10 findings about the state of the world’s human capital

The Human Capital Report 2015 assesses how well countries are developing and deploying their human capital, focusing specifically on learning and employment. The Index in the Report is a tool with which business, government and others can assess the global stock of talent and design interventions.

The Index covers 124 countries, representing 92% of the world’s population and 98% of global GDP, which means it can tell us a lot about how the world is doing on building up and leveraging its human capital.  Here are ten key findings:

1. No country has optimized their human capital potential.

Even Finland, the highest ranking country in the Index, has optimized only 86% of its human capital potential, while Yemen has developed and deployed only 41% of its human capital potential. Only 14 countries have crossed the 80% mark. Investing in learning is a prerequisite for maximizing employment outcomes, but not enough in itself. Countries need to create the right environment in which people can use their learning to engage in productive work. The top 5 countries in the Index – Finland, Norway, Switzerland, Canada and Japan – have done the best at maximizing both.

2. Rich, small, northern European economies aren’t the only models

The Index debunks the myth that only rich, small, northern European economies exist as role models in optimizing their human capital potential. There are both leaders and laggards in all regions of the world, within countries of all types of population sizes, all forms of demographic structures and within countries at all income levels. Therefore, potential role models exist for all types of countries: whether developed or emerging, small or large, ageing or young.

3. Economies can be ‘over-skilled’ or ‘under-skilled’

Another way to look at how countries are developing and deploying their human capital is the skills utilization gap for high-skilled people, specifically, how many people are tertiary educated vs how many people are actually able to use this higher education in high-skilled work. Austria, Italy, Germany, South Africa and the Netherlands are among the most “under-skilled” economies – those with more people in high-skilled work than there are tertiary educated people. Armenia, Venezuela, Chile, Argentina, Ireland, Spain and Morocco are amongst the most “over-skilled” economies – those with more tertiary educated people than high-skilled jobs.

4. Tertiary-educated youth, women and the “silver workforce” are often underutilized

In some countries much of the tertiary-educated talent is not integrated at all, for example, Saudi Arabia has more inactive tertiary-educated people than any other country. Nearly 37.3% of the population have post-secondary school qualifications but are not currently working – most of them are women. In other countries, especially ageing economies with shrinking workforces, it’s the older workers that want to continue to work that are being underutilized. Cultural factors, family and retirement policies and the skills mismatch between education and employment all contribute to this chronic under-use of talent.

5. Recent high-skilled graduates are concentrated in a few countries

In absolute terms, most of the world’s recently graduated high-skilled talent is concentrated in a few countries.  China (9 million), United States (3 million), Russia (2 million) and Brazil (1 million) have the largest absolute numbers of recent university graduates. Together these 4 countries contain half of the world’s entry-level high-skilled talent.

6. Relative to population the league table for tertiary enrolment looks very different

Relative to the size of the population in that cohort, the picture for current university enrolment looks quite different. The top performing countries are Korea, the United States, Finland and Greece, each with tertiary enrolment above 90%, followed by Australia, Slovenia, Spain, Iceland and Argentina, each with enrolment between 80 and 90%.

7. The most popular university courses are in the social sciences

Around the world, the most popular subjects for recent university graduates are in the social sciences, including business and law. There are currently 7 million recent social science graduates – this is more than twice the number of engineering graduates (2.8 million), sciences (1.6 million), humanities (2 million), health (2.3 million), education (2.1 million) and agriculture (0.4 million). Russia has more graduates in engineering, manufacturing and construction than any other nation, ahead of the US, Iran and Japan. The United States, Japan, United Kingdom and Bangladesh have the lead on the humanities.

8. Many of the world’s youth form a “lost generation”

Out of the 1.1 billion youth in the world aged 15-24, 300 million young people – nearly 30% of this cohort – have not completed secondary school. Out of these, 70 million – nearly 6% of all 15-24 year-olds – have not completed primary school.

9. But today’s youth are still better off than older generations

In all countries, today’s youth are doing better than earlier cohorts in terms of education but the progress between generations is not uniform. North America has made the most progress in investing in the youth of today compared to the youth of 50 years ago in absolute terms, but proportionally, Sub-Saharan Africa, the Middle East and Asia have also made tremendous progress.

10. Human capital optimization and GDP are correlated

In the short term, rich countries may have more capacity to invest in human capital but, in the long term, countries get richer by investing in human capital. All countries should be trying to create this virtuous cycle. If they did, global GDP could rise by 20%, even by conservative estimates. The theory behind this is simple: people are the greatest asset available to any nation. They alone embody the know-how and skills that lead to growth and prosperity and hence the single greatest investment any country can make to lay the foundation for its progress.

Author: Saadia Zahidi is a Senior Director, Head of Gender Parity and Human Capital and Constituents at the World Economic Forum.

Image: After studying Dutch, a group of young Spanish nurses moved to the Netherlands to take up work. . Picture taken June 5, 2013. REUTERS/Marcelo del Pozo