Opinion: 2 things the World Bank's human capital index gets right on education

The idea that investing in human capital is central to promoting development has been widely accepted since the 1950s — and the world has seen spectacular progress. Improvements in life expectancy and the expansion of schooling in the developing world have been extraordinary: both have improved more in the past 60 years than the previous 6,000 years of human history.  

The World Bank recently announced its much-anticipated Human Capital Project — which signals a renewed emphasis on investing in human capital. But the initiative will only be effective if everyone recognizes the two new challenges the initiative brings to the fore.

First, the new human capital index recognizes that “schooling ain’t learning.” Parents, communities, and countries have always had learning goals for their youth, namely that they acquire the skills and capabilities they will need to be successful adults. However, the international community has often reduced learning goals to goals based on “time served” in a school. In the Millennium Development Goals, for example, the “universal primary completion” goal made no reference to what a child might learn in those years.

This had produced success in schooling, in that nearly every child now has access to and attends school. But, tragically, if you want to find an uneducated child in the world today, the place to find them is in school. Analysis of recent data from surveys of women around the world finds that less than half of adult women who completed only six years of schooling could read a single simple sentence.

While the Sustainable Development Goals reflect both goals for schooling and for learning, the World Bank’s new human capital index uses “learning adjusted school years” and is the first international measure to directly incorporate student learning into an overall index.

A new index might seem an uninteresting technical detail for development insiders only, but the policy implications are actually enormous. The new HCI essentially rules out the “more only” strategies that countries often find most comfortable. Since all countries know how to build and equip schools and staff them with teachers, the temptation is to hear “invest in human capital” and think “build more schools so that kids complete more years.”

But with “learning adjusted school years” as the measure of human capital, that doesn’t work. If your children are only learning half as much as children in the leading learning performance countries, then “more only” can produce half the human capital of the higher learning countries. “More only” strategies are just not a viable path to high human capital.

The second new piece is that if “schooling ain’t learning,” then “spending ain’t investment.” “Invest in human capital” does not mean “spend more” in business as usual ways. The World Bank’s 2018 report on education emphasizes that there is little or no association across countries between levels of spending and levels of learning outcomes. Countries such as India have more than doubled spending on education — but their learning levels have actually deteriorated over time. The HCI doesn’t measure inputs; it measures outputs, and hence spending that doesn’t lead to higher schooling or higher learning doesn’t really count as investment in human capital.

Interestingly, Indonesia — the host country of the World Bank meetings where the HCI was launched — clearly illustrates both of these points: that “more only” cannot work and “spending ain’t investment.” A recent study used household surveys to compare the ability of recent cohorts of youth 18 to 24 years old to do simple arithmetic between 2000 and 2014.  They find that the percent of youth who had completed senior secondary school increased by 20 percentage points — so a massive dose of “more.” Data also shows that during this period, spending on education tripled. So Indonesia clearly spent more. But the percent of arithmetic questions that youth could answer increased only from 31.2 to 31.4 percent.

Despite increased spending and students completing more years of schooling in Indonesia, the mastery of even rudimentary mathematical skills barely budged. More of this glacial pace of progress means Indonesia’s youth will be ready for the 21st century by the 31st century.

“Invest in human capital” is not more the same old same old. It is a deep challenge to reorient education systems from a focus on just more years of schooling to a coherent focus on learning. It’s a call to destroy the complacency that spending alone will make a dent. To be an “investment,” spending has to have impact.