Human Development Index

The Human Development Index (HDI) is a summary measure of average achievement in key
dimensions of human development: a long and healthy life, being knowledgeable and have a
decent standard of living. The HDI is the geometric mean of normalized indices for each of the
three dimensions.
The health dimension is assessed by life expectancy at birth, the education dimension is
measured by mean of years of schooling for adults aged 25 years and more and expected years
of schooling for children of school entering age. The standard of living dimension is measured
by gross national income per capita. The HDI uses the logarithm of income, to reflect the
diminishing importance of income with increasing GNI. The scores for the three HDI dimension
indices are then aggregated into a composite index using geometric mean. Refer to Technical
notes for more details.
The HDI can be used to question national policy choices, asking how two countries with the
same level of GNI per capita can end up with different human development outcomes. These
contrasts can stimulate debate about government policy priorities.
The HDI simplifies and captures only part of what human development entails. It does not
reflect on inequalities, poverty, human security, empowerment, etc. The HDRO provides other
composite indices as broader proxy on some of the key issues of human development,
inequality, gender disparity and poverty.
A fuller picture of a country's level of human development requires analysis of other indicators
and information presented in the HDR statistical annex.

What does this indicator tell us?

The HDI is a summary measure of human development.
How is it defined?
The HDI is a summary composite measure of a country's average achievements in three basic
aspects of human development: health, knowledge and standard of living. It is a measure of a
country's average achievements in three dimensions of human development:
 a long and healthy life, as measured by life expectancy at birth;
 knowledge, as measured by mean years of schooling and expected years of schooling;
and
 a decent standard of living, as measured by GNI per capita in PPP terms in US$.
The HDI sets a minimum and a maximum for each dimension, called "goalposts", then shows
where each country stands in relation to these goalposts. This is expressed as a value between
0 and 1. The higher a country's human development, the higher its HDI value.

What are the consequences and implications?

The HDI is used to capture the attention of policy-makers, the media and nongovernmental
organizations, and to change the focus from the usual economic statistics to human outcomes.
It was created to re-emphasize that people and their capabilities should be the ultimate criteria
for assessing the development of a country, not economic growth.
The HDI is also used to question national policy choices and to determine how two countries
with the same level of income per person can have widely different human development
outcomes. For example, two countries may have similar incomes per person, but have
drastically differing life expectancy and literacy levels, such that one of the countries has a
much higher HDI than the other. These contrasts stimulate debate on government policies
concerning health and education to determine why what can be achieved in one country is
beyond the reach of the other.
The HDI is also used to highlight differences within countries, between provinces or states, and
across genders, ethnicities and other socioeconomic groupings. Highlighting internal disparities
along these lines has raised the national debate in many countries.

How Is the HDI Measured?

The HDI is a summary measurement of basic achievement levels in human development. The
computed HDI of a country is an average of indexes of each of the life aspects that are
examined: knowledge and understanding, a long and healthy life, and an acceptable standard
of living. Each of the components is normalized to scale between 0 and 1, and then
the geometric mean of the three components is calculated.2
 The health aspect of the HDI is measured by the life expectancy, as calculated at the
time of birth, in each country, and normalized so that this component is equal to 0 when
life expectancy is 20 and equal to 1 when life expectancy is 85.3
 Education is measured on two levels: the mean years of schooling for residents of a
country, and the expected years of schooling that a child has at the average age for
starting school. These are each separately normalized so that both 15 mean years of
schooling and 18 years of expected schooling equal 1, and a simple mean of the two is
calculated.3
  The economic metric chosen to represent the standard of living is GNI per capita based
on purchasing power parity (PPP), a common metric used to reflect average income. The
standard of living is normalized so that it is equal to 1 when GNI per capita is $75,000
and equal to 0 when GNI per capita is $100.4

What Are the Indicators Used in the Human Development Index (HDI)?
The Human Development Index (HDI) measures each country’s social and economic
development by focusing on the following four factors: mean years of schooling, expected years
of schooling, life expectancy at birth, and gross national income (GNI) per capita.

Is a High HDI Good or Bad?

The higher the HDI, the better. A high HDI essentially means that the country in question offers
a generally high standard of living, with decent healthcare, education, and opportunities to earn
money.

Which Countries Have the Highest HDI?

In the latest HDI ranking, from 2022, Switzerland finished first with an HDI value of 0.962.
Norway, Iceland, Hong Kong, and Australia rounded out the top five. Meanwhile, the United
States was ranked just 21st with an HDI value of 0.921.

Limitations of the HDI

There are criticisms of the HDI. It is a simplification and an admittedly limited evaluation of
human development. The HDI does not specifically reflect quality-of-life factors, such as
empowerment movements or overall feelings of security. In recognition of these facts, the U.N.
Human Development Report Office (HDRO) provides additional composite indices to evaluate
other life aspects, including inequality issues such as gender disparity or racial inequality.6
Examination and evaluation of a country’s HDI are best done in concert with examining these
and other factors, such as the country’s rate of economic growth, expansion of employment
opportunities, and the success of initiatives undertaken to improve the overall quality of life
within a country.

Several economists say the HDI is essentially redundant as a result of the high correlations

among the HDI, its components, and simpler measures of income per capita. GNI per capita (or
even GDP per capita) correlates very highly with both the overall HDI and the other two
components in both values and rankings. Given these strong and consistent correlations, they
say, it would be simpler and clearer to just compare per-capita GNI across countries than to
spend time and resources collecting data for the additional components that provide little or no
additional information for the overall index.

Indeed, a fundamental principle of the composite index design is to not include multiple
additional components that are strongly correlated in a way that suggests that they might
reflect the same underlying phenomenon. This is to prevent inefficient double counting and
avoid introducing additional sources of potential errors in the data.
In the case of the HDI, the inclusion of the components is problematic because it is easily
plausible that higher average incomes directly lead to both more investment in formal
education and better health and longevity. Moreover, definitions and measurement of years of
schooling and life expectancy can vary widely from country to country.

The Bottom Line

The United Nations' Human Development Index (HDI) seeks to quantify a country's level of
prosperity based on both economic and non-economic factors. Non-economic factors include
life expectancy, and educational attainment. Economic factors are measured by gross national
income (GNI) per-capita. While the U.N. argues that the HDI improves our understanding of
relative well-being around the world, economists have criticized the index as overly simplistic
and flawed in its methodology.
whTSA