Three Human Capital Gaps Holding Back Jobs in Europe and Central Asia
If countries in Europe and Central Asia (ECA) were to catch up to the human capital levels of the region’s more advanced economies, wages could rise on average by more than 30 percent.
Many countries in ECA already have relatively strong human capital foundations. Educational attainment is high, basic health outcomes are comparatively strong, and several economies rank among the best performers among emerging regions. Still, many of them still struggle to translate these advantages into stronger job outcomes. Employment growth has often lagged economic growth, productivity remains well below that of advanced economies, and about 30 percent of working-age adults are not working, either because they are unemployed or out of the labor force.
Looking at human capital across the full life cycle can help shed light on this puzzle. The recently introduced Human Capital Index Plus (HCI+) measures the human capital a child born today can expect to accumulate over their entire working life. Combining this information with other data on labor markets, skills, health, and evolving megatrends can reveal three gaps that are holding back the region’s human capital and its potential to generate more and better jobs.
Three human capital gaps in Europe and Central Asia, in three U’s
Unfinished foundations. Although many countries perform well on basic indicators, progress across the region has been uneven and, in some places, the foundational agenda remains incomplete, with gaps both across countries and within them.
Central Asia stands out, with average HCI+ scores in the subregion at around 182 out of 325, where differences of up to about 30 points on this index can be interpreted as one-to-one differences in expected lifetime earnings. This figure of 182 for Central Asia compares with about 257 for countries that were members of the European Union before the 2004 enlargement and 233 for all other countries in the region, placing Central Asian economies closer to the human capital levels of lower-income countries such as India, Nicaragua, and Rwanda than to those of many of their neighbors in ECA.
Similarly, within-country disparities are also large. National averages in the region often mask gaps linked to gender, geography, socioeconomic status, and ethnicity. For example, in Türkiye, closing gender-based gaps by investing in women’s human capital could raise average wages nationally by about 17 percent.
Underutilized human capital. Even where strong foundations exist, labor markets do not always make full use of the human capital people acquire. Low labor force participation limits opportunities to build skills through work. In addition, with nearly one in three jobs being informal, access to training and social protection are often out of reach for that segment of the population. Large gender gaps mean also that women accumulate less human capital through work and that their skills are more likely to depreciate over time. As a result, while many countries perform well on overall human capital, performance weakens once on-the-job learning is factored in, displaying serious regional challenges when it comes to using the available human capital.
Unpreparedness for the future. New pressures are reshaping labor markets and societies. Rapid aging in some contexts and youth bulges in others, declining fertility, and emigration, make it increasingly important to raise labor force participation, extend working lives, and build skills later in life. Health, care, labor, and skilling systems must adapt to support longer and more productive working lives.
Technological change and the green transition are also transforming skill demands, making adaptable skills and lifelong learning increasingly important. The challenge is already visible: two-thirds of innovative firms in the region report skills shortages as a constraint to their business, the highest share of any region globally. While basic education is relatively strong, the relative quality of technical and higher education often lags, contributing to these challenges. Without stronger systems for lifelong learning and skill upgrading, the region risks falling behind as the nature of work continues to evolve.
Progress is possible and reforms are paying off
Closing these three gaps may seem difficult in the context of tight budgets and competing policy priorities. Yet, experience across the region shows that progress is possible. Between 2015 and 2025, seven of the ten most improved countries in the HCI+ globally were in ECA, driven by improvements in education systems and labor market outcomes.
For example, Serbia increased preschool enrollment from 52% in 2018 to 74% in 2024, while improving quality, Türkiye’s reforms in teacher training and assessments, plus digital investments contributed to the best results in Grade 4 science in TIMSS 2023 worldwide. Other inspiring examples include Romania’s digital skills program, Moldova’s agricultural innovation center, and expanded student financing in Uzbekistan.
Moving forward
Many countries in ECA already have solid human capital foundations. However, better job outcomes will require more than strong early-life health and schooling. The next frontier for the region lies in finishing the foundational agenda where national or sub-national gaps persist, ensuring that human capital is fully utilized through more dynamic and resilient labor markets, and preparing workers and institutions for demographic and technological change. Closing these three gaps can help raise productivity, expand opportunities, and create more and better jobs across the region.