Skills and talent are an important part of the innovation ecosystem, so recent data suggesting that only 65% on average of the world’s talent is being optimized through education, skills development and deployment during people’s lifetimes indicates more can be done to utilize that talent in a changing global economy.
The World Economic Forum’s Human Capital Report 2016 says that rich and poor countries alike are missing huge opportunities when it comes to making the most of their populations’ economic potential. Its report assesses how public and private sector investments in education and skills can best prepare workforces for the future and how big data and the gig economy might drive greater opportunity for workers. It also highlights that Finland, Norway and Switzerland hold the top spots, utilizing around 85% of their human capital; Japan leads when it comes to utilizing the skills of 55 year-olds and over.
In addition to measuring the 130 countries that comprise the report’s Human Capital Index, it also analyzes a mix of public and private data from online platforms such as Care.com, LinkedIn, Uber and Upwork to generate insights on skills gaps and the potential of the online gig economy. “Today’s transition to the Fourth Industrial Revolution, combined with a crisis of governance, creates an urgent need for the world’s educators and employers to fundamentally rethink human capital through dialogue and partnerships. The adaptation of educational institutions, labour market policy and workplaces are crucial to growth, equality and social stability,” said Klaus Schwab, founder and executive chairman of the World Economic Forum.
Across the Index:
- a total of 19 nations have tapped 80% of their human capital potential or more
- in addition to these 19 countries, 40 countries score between 70% and 80%.
- a further 38 countries score between 60% and 70%
- 28 countries score between 50% and 60%
- five countries in the index remain below 50% in 2016.
At the top, Norway (2) and Switzerland (3) are nearly tied and gaining ground on Finland’s top position. All three are effectively utilizing about 85% of their full human capital potential. Japan (4) rises one rank in this year’s index, with greater potential to be tapped by closing the gender gap. New Zealand (6), the other country in the top 10 from the East Asia and the Pacific region, rises three ranks since last year. Sweden (5) also rises one rank in this year’s Index, slightly outperforming its neighbour Denmark (7). The Netherlands (8) and Belgium (10) maintain their respective rankings while Canada (9) drops five ranks since last year.
Taking a regional perspective, on average only one region — North America — passes the 80% threshold, even though the United States (24) lags its northern neighbor by a considerable margin. Two regions – Western Europe and Eastern Europe and Central Asia — score in the 70% to 80% range and three others — East Asia and the Pacific, Latin America and the Caribbean and the Middle East and North Africa — in the 60% to 70% range. Two regions— South Asia and Sub-Saharan Africa — have not yet crossed the 60% average threshold.
Western Europe’s three largest economies all fall in the top twenty of the index, led by Germany (11) followed by France (17) and the UK (19). The lower range in the region comprises Italy (34), Portugal (41), Greece (44) and Spain (45). In total, the 28 current member states of the European Union collectively achieve a group average score of 78.48, with 12 member states passing the 80% threshold. The remaining 16 member states all make use of 70% to 80% of their full human capital potential.
The index covers 22 countries from Eastern Europe and Central Asia. With an overall average score of 75.02, the region ranks in third place globally, after North America and Western Europe. It includes several remarkable success stories with regard to successful human capital potential maximization, including Estonia (15) and Slovenia (16) which both score above the 80% threshold, and the Czech Republic (25), Ukraine (26), the Russian Federation (28), Kazakhstan (29) and Poland (30) all scoring within the top 30. Ukraine’s performance is particularly remarkable relative to its GDP per capita levels.
East Asia and the Pacific scores towards the middle of the range of Human Capital Index results, with an overall average score of 69.75. The best performing countries; Japan (4), Singapore (13), and the Republic of Korea (32) are global strongholds of human capital success, while countries such as Cambodia (100), Lao PDR (106) and Myanmar (109) trail the region despite a relatively solid performance relative to their income levels. China (71) scores near the regional and overall Index average with regard to its human capital performance.
The 24 countries from the Latin America and the Caribbean region score in the middle range of the index, just behind the East Asia and the Pacific region, with an overall average score of 66.95. With the exception of Cuba (36) and Haiti (111), the gap between the best and worst performers in the region is much smaller than for any other region. Chile (51) and Argentina (56) share similar strengths and weaknesses, passing the 70% overall human capital maximization threshold. By contrast, Brazil (83) is lagging behind the regional average.
The Middle East and North Africa region comprises 15 countries that had enough data for coverage in the Index. Of these, only one—Israel (23)—makes it into the top 30 of the Index. The Gulf states, Bahrain (46), Qatar (66), and the United Arab Emirates (69), outperform the rest of the region in terms of making the best use of their human capital potential. The North African nations of Morocco (98), Tunisia (101) and Algeria (117) make up the lower end of the region’s rankings, ahead of Yemen (129) and Mauritania (130).
The index covers six countries from the South Asia region: Sri Lanka (50), Bhutan (91), Bangladesh (104), India (105), Nepal (108) and Pakistan (118). The overall average score for the region is 59.92, behind the Middle East and North Africa and ahead of Sub-Saharan Africa, and all but the top two are yet to reach the 60% threshold with regard to optimizing their human capital potential.
In Sub-Saharan Africa, a cluster of countries, including Mauritius (76), Ghana (84), South Africa (88) and Zambia (90) score in the 60–70% range — placing them ahead of the Middle East and North Africa regional average and on a par with the lower half of the Latin American and East Asia and the Pacific regions. Other economies, however, such as Ethiopia (119) and Nigeria (127) face a range of human capital challenges, including low survival rates for basic education. With an overall average score of 55.44, the Sub-Saharan African region is the lowest-ranked region in the Index. In total, the Index covers 26 countries from the region.
Human capital investment and planning can make a difference to a nation’s human capital endowment regardless of where it falls on the global income scale. Creating a virtuous cycle of this nature should be the aim of all countries. That said, there remains a clear correlation between an economy’s income level and its capacity to develop and deploy human capital
The reports also offers further insights such as:
- Employers and employees need to start thinking about skill bundles, not job titles
- Re-skilling may be easier than we thought
- Countries need to maximize learning at school and at work
- Understanding data can help countries manage brain drain and gain
The report concludes that instead of passive “techno-optimism” or “techo-pessimism”, it is important for policymakers and companies to begin dialogue and action to leverage opportunities and mitigate risks. “The new technologies of the Fourth Industrial Revolution are creating disruptions to work but they are also providing the tools to rapidly enhance human capital. How business and governments react today will determine which future we end up in. The forum’s analysis seeks to provide the insights and space for leaders to understand the changes underway and adapt quickly,” said Saadia Zahidi, co-author of the report and head of education, gender and work initiatives.
The full report can be downloaded here.
[Image Credit: World Economic Forum]