World Bank launches highly anticipated human capital index

NUSA DUA, Indonesia — The World Bank’s much-anticipated human capital index has launched, with Singapore in top place and African countries occupying the bottom spots.

The first edition of the index, which bank World Bank President Jim Kim first talked about a year ago, ranks 157 countries based on their education and health outcomes and the impact they are having on productivity.

The index was due to be officially launched on Thursday afternoon in Bali at a star-studded event featuring ministers of state, Melinda Gates, co-chair of the Gates Foundation, the heads of two United Nations Agencies, and Kim, as part of the World Bank annual meetings.  The top three spots went to Singapore, South Korea, and Japan.

At the other end of the rankings, Chad came in last place just behind South Sudan, Niger, and Mali. The United States was ranked 24th.

Singapore’s high score of 0.88 out of a maximum possible score of 1 was driven by a strong focus on quality education and an innovative health insurance system delivered by spending a relatively modest 4 percent of gross domestic product on health care, Kim told reporters during a roundtable on Wednesday.

Modeled on the bank’s existing doing business index, which assesses national business conditions, the human capital index aims to create a similar ranking for countries based on how well they look after their people. It aggregates data from four indicators including under‐5 mortality rates; expected learning‐adjusted years of school; adult survival rates; and stunting rates.

Kim has described the human capital index as both a carrot and a stick for governments — on the one hand, “naming and shaming” countries that rank poorly; on the other, presenting compelling data on the economic benefits of investing in education and health.

“This is about drawing their attention to a crisis that we think is real … [human capital] is connected to productivity, it’s connected to economic growth, and it’s probably more highly correlated than other kinds of infrastructure investment that heads of state and ministers of finance are much more likely to go for because the visible outcomes come to you sooner,” Kim said.

The effort is especially important at a time when rapid population growth and technological progress mean the future of work is changing — the subject of the forthcoming “World Development Report 2019.”

“We’re doing this to plead with [governments] … You need to take your human capital investments much more seriously,” Kim said.

The bank president said the index can also be an accountability tool, telling civil society groups at a town hall meeting on Wednesday: “Look at the human capital index and then use that to ask questions of the leaders of your countries.”

The message appears to be hitting home: Demand for World Bank loans for health and education are up 70 percent in the year since the project was first announced, Kim said. While he has said in the past that the index could prove controversial, especially if countries score lower than expected, he told reporters it had received unanimous support from the bank’s shareholders as represented by the executive directors.

The bank had pre-empted negative reactions by forewarning countries of their scores and is already working with 28 countries to help them develop “transformative plans” for boosting their human capital, he added — including Indonesia, the host of this year’s annual meetings.

But the findings are not only relevant to those countries scoring near the bottom. The United Kingdom, which ranked 15th, is in discussions with the bank about doing a “neighborhood by neighborhood” index so it can better target spending, Kim said.

While many civil society groups have welcomed the bank’s emphasis on education and health, some have criticized the methodology for not taking inequalities between populations into account.  Others have also said the term “human capital” reduces workers to being “capital goods.”

However, Kim defended the methodology, saying the four indices had been chosen because there was “real data” available on them in all the countries assessed. “We have to be absolutely sure about our data if we are going to go out and rank [countries] … so we asked very specific questions and the index answers those questions,” he said.

Roberta Gatti, chief economist for the bank’s human development practice group said the index would explore including additional indicators, such as equality, in future iterations.

Catch up on what happened at the World Bank Annual Meetings in Indonesia, where Devex reporters Michael Igoe and Sophie Edwards were on the ground.