How PH fares in the Human Capital Index

The Human Capital Index (HCI) is the latest indicator that has been formulated (by the World Bank) to help countries achieve inclusive and sustainable growth. But we already have a Human Development Index (HDI), so why the need for an HCI?

The simplest way I can put it is that the HDI measures the average achievement of a country (or its regions/provinces) in key areas of human development—a long and healthy life, being knowledgeable, and having a decent standard of living. For example, in 2018, our HDI is 0.699 (compare this with Norway’s highest 0.953, and with Niger’s lowest 0.354). We ranked 113th out of 189 countries, which are categorized into Very High, High, Medium (that’s us) and Low Human Development.

By the way, in terms of income, we are classified as a Lower Middle Income Country.

Got it? Now what does the HCI measure? The WB explains that the index, which is between 0 and 1 like the HDI, takes the value of 1 only if a child born today can expect to achieve full health (defined as no stunting and survival up to at least age 60) and complete her education potential (defined as 14 years of high-quality school by age 18).

Therefore, a country’s score is its distance to the frontier of complete education and full health. An HCI of 0.70 means that the future earnings potential of children born today is 30 percent below what they could have achieved with complete education and full health.

What data are needed to construct the index? First, the under-5 survival rate, which answers the question: Will kids born today survive to school age?

Given that, the question is then asked: How much school will they complete and how much will they truly learn?  For that, the data we need are the expected years of school by age 18, and the harmonized student test scores, which will together give us the quality-adjusted years of expected schooling.

And finally, the questions: How much health will kids leaving school have? Will they be ready for further learning and/or work? The proxies that will supply the answers are the not-stunted prevalence and the adult survival rate.

So, how does the Philippines fare with respect to the above questions?

1. Between 1990 and 2016, the probability that a Filipino newborn would survive to age 5 improved from 94.2 percent to 97.3 percent. This is a better score than the world average (95.9 percent), and better than that of lower middle income countries (94.9 percent). But (sob!), it is lower than the average of East Asia and the Pacific (98.4 percent).

2. The Expected Years of School in the Philippines is 12.8. That is higher than the average for lower middle income countries (10.4), higher even than upper middle income countries (11.7 percent), and higher than the East Asia and Pacific countries. Pretty good, yes?

3. In terms of the Harmonized Test Scores, however, which are used as an indicator of the quality of schooling, the Philippines has a problem. The Philippines scores 409 (on a TIMSS equivalent scale score). The good news is that we perform better than the other lower middle income countries (363). The bad news is that our students perform well below the East Asia average (451).

4. Why we score so poorly may be largely influenced by an indicator of our nutritional status: the not stunted prevalence. It has been shown that stunting is associated with an underdeveloped brain, and children over the age of 2 who are stunted are unlikely to regain their lost growth potential. Stunting reduces per capita GDP by 45 percent!

And this is the really terrible news, Reader: Since 2005, our not-stunted levels have remained at 67 percent, i.e., one in three children are stunted. This is lower than the lower middle income group (68 percent), lower than the world (78 percent), and much, much lower than East Asia (88 percent). Red Flag.

5. Our final health indicator, the adult survival rate, is also disappointing. The percentage of 15-year-olds surviving to age 60 in the Philippines is 80 percent, compared to lower middle income countries at 82 percent, the world at 85 percent, and East Asia at 90 percent.

So what’s the bottom line? Our HCI is 0.55, which means, the future productivity of Filipino children born today will reach just over half of their maximum potential. That is the state of our human capital.

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