Collapse & Recovery: How COVID-19 Eroded Human Capital and What to Do About It

In Latin America and the Caribbean, youth employment declined sharply during the pandemic, a new global report says

Pandemic Damaged Cognitive Development and Lifetime Earnings of Children and Youth, Jeopardizing the Well-being of Generations and Growth of Economies

WASHINGTON, Feb. 16, 2023 – The COVID-19 pandemic caused a massive collapse in human capital at critical moments in the life cycle, derailing development for millions of children and young people in low- and middle-income countries, according to the first analysis of global data on young people who were under the age of 25 at the onset of the pandemic.

The new World Bank report, Collapse and Recovery: How COVID-19 Eroded Human Capital and What to Do About It, analyzes global data on the pandemic’s impacts on young people at key developmental stages: early childhood (0-5 years), school age (6-14 years), and youth (15-24 years). It found that today’s students could lose up to 10% of their future earnings due to COVID-19-induced education shocks. And the cognitive deficit in today’s toddlers could translate into a 25% decline in earnings when these children are adults.

Human capital—the knowledge, skills, and health that people accumulate over their lives—is key to unlocking a child’s potential and enabling countries to achieve a resilient recovery and strong future growth. Yet the pandemic shuttered schools and places of employment and disrupted other key services that protect and promote human capital, such as maternal and child health care and job training.

In Latin America and the Caribbean (LAC), data shows a sharp decline inyouth employment. These declines were particularly pronounced at the beginning of the pandemic in Brazil and Mexico, with a 6 percent and a 7 percent decline, but by the end of 2021 youth employment had recovered fully and even exceeded pre-pandemic levels in both countries.

For school-age children, the study found that between March 2020 and March 2022, an average child lost about 1 year of in-person schooling due to school closures; in LAC, children lost 1.7 years due to particularly long school closures. Furthermore, the youngest children experienced COVID-related service disruptions while still *in utero, *as their mothers prepared for their births. For example, relative to the levels observed in 2019, births taking place in a health care institution fell by more than 25 percent in Haiti. Regionally, the pandemic worsened an ongoing decline in vaccine coverage rates for children, especially among the poor.

*”School closures, associated lockdowns, and disruptions in services during the course of the pandemic threatened to wipe out decades of progress in building human capital. Targeted policies to reverse the losses in foundational learning, health, and skills are critical to avoid jeopardizing the development of multiple generations”, *said World Bank Group President David Malpass. “Countries need to chart a new course for greater human capital investments to help citizens become more resilient to the overlapping threats of health shocks, conflict, slow growth and climate change and also lay a solid foundation for faster, more inclusive growth.”

Due to the pandemic, preschool-age children in multiple countries have lost more than 34% of learning in early language and literacy and more than 29% of learning in math, compared to pre-pandemic cohorts. In many countries, even after schools had reopened, preschool enrollment had not recovered by the end of 2021; it was down by more than 10 percentage points in multiple countries. Children also faced greater food insecurity during the pandemic.

Among school-age children, on average, for every 30 days of school closures, students lost about 32 days of learning. This is because school closures and ineffective remote learning measures caused students to miss out on learning and also forget what they had already learned. In low- and middle-income countries, nearly 1 billion children missed out on at least a full year of in-person schooling due to school closures, and more than 700 million missed one and a half years. As a result, learning poverty—already 57% before the pandemic—has increased further in these countries, with an estimated 70% of 10-year-olds unable to understand a basic written text.

COVID-19 dealt a heavy blow to youth employment. Forty million people who would have had a job in the absence of the pandemic did not have one at the end of 2021, worsening youth unemployment trends. Youth earnings contracted by 15% in 2020 and 12% in 2021. New entrants with lower education will have 13% less earnings during their first decade in the labor market. Evidence from Brazil, Ethiopia, Mexico, Pakistan, South Africa, and Vietnam showed that 25% of all young people were neither in education, employment nor training in 2021.

The window for addressing setbacks in human capital accumulation is small, as gaps in early stages of the life cycle tend to widen over time. Without urgent action, the pandemic also threatens to deepen poverty and inequality. This report highlights evidence-based policy options to recover from current losses and forestall future ones. It also provides an approach to help countries prioritize among different crisis recovery policy options.

In the short term, for young children, countries should support targeted campaigns for vaccinations and nutritional supplementation; increase access to pre-primary education; and expand coverage of cash transfers for vulnerable families. For school-age children, governments need to keep schools open and increase instructional time; assess learning and match instruction to students’ learning levels; and streamline the curriculum to focus on foundational learning. For youth, support for adapted training, job intermediation, entrepreneurship programs, and new workforce-oriented initiatives are crucial.

In the longer term, countries need to build agile, resilient, and adaptive health, education, and social protection systems that can better prepare for and respond to current and future shocks.

“*People under the age of 25 today—that is, those most affected by the erosion of human capital—will make up more than 90% of the prime-age workforce in 2050,” *said **Norbert Schady, Chief Economist for Human Development at the World Bank, **and a lead author of the report. “Reversing the pandemic’s impact on them and investing in their future should be a top priority for governments. Otherwise, these cohorts will represent not just a lost generation but rather multiple lost generations.”

The World Bank Group is working closely with governments to protect and invest in people as they cope with and recover from the pandemic. The World Bank’s pandemic response financing reached $72.8 billion between April 2020 and June 2022, including $37.6 billion and $35.1 billion in IBRD and IDA commitments, respectively. During the same period, its financing in human development reached $47.5 billion, supporting 300 projects in low- and middle-income countries.

Source: World Bank