Rethinking the future: Human capital in times of pandemic

The Latin America region has been the new epicenter of the COVID-19 pandemic, with alarmingly steep spikes in number of cases and high mortality rates. The impact on healthcare, education and social protection systems as well as labor markets in the region has been exacerbated due to pre-existing inequalities  and an underprepared health sector. As a result, COVID-19 has catalyzed into the worst recession the region has ever encountered, eroding advancements in human capital made over the last decades.

Remedying this dire situation needs to start now by investing to protect and nurture human capital. The release of the 2020 Human Capital Index (HCI) is timely as it helps us understand the trajectories of human capital across countries, internalize what is at stake and build momentum for its preservation and accumulation in light of the COVID-19 pandemic.

Human Capital progress and challenges during the last decade

During the last decade, the Latin America and Caribbean region (LAC) experienced improvements in terms of human capital as well as reductions in inequality . In LAC, the Human Capital Index improved by about 5% between 2010 and 2020. What contributed most to these changes were improvements in student learning, declines in stunting and increased enrollment in upper secondary education.

However, these changes are concentrated in few countries that have shown larger advances in human capital outcomes than others. Thanks to progressive reforms of the education system during the early 2000s, Ecuador and Peru experienced substantial improvements in their PISA test scores over the last decade. Similarly, both Paraguay and Peru saw a steep decline in the share of children stunted (from 17.5% to 5.6% and 23.3 % to 12.2%, respectively), helped by promising interventions such as conditional cash transfer (CCT) programs to mothers. 

Despite these positive developments, severe shortcomings continue to plague the region, jeopardizing many childrens’ future. Although there have been some improvements in education outcomes, the region is still struggling with high dropout rates and low and flattening learning outcomes.  Moreover, even though most countries in LAC have experienced a dramatic decrease in infant mortality since the mid-1950s, epidemics such as cholera (Haiti) and zika (Brazil) have had a negative impact. In Haiti, for example, 25 children out of 1,000 do not survive the age of 5. While stunting is slowly defeated in the region, obesity is becoming a growing problem, leading to an increased risk of non-communicable diseases. These education and health risks will hinder children from reaching their full human capital potential. Furthermore, informality and poor social safety net coverage in the region leaves many children without protection from income shocks, which in turn can translate to shocks to human capital.

Globally, LAC is the region with the largest income inequalities.  There are substantial disparities across socioeconomic, gender and geographic groups within countries. This means that a child belonging to a more vulnerable group has far worse human capital outcomes than a child belonging to the top quintile of the income distribution.

How is COVID-19 changing the landscape?

COVID-19 arrived in LAC in February 2020 and since then the number of cases has increased exponentially. Beyond its direct human health impacts, the pandemic will have long-lasting implications by worsening the gains made to human capital outcomes in the past decades . In LAC, these impacts are multifold:   

1. Due to school-closures, over 170 million children in the region are out of school. Coupled with an insufficiency in remote learning resources, this can drastically raise learning poverty. Colombia, for instance, is expected to experience a 6 to 10 p.p. increase in learning poverty. In addition, school closures are predicted to spur the dropout rates in the region.
2. The pandemic will also result in large reductions in the use of health care services. Ecuador, for example, has already experienced 12.5 million foregone health care visits and a 11 percent coverage reduction of Early Childhood Development Centers.
3. Food security and quality will be indirectly impacted by lower household incomes, as a result reducing the quantity and the quality of consumed food as households switch to poorer diets. Up to 14 million people are at risk of deteriorating nutrition intake in LAC.
4. Finally, more people risk falling into poverty due to low social protection coverage, which will have negative impacts on human capital investments.

Actions governments must take to reduce the impact of the pandemic

In the wake of the COVID-19 pandemic, government action should focus on the urgent need to protect gains in human capital achieved over the last several decades . In the short- and medium-term, options include:

• Supporting long-term distance-learning strategies.
• Development of early-warning systems to prevent school dropouts.
• Continued pandemic response for rapid identification, protection, treatment and recovery of patients with COVID-19.
• Investments in telemedicine.
• Expansion of safety nets, providing liquidity support to households and improving payment systems.

And as we address immediate conditions, government policies and interventions need to keep the eye on the long-term too:  Expanding social registries and moving towards universal social protection, building strong resilient public health systems, delivering quality universal health care at all levels, investing in early childhood education and stimulation, and lastly, improving employability, productivity and better working conditions.  These are the foundations to enable LAC to come out of the pandemic stronger.