China’s investment in ‘human capital’ jumps as US falls behind

Global study ranks countries according to the number of years an average citizen can be expected to work at peak productivity

PUBLISHED : Wednesday, 26 September, 2018, 1:02am
UPDATED : Wednesday, 26 September, 2018, 12:46pm

China’s investment in health care and education has gone up significantly since 1990, a new study ranking the “human capital” of nations around the world has found.

The United States, meanwhile, has seen a sharp decline in its ranking since then, according to the report published in medical journal The Lancet on Monday.

Commissioned by the World Bank, it is the first scientific study ranking countries by their levels of human capital – defined as the number of years a person can be expected to work at peak productivity.

China now ranks 44th in the world, moving up 25 places, while the US fell 20 places to 26th.

In 1990, an average Chinese aged between 20 and 60 was expected to contribute seven years of work at peak productivity. By 2016, that figure had risen to 20 years, the study found.

In comparison, it was 22 years for an average American in 1990, and by 2016 the number had edged up to 23 years.

“Clearly, China is on an upwards trajectory, while the US, without more strategic investments, especially in education, risks falling behind even further,” said Christopher Murray, director of the Institute for Health Metrics and Evaluation at the University of Washington and the lead author of the study.

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Researchers measured life expectancy, learning, functional health and years of schooling, using thousands of census and household survey records from 195 countries and regions.

The more investment in education and health care a nation made, the higher its score.

Murray said that the decline of human capital in the United States was “one of the biggest surprises in our study. Our findings show the association between investments in education and health and improved human capital and GDP – which policymakers here in the US ignore at their own peril”.

Nordic countries Finland, Iceland and Denmark took the top three spots in that order, followed by the Netherlands.

In Asia, Taiwan came in at fifth place, followed by South Korea at number six.

India, with a population nearly as large as China’s, remained almost unchanged after three decades at 158th. India’s score was seven years, while Niger had the lowest score of two years.

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“As the world economy grows increasingly dependent on digital technology, from agriculture to manufacturing to the service industry, human capital grows increasingly important for stimulating local and national economies,” Murray said.

The researchers said they based their findings on the assumption that not all labour is equal, and that the quality of workers could be improved by investing in them.

Jim Yong Kim, president of the World Bank, said the study made an important contribution to the measurement of human capital across countries and over time.

“Measuring and ranking countries by their level of human capital is critical to focus governments’ attention on investing in their own people,” Kim said.

Economic cold war between China and US inevitable

But the results could add to tensions between China and the US, according to Hu Xingdou, an economist based in Beijing.

“The US regards China as a threat to its dominance. This will strengthen that impression,” he said.

The study’s findings about China reflect studies and observations inside the country. For example, they are in line with education ministry figures showing that nearly all children under the age of 15 go to school and that almost half of China’s high school students continue on to university.

Life expectancy in China has also increased from 67.9 years in 1981 to 76.5 years in 2016, as the country has invested more in the public health system, according to official data.

“But the gap between China and the US remains huge,” Hu said, referring to the new study.

He gave the example of China depending mostly on domestic labour, while the US attracted top talent from all over the world.

“On some fundamental science and cutting-edge technologies, China is still years or even decades behind,” he said. “We won’t be overtaking the US overnight.”