World Economic Forums Human Capital Index

by Cecilia Magnergård on November 29, 2013

One of the global challenges to economic growth is the expansion of talent, of human capital on a national as well as international level.

Human capital is known to be the stock of knowledge, proficiencies, personal and social attributes embodied in the ability to perform work to produce economic value. In economist and corporate finance we define human capital as the value that the employees of a business provide through their active application of expertise, skills and know-how.

clip_image002The World Economic Forum (WEF), being a driving force for world development, emphasise n their research the importance of human capital, and incessantly delivers acumens as to how human capital investment impels national and international economies.

American University School of International Service’s International Relations Online has recently provided a comparison of nations performance within the pillars WEF uses to measure human capital. The Human Capital Index seeks to raise awareness of the factors that contribute to the development of a healthy and productive labour force, and the four pillars that the WEF uses in their measure human capital include Health & Wellness, Enabling environment, Workforce & Employment and Education.

Health & wellness

Health and wellness include indicators relating to a populations mental and physical well-being ranging from child- to adulthood. This pillar is, in turn, broken down into three parts; survival, health and well-being. The measure of survival is calculated by using infant mortality per 1000 live births, survival gender gap and the overall life expectancy. The measure of health is calculated by using unhealthy life years in per cent of life expectancy, stunting and wasting in per cent of children under 5 years of age, obesity as a per cent of adults with a body mass index (BMI) over 30, deaths under 60 years of age from non-communicable diseases, business impact of communicable diseases and business impact of non-communicable diseases.

The measure of well-being is lastly calculated by using depression as a per cent of the respondents as well as stress as a per cent of the respondents. In the country ranking within the pillar of health and wellness Switzerland and Sweden ranks as number 1 and 2 where, on the other hand, Trinidad and Tobago and Yemen ranks the last at place number 121 and 122.

Enabling environment

Enabling environment captures the indicators of infrastructure, legal framework and other similar factors that empower returns on human capital. The enabling environment pillar is divided into three parts comprising collaboration, infrastructure and social mobility. The measure of collaboration is calculated by using business and university R&D collaboration and state of cluster development.

The measure of infrastructure is calculated using internet users per 100 people, mobile users per 100 people and quality of domestic transport, whereas social mobility is calculated simply by counting social mobility. In the country ranking within the segment of enabling environment Switzerland and Singapore ranks as number 1 and 2 whereas Algeria and Mauritania rank last at position 121 and 122.

Workforce & Employment

The workforce and employment pillar is delineated to quantify the knowledge, training, experience and talent in a country’s working-age population. The workforce and employment foundation is divided into three parts; talent, participation and training. The measure of talent is calculated by using ease of finding skilled employees, country capacity to retain talent, pay related to productivity, index of economic complexity, median age of working population, scientific and technical journal articles per 1000 people, country capacity to attract talent and capacity for innovation.

The measure of participation is calculated by using the per cent of labour force participation rate aged over 65, the per cent of labour force participation in working age (15-65), unemployment rate in per cent, economic participation gender gap and youth unemployment rate in per cent. Conclusively, the measure of training rate is calculated using training services and staff training. In accordance with the previous pillar, Switzerland and Singapore top the country ranking followed by Mauritania and Guinea at last place.

Education

clip_image004The education sector contains information on both the present workforce and the future workforce and encompasses indicators relating to qualitative as well as quantitative aspects of education across primary-, secondary- and thirty level of schooling. In accordance with the pillars above, education is also divided into three parts; attainment, access and quality. The measure of attainment is calculated by using the percentage of primary, secondary and tertiary education attainment for the population aged over 25 years.

The measure of access is calculated by using the primary-, secondary- and tertiary enrolment rate in per cent and the education gender gap. Lastly, the measure of quality is calculated by using the quality of primary schools, management schools, math and science education and the overall quality of the education system. In opposition to the three pillars above, Switzerland do not top the country ranking for the education segment. Here, Finland and Canada takes lead whereas Burkina Faso and Yemen rank the lowest.

The country specific overall results of the human capital index are determined by an un-weighted average of the four above outlined segment scores, and the following countries rank the highest.

1. Switzerland

clip_image006In the overall country ranking within world economic forum’s human capital index Switzerland places as number one with a primary position in health and wellness, enabling environment and workforce and employment. The only spot in which Switzerland do not take lead is within the pillar that captures education where it places as number four.

2. Finland

clip_image008Unsurprisingly, Finland resides place number two in the overall country ranking holding first position within the segment of education. Thereafter, Finland ranks as number three both in enabling environment and in workforce and employment, and, a bit unexpectedly, only nine concerning indicators of health and wellness.

3. Singapore

clip_image010Singapore is one of the two non-European countries, and the only Asian, which positions itself top ten in the human capital index country ranking. Overall, Singapore ranks as number three, and marks number two and three in workforce and employment and education respectively. Observing the enabling environment pillar Singapore holds position number five whereas in the division of health and wellness the country falls to number thirteen.

4. Netherlands

clip_image012Netherlands bears forth place in the overall country ranking with a fourth position in health and wellness as well as in enabling environment. Within the divisions of education and workforce and employment the Netherlands sets as number seven and eight respectively.

5. Sweden

clip_image014In the overall country ranking Sweden stands as country number five holding second position in the segment that captures indicators of health and wellness. Furthermore, Sweden ranks as number six in workforce and employment, number ten in enabling environment, and falls down to position fourteen considering education.

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