There are four guiding concepts underlying the revised Index, forming the basis of how indicators were chosen, how the data is treated and the scale used. For a description of how these concepts are captured by the choice of indicators and construction techniques used in the creation of the Index, please refer to the sections below.
Outcomes vs. inputs
The Global Human Capital Index evaluates countries based on outcomes rather than inputs or means. Our aim is to provide a snapshot of a country’s current human capital, current investment in building future human capital and current outcomes in the labour market.
Distance to the ideal
The Index holds all countries to the same standard, measuring countries’ “distance to the ideal” state, or gap in human capital optimization. To arrive at this score the Index examines each indicator in relation to a meaningful maximum value that represents “the ideal.” Every indicator’s score is a function of the country’s “distance from the ideal” for the specific dimension measured. By establishing an absolute measure of countries’ performance, the Global Human Capital Index allows for both intra- and inter-country comparisons year-to-year.
Human capital as a dynamic concept
By “human capital” we mean not individuals themselves but the knowledge and skills they possess that enable them to create value in the global economic system.2 This requires investment both on the side of individuals and by public and private stakeholders across people’s lifetimes. The Index thus treats human capital as a dynamic rather than fixed concept. It recognizes that human capital is not defined solely through formal education and skilling but can be enhanced over time—growing through use and depreciating through lack of use.
Whenever possible and relevant, the Index aims to take a generational view and disaggregates indicators according to five distinct age groups, highlighting issues that are unique or particularly crucial for the human capital development of each cohort. This view across age groups allows for more targeted policy interventions and human resource planning.3