Society tells us that our potential for greatness is measured by how hard we work. Irrespective of material advantages, the qualities of discipline, determination, and perseverance are considered the “great equalizers.” But is this really true? Is hard work all it takes to be successful? The short answer is a resounding no. In fact, our potential often has little to do with how hard we work, and more to do with our exposure to inequality. As I explore the causes and consequences of global inequality, one acronym keeps coming across my desk: HCI+, or in long-form, the Human Capital Index Plus. What is this index? Why should we care about human capital? And why should a 16-year-old Burundian, for example, care about an HCI+ score of 0.39?
Human capital refers to the attributes and capabilities that make humans productive. Some economists understand human capital as an individual’s intrinsic economic value (think Adam Smith and one’s “acquired and useful abilities” as a fundamental source of wealth). For the purpose of poverty alleviation, human capital is more than just a tool to spur economic growth, but the key to lifting millions out of extreme poverty. Meaningful investments in education, health, and employment can drastically increase one’s accumulation of human capital and income, helping to transform communities.
Cue the Human Capital Index Plus (HCI+), which measures a country’s access to human capital. The HCI+ integrates three vital components of human development—education, health, and employment—into a single measurement, where each element is weighted by its contribution to human capital for a potential score of 325. More than simply reflect a country’s investment in human capital, it helps to estimate the likelihood that children will grow into healthy, educated, and productive adults.
Let’s think back to our 16-year-old Burundian friend. They reside in a country where 74.2% of the population live on less than $3.00 a day (meaning over 9 million Burundians live in extreme poverty). Compounding the extent of poverty is a lack of human capital, particularly in education. In Burundi, less than 50% of the population have completed primary education and only 28% have completed secondary education. Burundi’s HCI+ score of 0.39 means that our friend will be 39% as productive when they grow up as they could be if they had access to complete health and education.
Education alone accounts for 60% of the income gains among the bottom 20% of the population. Without stable access to quality education, the potential for a poverty trap—a self-reinforcing cycle that pushes families deeper into poverty—is increasingly likely. Families with scarce resources often can’t afford to send their children to school, resulting in a youth population with very low human capital. Poor education leaves many without stable employment, and many are forced into low-wage, low-skilled, and often vulnerable work. When individuals in this situation cannot risk scarce resources on human capital accumulation, they remain low-income, and continue the cycle of poverty with each generation.
For those in poverty, human capital is often the only form of capital in their possession. Investing in education is a necessary first step to improve human capital and to stop poverty traps before they take root in communities. Our Burundian friend is not necessarily destined for a life that is only 39% productive. Their likelihood of escaping extreme and acute poverty increases with each additional year of schooling and as their human capital improves. Sustained improvements to Burundian education would not only massively improve the country’s HCI+ score, but it would also help ensure that the hard work of our 16-year-old Burundian friend is actually translated into sustainable improvements.
Source : World Bank
