Current deficits in health, education, and skill development at work are costing low- and middle-income countries 51 percent of their future labor earnings, according to a new World Bank report. Over the past 15 years, even as incomes have risen and poverty has declined, two-thirds of low- and middle-income countries have experienced declines in nutrition, learning, or workforce skills. Reversing these deficits will require a new approach to human capital investments.
The report, Building Human Capital Where It Matters: Homes, Neighborhoods and Workplaces, finds that 86 out of the 129 low- and middle-income countries experienced declines in either nutrition, learning, or workforce skill development between 2010 and 2025. The report calls for broader investments in homes, neighborhoods, and workplaces—real-world settings that shape human capital.
A newly expanded global index, the Human Capital Index Plus, launched alongside this report, provides new country- and regional-level data tracking human capital accumulation from birth to age 65 and a metric for how gaps translate into forgone future labor earnings. For the first time, it captures how human capital gains—or losses—in the labor market affects lifetime productivity.
“The prosperity of low- and middle-income countries depends on their ability to build and protect human capital. Right now, we see that many countries are struggling to improve nutrition, learning, and skills of their current and future workforce, which raises concerns about labor productivity and the types of jobs their economies can sustain in the future,” said Mamta Murthi, World Bank Group Vice President for People.
According to the report, skill gaps linked to family circumstances emerge before age five—before most children in low- and middle-income countries start school—and remain virtually constant throughout adolescence. New evidence suggests that children who grow up in wealthier neighborhoods earn twice as much as those from poorer ones, even when their parents share the same income and education levels. In low- and middle-income countries, self-employed workers earn only half as much for each additional year of experience as wage workers.
