WASHINGTON, February 12, 2026-Current deficits in health, education, and skill development at work are costing low- and middle-income countries 51% of their future labor earnings, according to a new World Bank Group report released today. Over the past 15 years, even as incomes have risen and poverty has declined, two-thirds of low- and middle-income countries have experienced declines in nutrition, learning, or workforce skills. Reversing these deficits will require a new approach to human capital investments.
The report, Building Human Capital Where It Matters: Homes, Neighborhoods and Workplaces, finds that 86 out of the 129 low- and middle-income countries experienced declines in either nutrition, learning, or workforce skill development between 2010 and 2025. The report calls for broader investments in homes, neighborhoods, and workplaces - real-world settings that shape human capital.
A newly expanded global index, the Human Capital Index Plus (HCI+), launched alongside this report, provides new country- and regional-level data tracking human capital accumulation from birth to age 65 and a metric for how gaps translate into forgone future labor earnings. For the first time, it captures how human capital gains - or losses - in the labor market affects lifetime productivity.
"The prosperity of low- and middle-income countries depends on their ability to build and protect human capital. Right now, we see that many countries are struggling to improve nutrition, learning, and skills of their current and future workforce, which raises concerns about labor productivity and the types of jobs their economies can sustain in the future," said Mamta Murthi, World Bank Group Vice President for People. "Broadening investments in human capital to include the home, the neighborhood, and the workplace can activate these settings that shape people's lives and increase overall human capital accumulation."
According to the report:
- Homes: Skill gaps linked to family circumstances emerge before age five - before most children in low- and middle-income countries start school - and remain virtually constant throughout adolescence. Income alone does not offset poor care environments, which lower test scores and increase depression. The report found high rates of violent discipline at home, suggesting significant room for improvements in care at home.
- Neighborhoods: New evidence suggests that children who grow up in wealthier neighborhoods earn twice as much as those from poorer ones, even when their parents share the same income and education levels. Neighborhoods shape opportunities beyond access to schools and clinics. Exposure to pollution, crime, or poor infrastructure directly affects health, learning, and skills development.
- Workplaces: In low- and middle-income countries, self-employed workers earn only half as much for each additional year of experience as wage workers. Yet 70% of workers in these countries are in small-scale agriculture, low-quality self-employment, or micro firms - jobs that generally provide limited formal training and on-the-job learning. Labor force participation gaps further limit skill accumulation - around 50% of women are out of the labor force, and around 20% of youth are neither studying nor working.
According to HCI+ data:
- The HCI+ shows that countries with similar income levels can show dramatically different scores on the Human Capital Index, suggesting resources alone are not holding back human capital accumulation.
- High performers for their income levels include Jamaica, Kenya, Kyrgyz Republic, and Vietnam.
- The HCI+ also shows clear gender gaps: when computed for the female population only, the score is 20 points lower than for the male population, with the gap largely explained by differences in labor market participation and quality of jobs.
"The evidence suggests that policies that consider the drivers of human capital in each setting can improve nutrition, learning, and skill development at work. By enabling more people to build skills throughout life, countries can spark a 'virtuous cycle' - where rising productivity leads to higher wages and greater incentives for families and communities to invest in the next generation," said Norbert Schady, World Bank Group Chief Economist for People.
The report recommends:
- Parenting and preschool programs that promote early learning and improve children's care environments.
- Targeting struggling neighborhoods, with a focus on increasing nutrition, learning, and on-the-job skill development through collaboration among all government departments, not just those focused on education and health.
- Reforming labor markets to expand apprenticeships, childcare, and on-the-job learning.
- Promoting policies that integrate public services within homes, neighborhoods, and workplaces, and an ambitious data agenda to track progress.
worldbank.org/humancapitalreport
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