By Dr. Gyan Pathak
When the world seems to be on the rapid development trajectory, there has been a shocking lack of progress in Human Capital development across the world. Despite rising incomes and reductions in poverty, two-thirds of low- and middle-income countries have experienced a decline in health, learning, or on-the-job skill development over the past 15 years.
A new report of the World Bank, titled “Building Human Capital Where It Matters: Homes, Neighbourhoods, and Workplaces” has given this clear message and also stark examples. It says that average adult height—a marker of population health—has declined in many places. Student learning—measured by harmonized test scores—has remained stagnant in low- and lower-middle-income countries; in most countries, scores are even worse today than in 2010.Similarly, female labour force participation has remained low and stagnant in low- and middle-income countries.
There is a stagnation in human capital accumulation, the report says, adding that Part of the strategy to reverse these disappointing trends must acknowledge all the settings where human capital is built. Investment in the home, the neighbourhood, and the workplace needs to be accelerated.
The report says that average adult height—a widely used proxy for latent health—rose by about 1 centimetre per decade in Western Europe during the twentieth century and at a similar pace in China in recent decades, but, in several Sub-Saharan African countries, adults are shorter today than they were 25 years ago, indicating a deterioration in underlying health.
Learning outcomes show an equally troubling pattern. On average, children in low- and lower-middle-income countries show lower achievement levels today than they did 15 years ago. The largest declines have been observed in Sub-Saharan Africa.
Skill development at work also exhibits worrisome trends. On average, an individual acquires only about half as much human capital through work in India relative to Brazil, and an individual in Brazil only half as much as an individual in the United States.
The report warns that without significant investment in health care, education, and on-the-job learning, low- and middle-income countries will continue to fall behind. This report argues that focusing on how human capital outcomes are shaped in the home, in the neighbourhood, and in the workplace will help governments and stakeholders design more effective policies to increase human capital, which will lead to more well-paying jobs, less poverty, and higher levels of economic growth.
Family background shapes human capital accumulation from the start. By the time they are 5 years old and before they have attended school, children in rural Peru whose mothers have primary educational attainment or less have roughly half the vocabulary relative to children whose mothers have completed at least secondary school. Broadly similar patterns are apparent in Ethiopia, India, and Viet Nam. The disadvantage persists throughout school age and adolescence. The children of mothers with lower educational attainment never catch up.
These patterns reflect differing conditions within the home. Why does the home matter so much? One reason is because families vary in their access to resources. To thrive, children need nutritious food, safe and sanitary living conditions, and opportunities to learn. Many of these needs can be met only if families spend money. Healthier foods and diets tend to cost more than less healthy options, and, even if schools and health care are provided free of charge, families still need to purchase books and medicines and cover transportation costs.
Homes also vary a great deal in the care environment, that is, how much time parents invest in helping children learn, how much they play with their children, their style in maintaining discipline, and how much social-emotional support they offer to children and adolescents. Children’s early development increases with the number of care or stimulation activities at home, such as an adult singing or playing with a child.
Both resources and care matter, but resources cannot easily make up for low-quality care. This can be observed with data on China, where millions of children are left by their parents in the care of other relatives when the parents move from rural to urban areas in search of better jobs. These left-behind children live in homes with higher household income, but they do worse on tests of mathematics and language and exhibit higher levels of depression. In some parts of the world, there are also substantial differences by sex in the resources and care that children receive in the same household.
Because resources and care both matter, policies that increase resources or improve the quality of care generally improve human capital outcomes. The availability of more resources, either through higher earnings or through cash transfers, has been shown to improve child outcomes in many settings. Parenting programs that are aimed at changing the care environment in the home can also have large positive effects on children’s human capital that can persist into adulthood.
These interventions have frequently proven difficult to scale up, however. Alternatively, human capital accumulation can be achieved through programs that increase the coverage of preschool. These programs often allow women to join the labour force and, if the quality of preschool is high, can foster the development of cognitive and social-emotional skills that are rewarded in the labour market. Education can confer greater skills among parents as they build the human capital of their children. This is particularly true for women, who tend to bear most of the responsibility for providing care in the home. Therefore, policies that increase the education of girls will also increase the human capital of the next generation.
The report also emphasized on Human Capital accumulation in the neighbourhood, where children grow up and which can also have substantial effects on their growth trajectory. This has been shown in the United States and, more recently, in Brazil, where the children of low-income parents will complete two more years of schooling, learn more while in school, and earn twice as much in adulthood, if they grow up in a rich neighbourhood rather than a poor neighbourhood. In terms of policy, this means that it is important to target struggling neighbourhoods and identify the main constraints that individuals face to accumulate human capital in these neighbourhoods. Policies should provide resources and incentives to improve service quality, environmental quality, and social capital in struggling neighbourhoods.
Traditionally, workplaces have been considered as settings where human capital is used. More recently, however, a consensus has emerged that human capital is also built at work. Although there is potential to accumulate significant human capital at work, relatively few people in low- and middle-income countries have an opportunity to do so. Some people are not accumulating human capital at work because they are not even part of the labour force. In low- and middle-income countries, around 50 percent of women are out of the labour force, while around 20 percent of youth are neither studying nor working. Those who are employed, meanwhile, are concentrated in jobs where little learning occurs.
The report calls for creating more jobs with stronger potential for skill development at work, and argues that a careful consideration of the constraints and opportunities in three key settings—the home, the neighbourhood, and the workplace—is needed to prepare people for jobs, to help them thrive, and to unlock productivity. (IPA Service)
