Nations failing to invest in education and health care are at risk of slow economic growth

Nations with low investments in health and education are at risk of stagnating economies and lower per capita GDP, according to the first-ever scientific study ranking countries for their levels of human capital. The US dropped from 6th to 27th, China jumped from 69th to 44th, Turkey dropped from 102nd to 43rd, South Korea fell from 18th to 6th, and Singapore dropped from 43rd to 13th.

Some of the world’s most rapid improvements were in the Middle East, including Saudi Arabia and Kuwait.

“Investments in education and health and improved human capital and GDP – that policymakers ignore at their own peril,” said Dr. Christopher Murray, director of the Institute for Health Metrics and Evaluation (IHME) at the University of Washington. “As the world economy grows increasingly dependent on digital technology, from agriculture to manufacturing to the service industry, human capital grows increasingly important for stimulating local and national economies.”

The World Bank President, Dr. Jim Yong Kim, defines human capital as “the sum total of a population’s health, skills, knowledge, experience, and habits.”

Kim has stated that measuring and ranking countries by their human capital will enable comparisons over time, thereby providing governments and investors insights into where critical investments are needed to improve health and education. Last year, he asked IHME to develop such a measurement.

“Measuring and ranking countries by their level of human capital is critical to focus governments’ attention on investing in their own people,” Kim said. “This study from IHME is an important contribution to measuring human capital across countries and over time.”

The study, “Measuring human capital: A systematic analysis of 195 countries and territories, 1990–2016,” was published in the international medical journal The Lancet. It is based on a systematic analysis of extensive data from numerous sources, including government agencies, schools, and healthcare systems.

The study places Finland at the top. Turkey showed the most dramatic increase in human capital between 1990 and 2016; Asian countries with notable improvement include China, Thailand, Singapore, and Vietnam. Within Latin America, Brazil stands out for improvement. All these countries have had faster economic growth over this period than peer countries with lower levels of human capital improvement. In addition, the most significant increase in human capital among sub-Saharan African countries was in Equatorial Guinea.

Over the past quarter century, there has been limited progress in building human capital in selected countries that started at a high baseline. The US was ranked sixth in human capital in 1990 but dropped 27th in 2016 due to minimal progress in educational attainment, which fell from 13 to 12 years.

Health and education advocates, economists, and others should use the findings as evidence to argue for greater attention to – and resources for – improving their nations’ human capital.

“Underinvesting in people may be driven by lack of policy attention to the levels of human capital,” Murray said. “No regular, comparable reporting across all countries on human capital currently exists. Such reporting over the next generation – to measure investments in health and education – will enable leaders to be held accountable to their constituents.”

Researchers found that nations with more significant improvements in human capital also tend to have faster growth in per capita GDP. Countries in the highest quartile of improvements in human capital between 1990 and 2016 had a 1.1% higher median yearly GDP growth rate than countries in the bottom quartile of human capital improvements. For example, between 2015 and 2016, a 1.1% increase in the GDP growth rate in China equates to an additional $163 per capita; in Turkey, $268 per capita; and in Brazil, $177 per capita.

The study focuses on the number of productive years an individual in each country can be expected to work between the ages of 20 and 64, considering years of schooling, learning in school, and functional health. The calculation is based on a systematic analysis of 2,522 surveys and censuses providing data on years of education, testing scores on language, math, and science, and health levels related to economic productivity.

Then, the study’s comparison between Japan and Ethiopia exemplifies significant differences in human capital investments.

Japan’s score of 24.1 years of human capital comes from having a life expectancy of 43.9 out of a possible 45 years between the ages of 20 and 64, expected educational attainment of 12.4 out of a possible 18 years in school, and a learning score of 94 and a functional health score of 85, both out of 100. Components measured in the functional health score include stunting, wasting, anaemia, cognitive impairments, hearing and vision loss, and infectious diseases such as HIV/AIDS, malaria, and tuberculosis.

Despite significant progress, Ethiopia has a human capital score of only 4.7 years, 38 expected years lived from age 20 to 64, educational attainment of 7.3, learning of 62, and functional health of 49.

Among other findings:

At the top of the listing of 195 nations, Finland’s level of expected human capital in 2016 was 28 years, followed immediately by Iceland, Denmark, the Netherlands (each with 27 years), and Taiwan (26 years).

Niger, South Sudan, and Chad all ranked lowest in 2016 at 2 years, followed by Burkina Faso and Mali (each with 3 years). In 2016, 44 countries surpassed more than 20 years of expected human capital, while 68 countries had fewer than 10 years. Rankings for the 10 most populous countries in 2016 were China (44th), India (158th), the United States (27th), Indonesia (131st), Brazil (71st), Pakistan (164th), Nigeria (171st), Bangladesh (161st), Russia (49th), and Mexico (104th).

There were notable differences in expected human capital by sex in 2016. Across the board, expected years lived between 20 and 64 years are more significant in females than among males. In addition, health status tends to be higher among females than males, except in high-income countries. Regarding the overall measure, for countries below 10 years of expected human capital, the rates of human capital tend to be higher in males, while countries above 10 years tend to have higher expected human capital for females.