Human Capital Index (HCI), 2016

India has been ranked low at 105th position out of 130 countries on the recently released Human Capital Index (HCI), 2016. The HCI was released by the Geneva based World Economic Forum (WEF) at its Annual Meeting of New Champions, 2016 which is also known as `Summer Davos’ summit. India had secured 100^th position out of 124 countries in the last year’s index.

What is HCI?

The Human Capital Index measures countries’ ability to nurture, develop and deploy talent for economic growth. It is based on 46 indicators about how well countries are developing and deploying their human capital, focusing on education, skills and employment. The WEF report of HCI presents an analysis by focusing on a number of key issues that can support better design of education policy and future workforce planning.
Methodology
The index evaluates the levels of education, skills and employment to people in age groups beginning from under 15 years to over 65 years. It uses 46 indicators to offer insights into the outcomes of past and present investments in human capital and how it is likely to evolve into the future for a country’s talent base. Therefore, it acts a tool for capturing the complexity of education, employment and workforce dynamics facilitating the stakeholders to take an informed decision.

It assesses Learning and Employment outcomes on a scale of (worst) 0 to 100 (best) across the following age groups:

• 0-14 years: for this group, education is assessed among the most critical factors.
• 15-24 years: for this group, higher education and skills use in the workplace are assessed.
• 25-54 years: this group forms the bulk of the labour force of a nation. For this group, continued learning and employment quality are assessed.
• 55-64 years: for this group, attainment and continued engagement are assessed.
• 65 and above: for this group, both continued opportunity and health are assessed.

Indicators

The HCI takes the values for all the 46 indicators from publicly available data compiled by international organizations like the International Labour Organization (ILO), United Nations Educational, Scientific and Cultural Organization (UNESCO) and the World Health Organization (WHO).

Why human capital has been chosen?

Human capital of a nation is considered as an important determinant for its long term success than the other resources. So, it is imperative to assess this resource for investing and leveraging it efficiently in order to generate returns for the individual and the economy as a whole. Human capital is also critical for the productivity of society and effective functioning of political, social and civic institutions of a nation.

What are the salient findings of the report?

Overall scores

• Globally, only 19 nations have tapped 80% of their human capital potential or more.
• 40 countries have human capital potential between 70% and 80%.
• 38 countries have human capital potential between 60% and 70%
• Overall, the world has developed 81% of the human capital potential in the age group of 0-15 years of the global population for whom education is the most important critical factor. This is in line with the investments made by the UNESCO’s education for all and former UN Millennium Development Goals.

Human capital and Gross National Income

The HCI has established a clear correlation between human capital and economy’s income level. It has been observed that the countries with higher gross national income (GNI) and GDP per capita scores very high in the index.

Global human capital trends

With the beginning of 2016, world’s population is estimated as 7.4 billion. Out of these:

• 41% of people fall under prime working age group of 25-54 years.
• 16% of people fall in the 15-24 age group.
• 26% of people fall in the 0-15 age group.
• 9% of people fall in the 55-64 age group
• 8% are aged above 65 years of age.

Results by region

• North America narrowly scores above 80%
• Western Europe, Eastern Europe and Central Asia score in the range of 70% to 80%.
• East Asia and the Pacific, Latin America and the Caribbean, and the Middle East and North Africa score in the range of 60% to 70%
• South Asia and Sub-Saharan Africa are yet to cross the 60% average threshold.

Top 10 countries

Top 10 Countries in 2016 HCI: Finland (1st position), Norway (2nd), Switzerland (3rd), Japan (4th), Sweden (5th), New Zealand (6th), Denmark (7th), Netherlands (8th), Canada (9th) and Belgium (10th).

India’s Neighbours

Sri Lanka (50th), China (71st), Bhutan (91st), Bangladesh (104th), Nepal (108th) and Pakistan (118th).

Among BRICS countries

India is ranked lowest as against Russia (28th), China (71st), Brazil (83rd) and South Africa (8th).

Countries ranked below India

Nepal, Myanmar, Haiti, Malawi, Burundi.

Bottom 5 countries

Mauritania, Yemen, Chad, Nigeria and Mali

Major Economies

Rankings of some of the major economies:

Japan (4) and Canada (9), Germany (11), Singapore (13), France (17), Australia (18), United Kingdom (19), United States (24), Russian Federation (28), Rep. of Korea (32), Italy (35).

G20

• Among the countries of G20, Japan (4) has the highest human capital performance followed by Canada (9) and Germany (11).
• India with 105^th rank is the lowest ranked one in the group.
• The group has an average score of 73.09.

EU:

• Group score: 78.48
• Germany (11) and Austria (12) are highly ranked.

Elaborate India’s specific data of the index.

Positives
India has got better rankings in some HCI’s indicators such as quality of education system (39th), staff training (46th) and ease of finding skilled employees (45th). India is the second largest country in the global distribution of tertiary degree holders share at nearly 78 million after China (2.5 million) in STEM subjects (science, technology, engineering and mathematics).

Negatives

India has optimized just 57% of its human capital endowment. Its youth literacy rate is still only 90% (103rd in the world). In case of labour force participation, India ranks low as it has world’s largest employment gender gaps (121st).
Reasons for low ranking

• Insufficient educational enrolment rates.
• Poor-quality primary schools.
• Low levels of skill diversity among university graduates
• Difficulty of finding skilled employees
• Presence of significant employment gender gaps.

What is the way forward?

Some of the suggestions put forward by the index are:

• Countries should try to maximize human capital outcomes across the two sub-themes- Learning and Employment.
• Nations has to equip all the age groups with timely and relevant knowledge and skills and also take steps to deploy the acquired skills in high quality jobs.
• The quality of education and opportunities for learning has to be enhanced.
• The index has observed that the current education systems in most of the countries are not suited to current or future labour markets. It calls for the development of cognitive and non-cognitive skills that relate to individual’s capacity to collaborate, innovate, self direct and problem solve.
• Business leaders, educational institutions and all the other stakeholders to rethink the global talent value chain.
• It has called the legislators to develop agile, thoughtful, and forward thinking governance to manage rapidly emerging digital labour market for obtaining optimal socio-economic results.
• Companies should treat jobs as bundles of skills and invest in the life-long learning, re-skilling and up-skilling of present employees.

India-specific:

In economies such as India (105), the index calls for the need to simultaneously improve the development as well as deployment of the nation’s human capital potential across the Learning and Employment themes for all age groups.

World economic forum

World Economic Forum (WEF) is an international institution founded by Klaus Schwab, that works to improve the state of the world through public-private cooperation. It was established in 1971 and is headquartered in Geneva, Switzerland. It is an independent not-for-profit organization that works closely with other international organizations. It also works with leaders in the field of politics, business, academia to set global, regional and industrial agenda. The Motto of WEF is: “Committed to improving the state of the world”.