The Future of Human Capital and Growth: Evidence from a New Global Cohort Model

The paper shows that global human capital is currently growing at close to 1 percent a year, but this growth will steadily slow and approach zero by late century unless education and health reforms continue. Sustained investment in human capital can significantly raise long-run GDP by around 45 percent under typical reforms and up to 60 percent under ambitious ones, though most near-term gains reflect reforms already made.

Produced by researchers from the World Bank’s Development Research Group and the Office of the Chief Economist for the Prosperity Vertical, this Policy Research Working Paper by Arthur Mendes and Steven Pennings introduces a major extension to the World Bank’s analytical toolkit for long-run growth analysis. The study presents the Long-Term Growth Model–Human Capital Extension (LTGM-HC), a cohort-based framework that tracks how education and health shape workforce productivity from 2025 to 2100 across 153 countries. The paper addresses a long-standing blind spot in development economics: while human capital is widely recognized as central to growth, policymakers have lacked credible estimates of how fast it is growing today, how it will evolve over time, and how different reform paths translate into future income gains.

From Static Indicators to Dynamic Cohorts

The paper’s conceptual shift is from static measures of human capital to a dynamic, demographic perspective. Instead of focusing only on the expected productivity of today’s children, the LTGM-HC models how successive generations replace one another in the workforce. Human capital growth arises as younger, better-educated, and healthier cohorts enter employment while older, less-educated cohorts retire. To implement this approach, the authors assemble a harmonized global dataset combining historical and projected years of schooling, education quality, and health outcomes for five-year age cohorts. Schooling attainment is drawn mainly from the Wittgenstein Centre’s projections, education quality from harmonized international test scores, and health from adult survival and childhood non-stunting rates, following the World Bank’s Human Capital Index methodology.

How Fast Human Capital Is Growing Today

Applying this framework to recent data yields a surprising result. Excluding temporary learning losses from COVID-19 school closures, global human capital of the workforce is currently growing at close to 1 percent per year. Even more striking, growth rates are remarkably similar across income groups. Low-income countries have achieved far larger increases in schooling years across generations, but these gains are largely offset by lower education quality. Once schooling is adjusted for learning outcomes, effective human capital gains converge across rich and poor countries. This finding contrasts sharply with estimates from the Penn World Tables, which often show volatile or even negative human capital growth. The paper demonstrates that these discrepancies stem mainly from how schooling trends are extrapolated, rather than from differences in underlying education data.

The Long Shadow of Past Reforms

Looking ahead, the projections underscore the importance, and the limits, of past investments. Even without new reforms, human capital growth remains positive for several decades, driven by what the authors call the “human capital dividend” of earlier improvements in education and health. However, this dividend steadily fades. In a no-reform scenario, global human capital growth slows by around 0.15 to 0.2 percentage points per decade and falls to near zero by about 2080, when today’s children begin to retire. At that point, demographic replacement no longer boosts productivity because all cohorts in the workforce have similar human capital levels. Under a “middle-of-the-road” scenario, where countries continue improving education and health at historically typical rates, the slowdown is much more gradual but still inevitable.

What Reforms Can Change, and What They Cannot

The paper explores alternative futures to clarify the stakes. Moderate reform scenarios, based on median improvements observed over the past decade, roughly halve the long-run deceleration in human capital growth. Optimistic scenarios, reflecting top-quartile rates of progress, can sustain growth at around half a percent per year well into the second half of the century. Feeding these paths into the World Bank’s standard long-term growth model reveals large macroeconomic implications. Over the next one to two decades, human capital accumulation is projected to add about half a percentage point to annual global GDP per capita growth. Cumulatively, the middle-of-the-road scenario raises global GDP per capita by roughly 45 percent by 2100 relative to a world with no human capital growth, while more ambitious reforms could push gains toward 60 percent.

Why Patience Matters for Policy

A central message of the paper is that much of the growth expected in the coming decades reflects reforms already undertaken. Around two-thirds of projected gains stem from past investments rather than future ones, highlighting both the payoff to sustained human capital policies and the danger of complacency. Growth today is buoyed by yesterday’s reforms; growth tomorrow depends on decisions made now. The authors conclude that investing in education and health remains one of the most reliable strategies for long-term development, but it requires patience. Human capital accumulates slowly through cohorts, and its full economic benefits only materialize decades later, once better-educated and healthier workers are matched with the physical capital needed to realize their productivity potential.