Restoring Human Capital: How Families, Places and Jobs Shape Opportunity

The report argues that human capital is built not only in schools and clinics but in homes, neighborhoods and workplaces, where daily environments shape health, learning and skills. To reverse stalled progress in many developing countries, governments must adopt coordinated, place-based policies that strengthen families, communities and job opportunities together.

Human capital, the health, knowledge and skills people build over their lives, is often described as the engine of economic growth. But a new World Bank report, Building Human Capital Where It Matters: Homes, Neighborhoods, and Workplaces, warns that this engine is losing momentum in many developing countries. Drawing on research from institutions such as the Young Lives Study at the University of Oxford, the International Labour Organization and the OECD, the report shows that progress in learning, health and job-related skills has stalled or even reversed in parts of the world.

School enrollment has increased dramatically over the past two decades. Yet children in several low- and middle-income countries are learning less than they were 15 years ago. In some regions, average adult height, a basic measure of long-term health and nutrition, has declined. At the same time, millions of workers remain stuck in low-paying jobs with little chance to build new skills. The message is clear: expanding access to schools and clinics is not enough.

The Home: Where It All Begins

The report argues that human capital does not start in the classroom. It begins at home. Before children enter school, major gaps in vocabulary, numeracy, and health are already visible. Studies from countries such as Ethiopia, India, Peru and Viet Nam show that children of less educated parents start behind and often stay behind throughout adolescence.

Two key factors explain this. The first is resources. Families with more income can afford nutritious food, books and safer living conditions. The second is care. Children who are read to, spoken with and supported emotionally develop stronger cognitive and social skills. Parenting programs that teach caregivers simple ways to stimulate learning at home have shown lasting benefits.

The report also highlights troubling trends. Violent discipline remains common in many countries, even though many parents say they do not believe it is necessary. And in places where parents migrate for work and leave children behind, higher income does not always compensate for the loss of daily care and emotional support. In short, money helps, but nurturing relationships matters just as much.

Neighborhoods Shape Opportunity

Even strong families cannot overcome every obstacle if the surrounding environment is weak. The report shows that neighborhoods play a powerful role in shaping life outcomes. Children from equally poor families can have very different futures depending on where they grow up.

In Brazil, for example, children raised in better-off neighborhoods complete more years of schooling and earn more as adults than similar children raised in poorer areas. Why? Because neighborhoods influence access to quality schools, health services, clean water and safe streets. Exposure to pollution, crime or poor sanitation can directly harm health and learning.

This means human capital policies must go beyond individual services. Improving struggling communities requires coordinated investments in infrastructure, education, healthcare and safety. Place matters more than policy makers often assume.

Workplaces: The Missing Piece

Education does not end when a person gets a job. In fact, a large share of human capital is built at work. Through experience, training and problem-solving, workers continue to learn and refine their skills.

But in many developing countries, most jobs offer limited growth opportunities. About 70 percent of workers are in small-scale agriculture, informal self-employment or microenterprises. These jobs often lack structured training and exposure to new technologies. As a result, the financial rewards from gaining experience are much lower than in richer countries.

The report calls for stronger apprenticeship programs, better job matching services and incentives for firms to provide training. Supporting business growth and making it easier for women to work, for example, by expanding childcare, can also unlock new opportunities for skill development.

A Smarter Way Forward

The central idea of the report is simple but powerful: human capital is built in homes, neighborhoods and workplaces. Policies that focus only on schools or hospitals miss much of the picture.

Addressing malnutrition, for instance, requires better nutrition and care at home, clean water and sanitation in the community, and stable employment that allows families to afford healthy food. Similarly, improving learning outcomes demands not just better teachers, but supportive home environments and safe communities.

The report urges governments to coordinate efforts across sectors and to track progress more carefully. Tools such as social registries and integrated service systems can help connect families to the support they need.

At a time when countries face economic uncertainty, rapid technological change and climate pressures, investing in people is more important than ever. The message is clear: to build human capital, policymakers must focus on the everyday settings where life unfolds. Only then can countries restore progress and unlock the full potential of their people.