World Bank warns of COVID-19 toll on human capital

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Myanmar migrants learn how to stay coronavirus-free in Samut Sakhon, Thailand. Photo by: UNICEF Thailand / Preechapanich / USAID Asia / CC BY-NC

BURLINGTON, Vt. — On Wednesday, the World Bank released its latest installment of the“Human Capital Index,” a country-by-country ranking that translates shortfalls in health and education into potential productivity losses at a national level. The 2020 version of the index describes the world of human capital before COVID-19 and could offer its greatest value as a marker of what has been lost.

The World Bank collected and analyzed data from each country through March 2020, just as the pandemic was gathering steam, and well before its full implications for health and social services were felt. That is especially true in low- and middle-income countries, which were generally spared from the initial wave of infections, but many of which are now among the hardest hit, with the harshest implications for vulnerable populations.

The COVID-19 pandemic has resulted in a 12% drop in global employment, said World Bank President David Malpass, citing the International Labour Organization. Coupled with decreases in global remittances, that means that income levels have fallen sharply in many of the bank’s client countries, he told reporters ahead of the report’s release.

“Our concern right now with the pandemic is the subtractions or the challenges facing human capital creation in this environment.”

— David Malpass, president, World Bank

The bank expects the pandemic to push more than 100 million people into extreme poverty, and plans to update that figure again in early October, according to Malpass. He added that 80 million children are missing out on essential vaccinations.

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“We think more than a billion children have been out of school due to COVID, and that could lose as much as $10 trillion in lifetime earnings because of the … reduced learning, the school closings, and the potential for dropping out of school,” Malpass said.

He added that the bank is “trying to work to restart the learning process,” including by helping countries secure access to equipment, assisting in reopening, and with distance learning.

With those startling figures in mind, the new human capital report’s authors describe their latest findings as “a snapshot of the state of human capital before COVID-19 and a baseline to track the pandemic’s impacts on human capital.”

At the time the results were tallied, the project recorded an average human capital index score of .56 on a scale of 0 to 1. That means that on average, a child in the world can expect to achieve 56% of her potential future productivity, as a result of the health and educational support structures in place. The figures vary significantly by country, region, and level of wealth, with children born in low-income countries projected to attain 37% of their productivity potential, while children born in high-income countries are projected to attain 70%.

Malpass told reporters that the human capital costs of COVID-19 add fresh urgency to calls for debt relief.

“The number of countries in debt distress is increasing rapidly,” Malpass said, as countries deploy public resources to combat the pandemic at the same time many of their economies have ground to a halt.

The World Bank chief said this would be the central theme of the institution’s annual meetings, which will be held virtually in early October.

The Human Capital Project is considered a key legacy item of former World Bank President Jim Kim’s, who launched the initiative in 2018 just months before his sudden departure. During his tenure, Kim described ambitions to link countries’ human capital performance with their creditworthiness on global capital markets, so that countries that achieve better outcomes in health and education would also achieve better credit ratings.

Speaking to reporters, Malpass agreed with the basic premise that “human capital is vital in terms of a country’s growth” and their “ability to attract investment and capital,” but was less enthusiastic about a specific link to credit ratings.

“I would rather put it in the broad context that human capital is absolutely vital to the financial and economic future of a country, as well as the social well-being, and all of those are closely connected,” Malpass said.

“Our concern right now with the pandemic is the subtractions or the challenges facing human capital creation in this environment,” he added.

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When the project launched, it initially encountered resistance from some of the World Bank’s client countries, specifically India, which found itself ranked 115th out of 157 countries, and objected to the bank’s methodology. At the time, the government of India announced it would ignore the results of the ranking — a sharp departure from their approach to the bank’s influential, and controversial, Ease of Doing Business index, which India watches very closely.

Asked whether India and the World Bank have overcome that methodological dispute, Roberta Gatti, the bank’s chief economist for human development, said that the team has worked with client countries to improve the quality of the data that is included in the index, in order to make it, “a better index for everyone.”

“An index is a conversation-opener, and what we have discussed with our client countries is that all that is in the index matters, but not everything that matters can be in the index,” Gatti said.

“We have worked very directly with some of our client countries to use the index as a way to improve measurement, and India was exactly one of these cases,” she added.

India’s overall ranking remained unchanged in the 2020 index, but the country’s score increased from 0.44 in 2018 to 0.49 this year.

About the author

  • Michael Igoe

    Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.