Ignore at India’s peril

Building human capital
Last Updated 19 November 2018, 18:53 IST

The controversy caused by the government’s rejection of the Human Capital Index (HCI), published for the first time by the World Bank, has diverted attention from what needs to be done to get citizens ready for the workplace of tomorrow. In one line, India’s HCI tells us that children born in 2018 will only be 44% as productive when they grow up, compared to what they could be given complete education and full health. In Singapore, it’s 88%. Our neighbours Sri Lanka, Nepal, Bangladesh and Myanmar sit better than us.

This hurts, particularly under a government that is known for its mega schemes and glamorous investments in physical infrastructure like the bullet train when the issues with everyday trains are not being fixed. But physical capital cannot make up for the loss of human capital. And that’s the central issue that India needs to debate. That India’s children will be only 44% as productive by the time they are 18 is bad enough. The double whammy is that the world they are entering is changing; the workplace is very different from the way it has been.

Forget advances around the globe. Consider an Indian company like Reliance Jio, which says it wants to redefine the standards of customer service with video bots. The bot listens to queries, answers appropriately and progressively improves its responses and the quality of interaction as it goes along, using artificial intelligence (AI).

The “Video Call Bot as a Service” claims to democratise AI technologies. Jio also wants most of its customer service calls answered by this platform, reducing the need for humans and reserving them only for the most high-end of its customers. So, while the customer base can zoom, the number of people required to manage that base will shrink. This captures the challenge societies face from the new workplace with revolutionary technology and very few humans.

Added to that are the requirements of a gig economy that will have people moving in and out of jobs and companies over increasingly shorter periods of time. In that sense, the new wave of innovation is exciting but also carries huge risks associated with working conditions that are not too good in many parts of the world and will probably become a race to the bottom for workers as technology replaces people. In this emerging scenario, how can nations and societies prepare the young of today for the jobs of tomorrow? Human capital that is only 44% as productive because of gaps in health and education is certainly a recipe for disaster.

Indeed, the World Bank has presented the HCI as part of a larger “World Development Report, 2019” which is titled, “The changing nature of work”. As the book the Rise of the Robots by Martin Ford has pointed out, this era will be defined by “a fundamental shift in the relationship between workers and machines”. The book noted: “That shift will ultimately challenge one of our most basic assumptions about technology: that machines are tools that increase the productivity of workers, and the line between capability of labour and capital is blurring as never before.”

These are tectonic shifts. They bring to the fore three types of skills that are increasingly important in labour markets today: advanced cognitive skills such as complex problem-solving, socio-behavioural skills such as teamwork, and skill combinations that are predictive of adaptability such as reasoning and self-efficacy. Building these skills requires strong human capital foundations and lifelong learning, the World Development Report, 2018 points out. This requires strong foundations in health and education, and HCI again assumes significance in this context.

Governments must act to fix this with investments in public health, public education and quality control of private providers. The HCI calls out that investments alone won’t do; they must drive outcomes. As the World Bank has noted in a general observation not limited to India, “Most governments commit a significant share of their budgets to education and health, but public services are often too low quality to generate human capital. Sometimes, those services fail only the poor. Sometimes, they fail everyone—and the rich simply opt out of the public system.” This is the classic picture in India at least, and merits some reflection and course correction.

India’s public healthcare system is weak and underfunded; private healthcare is booming and providing world-class services but is increasingly out of reach of a majority of the population. The education system reaches out far and wide on paper but outcomes are poor. The rich schools, many of them on public land, are doing very well but their gates are closed to a majority as schooling becomes a status symbol — the costlier the better. In the public system, students in secondary grade often cannot read or write at primary grade levels.

India’s HCI is low because the indicator uses data that corrects for quality. For example, it counts not only years in school but years adjusted against test scores. Children in India can expect to complete 10.2 years of pre-primary, primary and secondary school by age 18. However, when years of schooling are adjusted for quality of learning, this is only equivalent to 5.8 years: a learning gap of 4.4 years, according to the HCI data. Similarly, the HCI includes the healthy growth of children in terms of non-stunted growth. The report says 38 out of 100 children are stunted, and so at risk of cognitive and physical limitations that can last a lifetime.

The World Bank’s HCI draws attention to the need for public investments in health, education and skills to drive outcomes. Unlike roads and bridges, the physical capital, building human capital is a slower and more laborious process. But that is the only way to attain sustainable and inclusive growth in a world that is changing fast. We need physical capital and human capital but the former without the latter will mean little or nothing for modern day economies.

(Rattanani is a journalist and Pattnaik is a former Central banker. Both are faculty members at SPJIMR)

(The Billion Press)

(Published 19 November 2018, 18:45 IST)

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