People – and the skills and talent they possess – are one of the most precious resources available to any economy. How countries invest in and leverage that human capital is an important determinant of their stability, growth and prosperity.
In parts of Europe and the Arab world, youth unemployment and skills mismatches have become major concerns for policy-makers and business leaders alike. However, in many other parts of the world, these and other issues related to human capital have been in a permanent state of crisis, as generation after generation finds itself unable to fulfil its potential due to subpar education, health, employment or opportunities.
There are three reasons why there is more urgency than ever before to address these multiple crises – skills shortages, demographics and limited resources.
First, skills shortages are projected to become more severe over time in much of the developed and developing world as businesses voice the now common refrain that they have latent demand for talent but are unable to find the skills needed to fill those roles. We must turn our attention to how these shortages can be met in the short term and prevented in the long term.
Second, demographic pressures – like youth bulges and ageing economies – are expanding or shrinking the pool of the working age population in many countries. Young countries must think of how they will create employment or entrepreneurship opportunities for their expanding workforces. Ageing countries must think of how their shrinking workforces will support growth and innovation – while supporting dependents.
Third, limited resources in many parts of the world make it vital that we objectively assess what the highest value investments are and make strategic – and tough – choices on where to direct limited funds for developing human capital.
In the World Economic Forum’s Human Capital Index, we take a multi-dimensional approach to measuring how countries are developing and deploying their most precious resource by encompassing aspects of education, health, the workforce and the enabling environment. We cover 122 countries. While there is a strong correlation between national income and human capital, there are also variations within each income category and unique experiences that can serve in part as examples within income groups.
Among the lowest income countries – those with around US$ 1,000 per capita income – countries like Kenya and the Kyrgyz Republic perform far ahead of countries such as Malawi or Burkina Faso. Among lower middle income countries – those with US$ 1,000 to 4,000 per capita income – Nigeria, Pakistan and Egypt rank low, while others such as Sri Lanka, Ukraine and Indonesia rank higher. Among upper middle income countries – those with US$ 4,000 to 12,000 per capita income – countries such as Malaysia, Costa Rica and China outstrip South Africa, Venezuela and Algeria.
Among the high income countries – those with US$ 12,000 per capita income and above – the variations are the greatest. There are strong performers such as the Nordic countries and Singapore. There are countries such as Qatar and the United Arab Emirates that are hubs for skilled and unskilled talent and rank in the upper half of this group. And then there are countries like Russia, Greece and Kuwait that fall near the bottom.
For the individual, as well as for societies as a whole, investing in human capital is critical. Countries that invest in human capital prosper. Growth and higher income lead to increased capacity to further invest in human capital – and a virtuous cycle is created. Understanding this – and investing on this basis – has been critical to the fortunes of many societies – and will continue to be a key factor for the stability and affluence of nations and their populations.
For more information, read the Human Capital Report 2013.
Author: Saadia Zahidi is Senior Director, Head of Gender Parity and Human Capital at the World Economic Forum.
Image: A labourer cuts scrap steel at a factory of Dongbei Special Steel Group Co., Ltd., in Dalian, Liaoning province July 24, 2013. REUTERS/China Daily