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Pandemic Threatens Human Capital Gains of the Past Decade

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The COVID-19 pandemic threatens hard-won gains in health and education over the past decade, especially in the poorest countries, a new World Bank Group analysis finds. Investments in human capital—the knowledge, skills, and health that people accumulate over their lives—are key to unlocking a child’s potential and to improving economic growth in every country.

The World Bank Group’s 2020 Human Capital Index includes health and education data for 174 countries – covering 98 percent of the world’s population – up to March 2020, providing a pre-pandemic baseline on the health and education of children. The analysis shows that pre-pandemic, most countries had made steady progress in building human capital of children, with the biggest strides made in low-income countries. Despite this progress, and even before the effects of the pandemic, a child born in a typical country could expect to achieve just 56 percent of their potential human capital, relative to a benchmark of complete education and full health.

Twelve Pacific Island Countries were included in this Index. Based on the report, a child born today in the Pacific Islands will on average reach 48 percent of his or her full potential, significantly lower than the global benchmark, with the lowest scoring countries being Solomon Islands and Marshall Islands at 42 percent, and Papua New Guinea at 43 percent. Stronger performing countries in the Pacific include Fiji, Kiribati, Samoa, Tonga and Palau.

“The pandemic puts at risk the decade’s progress in building human capital, including the improvements in health, survival rates, school enrollment, and reduced stunting. The economic impact of the pandemic has been particularly deep for women and for the most disadvantaged families, leaving many vulnerable to food insecurity and poverty,” said World Bank Group President David Malpass. “Protecting and investing in people is vital as countries work to lay the foundation for sustainable, inclusive recoveries and future growth.”

Due to the pandemic’s impact, most children – more than 1 billion – have been out of school and could lose out, on average, half a year of schooling, adjusted for learning, translating into considerable monetary losses. Data also shows significant disruptions to essential health services for women and children, with many children missing out on crucial vaccinations.

In the Pacific, many countries are responding to multiple crises; with response and recovery efforts continuing following April’s Tropical Cyclone Harold that caused widespread destruction in Solomon Islands, Vanuatu, Fiji and Tonga. The region had also been recovering from one of the worst measles outbreaks recorded, affecting American Samoa, Fiji, Kiribati, Tonga and, most significantly, Samoa – where the outbreak claimed 83 lives, the majority of who were young children.

Furthermore, the ongoing and increased threats of natural disasters and impacts climate change, with the added burden of some of the world’s highest rates of non-communicable diseases and overall low health capacity continue to threaten the lives and livelihoods of Pacific Islanders, that has been further exacerbated by the impacts of the global COVID-19 pandemic.

The 2020 Human Capital Index also presents a decade-long view of the evolution of human capital outcomes from 2010 through 2020, finding improvements across all regions, where data are available, and across all income levels. These were largely due to improvements in health, reflected in better child and adult survival rates and reduced stunting, as well as an increase in school enrollment. This progress is now at risk due to the global pandemic.

The analysis finds that human capital outcomes for girls are on average higher than for boys. However, this has not translated into comparable opportunities to use human capital in the labor market: on average, employment rates are 20 percentage points lower for women than for men, with a wider gap in many countries and regions. Moreover, the pandemic is exacerbating risks of gender-based violence, child marriage and adolescent pregnancy, all of which further reduce opportunities for learning and empowerment for women and girls.

Today, hard-won human capital gains in many countries are at risk. But countries can do more than just work to recover the lost progress. To protect and extend earlier human capital gains, countries need to expand health service coverage and quality among marginalized communities, boost learning outcomes together with school enrollments, and support vulnerable families with social protection measures adapted to the scale of the COVID-19 crisis.

The World Bank Group is working closely with Pacific countries to develop long-term solutions to protect and invest in people during and after the pandemic:

Ambitious, evidence-driven policy measures in health, education, and social protection can recover lost ground and pave the way for today’s children to surpass the human capital achievements and quality of life of the generations that preceded them. Fully realizing the creative promise embodied in each child has never been more important.

The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. We are supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs. We will be deploying up to $160 billion in financial support over 15 months to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans.

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Post-COVID-19, regaining citizen’s trust should be a priority for governments

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The COVID-19 crisis has demonstrated governments’ ability to respond to a major global crisis with extraordinary flexibility, innovation and determination. However, emerging evidence suggests that much more could have been done in advance to bolster resilience and many actions may have undermined trust and transparency between governments and their citizens, according to a new OECD report.

Government at a Glance 2021 says that one of the biggest lessons of the pandemic is that governments will need to respond to future crises at speed and scale while safeguarding trust and transparency. “Looking forward, we must focus simultaneously on promoting the economic recovery and avoiding democratic decline” said OECD Director of Public Governance Elsa Pilichowski. “Reinforcing democracy should be one of our highest priorities.”

 Countries have introduced thousands of emergency regulations, often on a fast track. Some alleviation of standards is inevitable in an emergency, but must be limited in scope and time to avoid damaging citizen perceptions of the competence, openness, transparency, and fairness of government.

 Governments should step up their efforts in three areas to boost trust and transparency and reinforce democracy:

 Tackling misinformation is key. Even with a boost in trust in government sparked by the pandemic in 2020, on average only 51% of people in OECD countries for which data is available trusted their government. There is a risk that some people and groups may be dissociating themselves from traditional democratic processes.

 It is crucial to enhance representation and participation in a fair and transparent manner. Governments must seek to promote inclusion and diversity, support the representation of young people, women and other under-represented groups in public life and policy consultation. Fine-tuning consultation and engagement practices could improve transparency and trust in public institutions, says the report. Governments must also level the playing field in lobbying. Less than half of countries have transparency requirements covering most of the actors that regularly engage in lobbying.

 Strengthening governance must be prioritised to tackle global challenges while harnessing the potential of new technologies. In 2018, only half of OECD countries had a specific government institution tasked with identifying novel, unforeseen or complex crises. To be fit for the future, and secure the foundations of democracy, governments must be ready to act at speed and scale while safeguarding trust and transparency.

 Governments must also learn to spend better, according to Government at a Glance 2021. OECD countries are providing large amounts of support to citizens and businesses during this crisis: measures ongoing or announced as of March 2021 represented, roughly, 16.4% of GDP in additional spending or foregone revenues, and up to 10.5% of GDP via other means. Governments will need to review public spending to increase efficiency, ensure that spending priorities match people’s needs, and improve the quality of public services.

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Sweden: Invest in skills and the digital economy to bolster the recovery from COVID-19

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Sweden’s economy is on the road to recovery from the shock of the COVID-19 crisis, yet risks remain. Moving ahead with a labour reform to facilitate adaptation in a fast-changing economic environment, and investing in digital skills and infrastructure, will be crucial to revive employment and build a sustainable recovery, according to the latest OECD Economic Survey of Sweden.

The pandemic triggered a severe recession in Sweden, despite mild distancing measures and swift government action to protect people and businesses. GDP fell by less than in many other European economies in 2020, thanks to reinforced short-time work, compensation to firms for lost revenue and measures to prop up the financial system, but unemployment still rose sharply. Solid public finances provided room for further stimulus in 2021 to buttress the recovery.

 The Survey recommends maintaining targeted support to people and firms until the pandemic subsides, then focusing on strengthening vocational training and skills and increasing investment in areas like high-speed internet and low-carbon transport. Addressing regional inequality, which is low but rising, should also be a priority as the recovery takes hold.

 The Survey shows that Sweden has been among the most resilient OECD countries in the face of a historic shock. Yet, like other economies, it faces challenges from demographic changes and the shift to green, digital economies. Investments in education and training, and labour reforms along the lines negotiated by the social partners, will support job creation and strengthen economic resilience. Building on Sweden’s leadership in digital innovation and diffusion will also be key for driving productivity.

 After a 3% contraction in 2020, interrupting several years of growth, the Survey projects a rebound in activity with 3.9% growth in 2021 and 3.4% in 2022 as industrial production resumes and exports recover. The recovery in world trade is bolstering the Swedish economy, however the country remains vulnerable to potential disruptions in global value chains.  

The pandemic has aggravated a mismatch in Sweden’s job market, with unfilled vacancies for highly qualified workers coinciding with high unemployment for low-skilled workers and immigrants. The public employment service needs strengthening to provide better support to jobseekers, including immigrants and women, and labour policies should strike the right balance between supporting businesses and workers and supporting transitions away from declining businesses towards growing sectors.

A rising share of youths and older people in the population, especially in remote areas, is affecting the finances of local governments, which provide the bulk of welfare services. Strengthening local government budgets and ensuring equal welfare provision across the country will require providing tax income to poorer regions more efficiently and raising the economic growth potential across regions through investments in innovation. Improving coordination between government entities and reinforcing the role of universities in local economic networks would help achieve that aim.

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Fewer women than men will regain work during COVID-19 recovery

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Generations of progress stands to be lost on women and girls' empowerment during the COVID-19 pandemic. Photo: ILO

Fewer women will regain jobs lost to the COVID-19 pandemic during the recovery period, than men, according to a new study released on Monday by the UN’s labour agency.  

In Building Forward Fairer: Women’s rights to work and at work at the core of the COVID-19 recovery, the International Labour Organization (ILO) highlights that between 2019 and 2020, women’s employment declined by 4.2 per cent globally, representing 54 million jobs, while men suffered a three per cent decline, or 60 million jobs. 

This means that there will be 13 million fewer women in employment this year compared to 2019, but the number of men in work will likely recover to levels seen two years ago. 

This means that only 43 per cent of the world’s working-age women will be employed in 2021, compared to 69 per cent of their male counterparts. 

The ILO paper suggests that women have seen disproportionate job and income losses because they are over-represented in the sectors hit hardest by lockdowns, such as accommodation, food services and manufacturing. 

Regional differences 

Not all regions have been affected in the same way. For example, the study revealed that women’s employment was hit hardest in the Americas, falling by more than nine per cent.  

This was followed by the Arab States at just over four per cent, then Asia-Pacific at 3.8 per cent, Europe at 2.5 per cent and Central Asia at 1.9 per cent. 

In Africa, men’s employment dropped by just 0.1 per cent between 2019 and 2020, while women’s employment decreased by 1.9 per cent. 

Mitigation efforts 

Throughout the pandemic, women faired considerably better in countries that took measures to prevent them from losing their jobs and allowed them to get back into the workforce as early as possible. 

In Chile and Colombia, for example, wage subsidies were applied to new hires, with higher subsidy rates for women.  

And Colombia and Senegal were among those nations which created or strengthened support for women entrepreneurs.  

Meanwhile, in Mexico and Kenya quotas were established to guarantee that women benefited from public employment programmes. 

Building forward 

To address these imbalances, gender-responsive strategies must be at the core of recovery efforts, says the agency. 

It is essential to invest in the care economy because the health, social work and education sectors are important job generators, especially for women, according to ILO. 

Moreover, care leave policies and flexible working arrangements can also encourage a more even division of work at home between women and men. 

The current gender gap can also be tackled by working towards universal access to comprehensive, adequate and sustainable social protection. 

Promoting equal pay for work of equal value is also a potentially decisive and important step. 

Domestic violence and work-related gender-based violence and harassment has worsened during the pandemic – further undermining women’s ability to be in the workforce – and the report highlights the need to eliminate the scourge immediately. 

Promoting women’s participation in decision-making bodies, and more effective social dialogue, would also make a major difference, said ILO. 

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