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The Global Economy is Failing 35% of the World’s Talent

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Rich and poor countries alike are missing huge opportunities when it comes to making the most of their populations’ economic potential, with only 65% on average of the world’s talent being optimized during all stages of the working life time, according to the World Economic Forum’s Human Capital Report 2016.

The purpose of the report is to help countries assess the outcomes of past and present policies and investments in education and skills and provide guidance on how to prepare the workforce for the future demands of the global economy. In addition to measuring the 130 countries that comprise the Report’s Human Capital Index, it also analyzes a mix of public and private data from online platforms such as Care.com, LinkedIn, Uber and Upwork to generate insights on skills gaps and the potential of the online gig economy.

“Today’s transition to the Fourth Industrial Revolution, combined with a crisis of governance, creates an urgent need for the world’s educators and employers to fundamentally rethink human capital through dialogue and partnerships. The adaptation of educational institutions, labour market policy and workplaces are crucial to growth, equality and social stability,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.

The Human Capital Index 2016

Across the Index, a total of 19 nations that have tapped 80% of their human capital potential or more. In addition to these 19 countries, 40 countries score between 70% and 80%. A further 38 countries score between 60% and 70%, while 28 countries score between 50% and 60%. Five countries in the Index remain below 50% in 2016.

At the top, Norway (2) and Switzerland (3) are nearly tied and gaining ground on Finland’s top position. All three are effectively utilizing about 85% of their full human capital potential. Japan (4) rises one rank in this year’s Index, with greater potential to be tapped by closing the gender gap. New Zealand (6), the other country in the top 10 from the East Asia and the Pacific region, rises three ranks since last year. Sweden (5) also rises one rank in this year’s Index, slightly outperforming its neighbour Denmark (7). The Netherlands (8) and Belgium (10) maintain their respective rankings while Canada (9) drops five ranks since last year.

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Taking a regional perspective, on average only one region—North America—passes the 80% threshold, even though the United States (24) lags its northern neighbour by a considerable margin. Two regions—Western Europe and Eastern Europe and Central Asia—score in the 70% to 80% range and three others—East Asia and the Pacific, Latin America and the Caribbean and the Middle East and North Africa—in the 60% to 70% range. Two regions—South Asia and Sub-Saharan Africa—have not yet crossed the 60% average threshold.

Western Europe’s three largest economies all fall in the top twenty of the index, led by Germany (11) followed by France (17) and the UK (19). The lower range in the region comprises Italy (34), Portugal (41), Greece (44) and Spain (45). In total, the 28 current member states of the European Union collectively achieve a group average score of 78.48, with 12 member states passing the 80% threshold. The remaining 16 member states all make use of 70% to 80% of their full human capital potential.

The Index covers 22 countries from Eastern Europe and Central Asia. With an overall average score of 75.02, the region ranks in third place globally, after North America and Western Europe. It includes several remarkable success stories with regard to successful human capital potential maximization, including Estonia (15) and Slovenia (16) which both score above the 80% threshold, and the Czech Republic (25), Ukraine (26), the Russian Federation (28), Kazakhstan (29) and Poland (30) all scoring within the top 30. Ukraine’s performance is particularly remarkable relative to its GDP per capita levels.

East Asia and the Pacific scores towards the middle of the range of Human Capital Index results, with an overall average score of 69.75. The best performing countries; Japan (4), Singapore (13), and the Republic of Korea (32) are global strongholds of human capital success, while countries such as Cambodia (100), Lao PDR (106) and Myanmar (109) trail the region despite a relatively solid performance relative to their income levels. China (71) scores near the regional and overall Index average with regard to its human capital performance.

The 24 countries from the Latin America and the Caribbean region score in the middle range of the Index, just behind the East Asia and the Pacific region, with an overall average score of 66.95. With the exception of Cuba (36) and Haiti (111), the gap between the best and worst performers in the region is much smaller than for any other region. Chile (51) and Argentina (56) share similar strengths and weaknesses, passing the 70% overall human capital maximization threshold. By contrast, Brazil (83) is lagging behind the regional average.

The Middle East and North Africa region comprises 15 countries that had enough data for coverage in the Index. Of these, only one—Israel (23)—makes it into the top 30 of the Index. The Gulf states, Bahrain (46), Qatar (66), and the United Arab Emirates (69), outperform the rest of the region in terms of making the best use of their human capital potential. The North African nations of Morocco (98), Tunisia (101) and Algeria (117) make up the lower end of the region’s rankings, ahead of Yemen (129) and Mauritania (130).

The Index covers six countries from the South Asia region: Sri Lanka (50), Bhutan (91), Bangladesh (104), India (105), Nepal (108) and Pakistan (118). The overall average score for the region is 59.92, behind the Middle East and North Africa and ahead of Sub-Saharan Africa, and all but the top two are yet to reach the 60% threshold with regard to optimizing their human capital potential.

In Sub-Saharan Africa, a cluster of countries, including Mauritius (76), Ghana (84), South Africa (88) and Zambia (90) score in the 60–70% range — placing them ahead of the Middle East and North Africa regional average and on a par with the lower half of the Latin American and East Asia and the Pacific regions. Other economies, however, such as Ethiopia (119) and Nigeria (127) face a range of human capital challenges, including low survival rates for basic education. With an overall average score of 55.44, the Sub-Saharan African region is the lowest-ranked region in the Index. In total, the Index covers 26 countries from the region.

Human capital investment and planning can make a difference to a nation’s human capital endowment regardless of where it falls on the global income scale. Creating a virtuous cycle of this nature should be the aim of all countries. That said, there remains a clear correlation between an economy’s income level and its capacity to develop and deploy human capital

Results by Age Group

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One further finding of the Index is the unequal development and deployment of human capital across the age group spectrum. Of the estimated 7.4 billion people that comprised the world’s population at the start of 2016, 26% were aged under 15, a further 16% fell within the 15-24 age group, while 41% fell within the prime working age group of 25-54 year-olds. At the upper end of the world population pyramid, 9% of the world’s people fall within the 55-64 age group and 8% are aged 65 and over. Of these, the Index finds that while the world has developed on average 81% of the human capital potential of under-15s, only 66% of the human capital potential of the next age group up, 15-24, has been similarly harnessed. This group is largely being failed when it comes to preparing them with the relevant skills for a successful education-to-employment transition. Those in the 25-54 group are similarly only making use of on average 63% of their human capital potential while the older two age groups are likewise under-utilized, with an average of 67% utilization in the 55-64 age group dropping to 54% for 65 and overs.

Using Big Data to Understand Skills

“The new platforms and technologies of the Fourth Industrial Revolution present unprecedented amounts of data with which to complement official statistics, although for now these insights represent particular membership bases, composed of digitally-connected subsets of the populations of selected economies. Through a unique partnership, the Report leverages LinkedIn’s Economic Graph to generate further insights – fully recognizing that unlike international data, these insights have limitations. For example, they provide an overview of a relatively high-skilled, digitally connected subset of the populations of selected economies:

Employers and employees need to start thinking about skill bundles, not job titles: While employees and employers often rely on academic degrees and previous job titles to determine fitness for a new role, a key finding in the report reveals that job titles can mean different things in different industries and geographies. The higher the skills overlap between two industries, the easier it is to transfer between them. For example, there is little skills overlap between LinkedIn members with the job title “data analyst” in the market research and oil & energy industries. By contrast, data analysts in the financial services and consumer retail industries exhibit very similar skills.

Re-skilling may be easier than we thought: Taking a focus on skills rather than jobs may broaden the talent pool for employers – and create new opportunities for workers. For example, only about 84,000 of LinkedIn’s 430 million members have the job titles “Data Scientist” or “Data Analyst”, a highly in-demand profession for which many employers report shortages. However analysis of the skills reveals an additional 9.7 million members that possess one or more of the primary or sub-skills for Data Scientist and Data Analyst, among which 600,000 have at least five of these skills. While this clearly does not make them data scientists, data such as this provides a wider range of options for developing new talent through a relatively modest amount of supplemental training.

Countries need to maximize learning at school and at work: Combining the Human Capital Index findings on skills diversity acquired through education with the LinkedIn findings on skills diversity acquired in the workforce highlights major differences across national boundaries. For example, Norway, Belgium, Spain, Switzerland and Portugal perform well on both skills diversity in both education and the workforce, while Australia and Romania perform relatively poorly on both areas. In the United States and Canada, the education system enables people to enter work with a relatively diverse set of skills, but these same people have less of an opportunity to diversify their skills in the workforce. In other countries, including France, Brazil and Colombia, opportunities to diversify skills by ‘learning on the job’ appear to be stronger than during the education system, where learning appears more concentrated around a narrower set of skills.

Understanding data can help countries manage brain drain and gain: Whether driven by declining opportunities within a country, or growing demand within others, in-demand workers go where there is opportunity. Mapping the skills flows between economies offers an unprecedented opportunity for governments, businesses and employees alike to understand skills hotspots in near real-time. Economic Graph data analysed by LinkedIn for the Report shows how countries are gaining or losing in-demand skills. For example, Australia, Chile and the United Arab Emirates are all leading their regions in gaining technology-related skills while countries such Greece—but also Canada and Finland—are losing them.

“Creating economic opportunity for every member of the global workforce is a defining issue of our time,” said Jeff Weiner, Chief Executive Officer, LinkedIn. “We’ve charted the supply, demand, and flow of talent as we’ve mapped the Economic Graph, and we’ve uncovered clear opportunities for governments and employers to capitalize on the potential of their workforce at much higher rates. We’re committed to providing educators, employers, policymakers, and workers with insights, products and services that narrow skills gaps and improve economies.”

Mapping the “Gig Economy”

While the potential and promise of new technologies for enhancing education and lifelong learning has already been well documented, there remains ambiguity around the role of platform technologies when it comes to accelerating and enhancing opportunities for the workforce. Using unique data from LinkedIn as well as public and private data from Uber, Care.com and Upwork, the Report sheds light on the so-called “gig economy” by revealing the diversity and range of platform-enabled work.

The Report finds that although digital formats for connecting people to work are new, the act of ad-hoc work or self-employment is not. With a global average of 13% own-account workers, the world working-age population is already deeply engaged in analogue formats of “gig work”. The Report also finds that while own-account work may be growing, particularly own-account work enabled by digital platforms, digital formats remain a very small portion of own-account work in many economies. For example, of all of LinkedIn’s nearly half a billion members, less than 3% are freelancers. In addition, digital platforms are growing in both the developed, emerging and developing world, where the number of own-account and informal workers are traditionally higher. The highest numbers of freelancers are in the Media, Entertainment & Information, Professional Services and Consumer Industries and in economies such as Italy, Argentina and Colombia. While some of these freelancers are using technology, most are still relying on traditional analogue ways of building relationships and accessing markets to generate returns for their services.

Moreover, digital work platforms can span a range of both high-skilled, high-wage work and low-skilled, low-wage work. Less evident but equally illuminating is the range of skills and wages within some of these platforms. For example, Care.com data shows the pay premium placed on what is seen as more skilled work, such as tutoring, as opposed to traditional care roles. In addition, platforms such as Upwork are seeing their fastest growth in highly-developed, high-wage, specialist skills building on an already strong base in high-skilled work. The age and gender profiles of platform economy workers are highly diverse and do not always follow patterns in the traditional economy. Finally, to the extent that digital talent platforms make large segments of the labour market more easily visible and measurable, often for the first time, they also provide an unprecedented opportunity for smart regulation.

The Report concludes that instead of passive “techno-optimism” or “techo-pessimism”, it is important for policymakers and companies to begin dialogue and action to leverage opportunities and mitigate risks. “The new technologies of the Fourth Industrial Revolution are creating disruptions to work but they are also providing the tools to rapidly enhance human capital. How business and governments react today will determine which future we end up in. The Forum’s analysis seeks to provide the insights and space for leaders to understand the changes underway and adapt quickly,” said Saadia Zahidi, co-author of the Report and Head of Education, Gender and Work Initiatives.

The Human Capital Index ranks 130 countries on how well they are developing and deploying their human capital, focusing on education, skills and employment. The generational lens used in constructing the index sheds light on age-specific patterns of labour market exclusion and untapped human capital potential. In total, the Human Capital Index covers 46 indicators, using both publicly available data and a limited set of qualitative survey data from the World Economic Forum’s Executive Opinion Survey. Details of the methodology can be found on the Report website.

The Human Capital Index is among the set of knowledge tools provided by the World Economic Forum as part of its System Initiative on Education, Gender and Work. The System Initiative produces analysis and insights focused on forecasting the future of work and skills across countries and industry sectors as well as best practices from businesses that are taking the lead in addressing skills gaps and gender gaps. The System Initiative also creates dialogues and public-private collaboration on education, gender and work in several regions of the world and within industry groups.

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‘Concerted efforts’ needed to meet 2030 Global Goals in Asia-Pacific region

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Action to reverse the depletion and degradation of the environment across Asia and the Pacific is a top priority if the region is to stay on course to meet the Sustainable Development Goals (SDGs), according to a new United Nations report launched online, for the first time, on Tuesday.

In the Asia and the Pacific SDG Progress Report 2020, the UN Economic and Social Commission for Asia and the Pacific (ESCAP) draws attention to the region’s poor performance on most of the measurable environmental targets of the 2030 Agenda for Sustainable Development, to determine where additional effort is needed and where momentum for future progress is building.

“Our analysis finds that the Asia-Pacific region has struggled the most with two Goals: advancing responsible consumption and production, and climate action”, observed UN Under-Secretary-General and ESCAP Executive Secretary Armida Salsiah Alisjahbana.

The flagship report sounded the alarm for the Asia-Pacific region to “urgently” foster sustainable resource usages, improve waste management, increase natural disaster resilience and enact policies to adapt to climate change impacts.

For example, the report reveals that the region emits half of the world’s total greenhouse gases which add to carbon emissions – a number which has doubled since 2000. Around 35 per cent of countries there continue to lose areas of forest, and the share of renewable energy has dropped to 16 per cent, one of the lowest rates globally.

A ray of light

On a positive note, many countries are showing remarkable progress on SDG 4 by improving the quality of education, as well as on SDG 7 – providing access to affordable and clean energy – making these two Goals well within reach.

And according to the report, the region is also making good progress on economic targets, although the data for report pre-dates the arrival of the coronavirus pandemic, which has caused a global economic slowdown.

It points out that in 2017, the real gross domestic product per capita growth in the region was more than double the world average, while at least 18 countries in the region were experiencing less income inequality.

Yet, to grow more sustainably and equitably, the current economic progress of the region must be aligned with human well-being and a healthy environment. 

The report reveals that progress has been far too slow in areas such as SDG 5, gender equality, and SDG 11, building sustainable cities and communities. 

Moreover, ESCAP warned that without concerted and extra efforts from all concerned, the region remains unlikely to meet any of the 17 SDGs by 2030.
“The region is not even moving in the right direction”, underscored Ms. Alisjahbana. 

Asia-Pacific subregions

Progress has also been uneven across the five subregions of Central, East, South, Southeast and Western Asia.

Singled out as areas where progress has been mixed, were SDG 10 to reduce inequalities; SDG 12 for responsible consumption and production; and SDG 16, which highlights the need for peace, justice and strong institutions.
However, steady improvement in electricity was a positive example of collective progress across the five subregions, particularly in rural areas. 

Gathering data 

While SDG data for each indicator has substantially increased in Asia and the Pacific -– from 25 per cent in 2017 to 42 per cent in 2020 -– it is still lacking in relation to half of the Global Goals indicators, especially those with slow progress. ESCAP flags that this highlights the urgent need to strengthen the policy-data nexus in the region. 

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Mongolia Poverty Update: Report

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The National Statistics Office of Mongolia (NSO) and the World Bank today launched a new joint poverty report, Mongolia Poverty Update, which draws on the 2018 Household Socio-Economic Survey (HSES).

According to the report, the pace of poverty reduction slowed down despite robust macroeconomic growth, indicating that Mongolia is struggling to translate the benefits of macroeconomic growth into improvements in household welfare, especially for the poor.

The report also highlights the uneven progress in poverty reduction between urban and rural areas during 2016-2018. Overall, these were good years for most rural herders as a result of higher livestock product prices. By contrast, urban residents in the poorest group were most negatively affected. Out of all the consumption classes, only the poorest urban households experienced negative real income growth (-1.0 percent, YoY) during this period due to sluggish wage and business income growth. Higher food price inflation also disproportionately affected urban poor and vulnerable households which spend a majority of income on food and purchase food items out of their own pockets. As a result, the rural poverty rate fell by 4.1 percentage points while the urban poverty rate was little changed from 2016 to 2018.

“This poverty report provides us with the latest updates of poverty status and profile of people in Mongolia and highlights the challenges and opportunities to tackle poverty reduction going forward,” said Ms. A. Ariunzaya, Chairperson of the National Statistics Office. “We strongly hope that the analysis and findings of this report shall serve as reference material not only for policy- and decision-makers, but also for researchers and a diverse range of audiences interested and working in poverty and socio-economic studies.”

The updated poverty profile shows that poverty is most prevalent among low-skilled wage workers, the unemployed and economically inactive individuals, large families and children. Important challenges are also seen in service delivery, particularly with regard to proper sanitation and reliable heating sources.

Mongolia’s education attainment level, particularly among youth, is the highest in the East Asia region, but for women, having a university diploma does not necessarily mean that they can obtain a better-paying job. The gender gap in labor force participation has barely improved over the past decade. Furthermore, despite a great improvement of herders’ welfare level, they remain highly vulnerable to livestock price shocks and harsh winters, which could have a profound impact on their well-being without adequate safety nets.

Mongolia is one of the youngest countries in the region in terms of the demographic structure. To harness the upcoming demographic dividend opportunity for inclusive growth and poverty reduction, the report suggests that the country will need to create a sufficient number of job opportunities in a wide variety of productive sectors in order to absorb these new workers.

“Monitoring and analyzing quality and timely data from the household surveys will help to track progress to date as well as shed light on where support and policy interventions are most needed,” said Andrei Mikhnev, World Bank Country Manager for Mongolia. “To accelerate poverty reduction and promote shared and sustainable prosperity in Mongolia, investment in children and youth to improve their skillsets to meet labor market needs is crucial, as is promotion of fair and equitable labor force participation for women.”

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Wastewater A Resource that Can Pay Dividends for People, the Environment, and Economies

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The world’s wastewater – 80 percent of which is released into the environment without adequate treatment – is a valuable resource from which clean water, energy, nutrients, and other resources can be recovered, according to a World Bank report released today to mark World Water Day.

The report, Wastewater: From Waste to Resource, calls for smarter wastewater management, including reuse and resource recovery, and looks at wastewater projects around the world which have paid dividends for people, the environment, and economies in the short and long-term.

Efficiently investing in wastewater and other sanitation infrastructure is crucial to achieve public health benefits, improve the environment, and enhance quality of life. Safely managed water, sanitation and hygiene (WASH) services are an essential part of preventing disease and protecting human health during infectious disease outbreaks, including the current COVID-19 pandemic.

At a time when 36 percent of the world’s population lives in water-scarce regions, wastewater treatment for reuse is part of the solution to water scarcity and pollution problems,” said Jennifer Sara, Global Director, World Bank Water Global Practice. “Once treated, it can be used to replace freshwater for irrigation, industrial processes, or recreational purposes. It can also be used to maintain the environmental flow and by-products from its treatment can generate energy and nutrients.”

Wastewater treatment offers a double value proposition, the report says. In addition to environmental and health benefits, wastewater treatment can bring economic benefits through reuse in different sectors. Its by-products, such as nutrients and biogas, can be used for agriculture and energy generation. And additional revenues generated from this process can help cover water utilities’ operational and maintenance costs.

In this sense, wastewater should not be considered a ‘waste’ anymore, but a resource. This is at the core of a circular economy, an economic system aimed at minimizing waste and making the most of resources. As cities continue to grow, future urban development requires approaches that minimize resource consumption and focus on resource recovery, following principles of the so-called circular economy,” said Diego Juan Rodriguez, the report’s author and a Senior Water Resources Management Specialist at the World Bank. “One of the key advantages of adopting circular economy principles in wastewater management is that resource recovery and reuse could transform sanitation from a costly service to one that is self-sustaining and adds value to the economy. This will help countries bridge the funding gap in sanitation to achieve the Sustainable Development Goals.”

The report casts a light on wastewater management experiences in the Latin America and Caribbean (LAC) region, which are already reaping benefits. For example:

By using treated wastewater instead of groundwater, the San Luis Potosi power plant in Mexico cut costs by 33 percent, leading to US$18 million in savings over six years for the power utility. For the water utility, the additional revenue from selling treated wastewater helped cover operations and maintenance costs.

A wastewater treatment plant in Cusco, Peru, saves US$230,000 a year in transporting biosolids (nutrient-rich organic materials resulting from the treatment of domestic sewage in a wastewater treatment facility) and landfill fees due to an agreement with the local compost producer. The compost produced with the plant’s biosolids is then used as part of the water management project to preserve the Piuray Lake.

The Brazil-based CAESB water and wastewater utility’s use of biosolids for corn production led to higher-than-average grain yields and was 21 percent more efficient than mineral fertilizers.

The operator of the La Farfana wastewater treatment plant in Santiago, Chile, after investing US$2.7 million to retrofit the plant, was able to sell biogas, accounting for an annual net profit of US$1 million for the business.

The report recommends incorporating wastewater interventions as part of river basin planning, and pairing them with policies, institutions and regulations that foster this paradigm shift. Wastewater treatment plants need to be gradually repurposed as water resource recovery facilities, while also exploring and supporting innovative financing and sustainable business models that leverage the potential revenue streams of resource recovery from wastewater.

Only 30 to 40 percent of the LAC region’s collected wastewater is treated, resulting in negative impacts on both human health and the environment.

The report shows what’s possible when governments at all levels apply circular economy principles to their wastewater challenges. For example, in the city of La Paz, Bolivia, the national and municipal governments, as well as the water utility, with support from the World Bank and other development partners, are working together to incorporate circular economy principles in the design of the La Paz wastewater treatment plant. The goal is to address water pollution and public health issues caused by low levels of wastewater treatment and unregulated use in agriculture.

We are happy to see that the necessary transformation is well under way – wastewater policies in many countries already include reuse and resource recovery, and we hope more countries will follow suit. Countries need to scale up action,” said Rodriguez.

The report was funded in part by the Global Water Security & Sanitation Partnership (GWSP) and the Public-Private Infrastructure Advisory Facility (PPIAF).

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