to enhance know-how. How nations develop their human capital can be a more important determinant of their long-term success than virtually any other factor.

By “human capital” the authors of the Report mean the knowledge and skills people possess that enable them to create value in the global economic system. Human capital is not defined solely through formal education and skilling. It can be enhanced over time, growing through use-and depreciating through lack of use-across people’s lifetimes.

The Global Human Capital Index 2017 featured in this Report thus treats human capital as a dynamic rather than fixed concept. The Index ranks countries on how well they are developing their human capital on a scale from 0 (worst) to 100 (best) across the above mentioned four thematic dimensions and five distinct age-groups.

It can be used as a tool to assess progress within countries and points to opportunities for cross-country learning and exchange. The Capacity sub-index quantifies the existing stock of education across generations; the Deployment sub-index covers skills application and accumulation of skills through work; the Development sub-index reflects current efforts to educate, skill and up-skill the student body and the working age population; and the Know-how sub-index captures the breadth and depth of specialized skills use at work.

The Report’s key findings are: On average, the world has developed only 62% of its human capital as measured by this Index. Or, conversely, nations are neglecting or wasting, on average, 38% of their talent.

— Across the Index, there are only 25 nations that have tapped 70% of their people’s human capital or more. In addition 50 countries score between 60% and 70%. A further 41 countries score between 50% and 60%, while 14 countries remain below 50%, meaning these nations are currently leveraging less than half of their human capital.

— The top ten of this year’s edition of the Human Capital Index is headed by smaller European countries-Norway (1), Finland (2), Switzerland (3)-as well as large economies such as the United States (4) and Germany (6).

— Four countries from the East Asia and the Pacific region, three countries from the Eastern Europe and Central Asia region and one country from the Middle East and North Africa region are also ranked in the Index top 20.

— The leaders of the Index are generally economies with a longstanding commitment to their people’s educational attainment and that have deployed a broad share of their workforce in skill-intensive occupations across a broad range of sectors.

— Unsurprisingly, they are mainly today’s high-income economies. Creating a virtuous cycle of this nature should be the aim of all countries.

— At a regional level, the human capital development gap is smallest in North America, followed by Western Europe, Eastern Europe and Central Asia, East Asia and the Pacific, Latin America, and the Middle East and North Africa. The gap is largest in South Asia and Sub-Saharan Africa.

— From North America, the United States (4) ranks in the top ten and Canada (14) ranks in the top 20. In Western Europe, the Nordic countries Norway (1), Finland (2), Denmark (5) and Sweden (8)-as well as Switzerland (3) and Germany (6)-dominate the rankings, collectively taking the region’s top spots.

— Twelve countries have crossed the threshold of developing at least 70% of their human capital. The Netherlands (13) and Belgium (15) rank ahead of the United Kingdom (23) and France (26) to make up the mid-range of the regional league table, while three Mediterranean countries-Portugal (43), Spain (44) and Greece (48)-take the bottom ranks.

— Three countries from the Eastern Europe and Central Asia region rank in the top 20: Slovenia (9) Estonia (12), and the Russian Federation (16). The Czech Republic (22), Ukraine (24) and Lithuania (25), all score above the 70% threshold. The bottom-ranked countries in the region, Macedonia, FYR (67) and Albania (85), are held back by high unemployment and underemployment rates across all age groups.

— In East Asia, the best-performing countries in the region, such as Singapore (11), Japan (17), and Korea, Rep. (27) are global strongholds of human capital success, while countries such as Lao PDR (84), Myanmar (89) and Cambodia (92) trail the region despite their very high degree of human capital utilization across the Deployment sub-index.

— The gap between the best and worst performers in Latin America and the Caribbean is smaller than for any other region. The two best-performing countries in the region are Argentina (52) and Chile (53). The region’s two largest economies, Mexico (69) and Brazil (77), rank in the middle and lower half of the Index overall along with Peru (66) and Colombia (68). The bottom ranks of the region are made up of Venezuela (94) and Central American nations such as Honduras (101).

— Only one country, Israel (18), from the Middle East and North Africa makes it into the top 20. Three gulf states-the United Arab Emirates (45), Bahrain (47) and Qatar (55)-outperform the rest of the region’s Arab-speaking countries and score in the mid-range of the Index overall. Turkey (75) has developed 60% of its human capital against the theoretical ideal. Saudi Arabia (82), the region’s largest economy ranks ahead of Egypt (97), its most populous one. Algeria (112), Tunisia (115) and Morocco (118), make up the lower end of the rankings, ahead of Mauritania (129) and Yemen (130).

— From South Asia, Sri Lanka (70) is the top performer, while Nepal (98), India (103), Bangladesh (111) and Pakistan (125) lag behind. With the exception of Sri Lanka, the rest have yet to reach the 60% threshold with regard to developing their human capital.

— Sub-Saharan Africa is the lowest-ranked region in the Index. Rwanda (71), Ghana (72), Cameroon (73) and Mauritius (74) have developed more than 60% of their human capital. South Africa (87), the region’s second largest economy, places towards the middle in the region. Nigeria (114) ranks in the lower midfield and Ethiopia (127) is the lowest performer, fourth from the bottom on the Index overall.

— There are significant opportunities for economies with already high talent capacity and development, such as France, Greece, Italy and United Arab Emirates, to boost their human capital performance through a focus on the Know-how sub-index, including opportunities for high- and medium-skilled work as well as broadening the complexity of the economies in question through sectoral investment.

— In North America, Western Europe, the Middle East and North Africa and Eastern Europe and Central Asia, more can be done to improve the deployment of their countries’ high capacity talent.

— Sub-Saharan Africa and South Asia need much better investment in developing their current and future workforces in order to expand beyond their relatively low current capacity.

— Core to the Index is the concept that investment in developing talent across the lifecycle-through education and employment-enhances human capital.

— Even with similar levels of upfront educational investment, on-the-job learning is critical for generating returns on the initial investment as well as ensuring that people’s skills grow and appreciate in value over time.

— Data from research confirms that individual’s specialization and capacity expand as they enter the labor market, highlights new opportunities for identifying and analyzing similar talent pools and points to opportunities for stronger design of re-skilling and up-skilling efforts.

— More broadly, this unique data also suggests that there is an opportunity for policymakers to use dynamic labor market information to enhance their workforce planning and decision-making.

Because human capital is critical not only to the productivity of society but also the functioning of its political, social and civic institutions, understanding its current state and capacity is valuable to a wide variety of stakeholders. The authors of the Report hope that its findings can support governments, businesses, education providers and civil society institutions in identifying key areas for focus and investment.

M. Ziauddin, "Human Capital Report 2017," Business Recorder. 2017-09-20.
Keywords: Social sciences , Formal education , Capital development , Global economic , Labor market , Business , Employment , Pakistan

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