# What Is the Human Development Index (HDI)?

> **Definition**
>
> The Human Development Index (HDI) ranks countries based on key indicators of well-being, such as health, education, and income levels.

## What Is the Human Development Index (HDI)?

The Human Development Index (HDI), developed by the United Nations, serves as a benchmark for assessing how well countries are doing in terms of improving people's quality of life, factoring in elements like health, education, and income. It is composed of four principal areas of interest: mean years of schooling, expected years of schooling, [life expectancy](https://www.investopedia.com/terms/l/lifeexpectancy.asp) at birth, and [gross national income](https://www.investopedia.com/terms/g/gross-national-income-gni.asp) (GNI) per capita.

This index is a tool used to follow changes in development levels over time and compare the development levels of different countries.

### Key Takeaways

*   The Human Development Index (HDI) is a measurement system used by the United Nations to evaluate the level of individual human development in each country.
*   It was introduced by the U.N. in 1990.
*   The HDI was created to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone.
*   The HDI uses components such as average annual income and educational expectations to rank and compare countries.
*   Social advocates have criticized the HDI for not representing a broad enough measure of the quality of life, and economists for providing little additional useful information beyond simpler measures of the economic standard of living.

![Human Development Index (HDI)](https://www.investopedia.com/thmb/bUeUWP_0W00iQwubqF264Lcdvr8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/human-development-index-hdi.asp-final-57aa610efde34482bf9a48594216674a.jpg)

*— Investopedia / Jake Shi*

## Understanding the Human Development Index (HDI)

The HDI was established to place emphasis on individuals—or, more precisely, on their opportunities to realize satisfying work and lives. Evaluating a country’s potential for individual human development provides a supplementary metric for evaluating a country’s level of development besides considering standard economic growth statistics, such as [gross domestic product](https://www.investopedia.com/terms/g/gdp.asp) (GDP).

This index can also be used to examine the various policy choices of nations; if, for example, two countries have approximately the same GNI per capita, then the HDI can help to evaluate why they produce widely disparate human development outcomes. Proponents of the HDI hope it can be used to stimulate such productive public policy debate.

## 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 indices of each of the life aspects that are examined: knowledge and understanding, a long and healthy life, and an acceptable [standard of living](https://www.investopedia.com/terms/s/standard-of-living.asp). Each of the components is normalized to a scale between zero and one, and then the [geometric mean](https://www.investopedia.com/terms/g/geometricmean.asp) of the three components is calculated.

*   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 zero when life expectancy is 20 and equal to one when life expectancy is 85.
*   **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 one, and a simple mean of the two is calculated.
*   The **economic metric** chosen to represent the standard of living is GNI per capita based on [purchasing power parity (PPP)](https://www.investopedia.com/updates/purchasing-power-parity-ppp/), a common metric used to reflect average income. The standard of living is normalized so that it is equal to one when the GNI per capita is $75,000 and equal to zero when the GNI per capita is $100.

The final HDI score for each country is calculated as a geometric mean of the three components by taking the cube root of the product of the normalized component scores.

> **Fast Fact**
>
> Switzerland scores the highest among 193 countries in the 2023/2024 HDI rankings from the U.N.

## HDI Rankings

Top HDI scores go heavily to Northern European countries, while the lowest-scoring nations are largely found on the African continent.

The top 25 countries in the 2023/2024 HDI rankings are in the table below.

The bottom five countries are in the table below.

## Limitations of the HDI

There are [criticisms of the HDI](https://www.investopedia.com/ask/answers/042815/are-there-critics-human-development-index-hdi.asp). 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.

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 just to 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 not to 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 measurements of years of schooling and life expectancy can vary widely from country to country.

## Explain Like I'm Five

The human development index (HDI) measures a country's educational level and economic well-being. The index for each country ranges from 0 to 1, based on the country's life expectancy, gross national income, and average years of schooling. A higher index value indicates a higher level of economic and social development.

The HDI was introduced by the United Nations in 1990 to provide a single, simple yardstick to compare social development across countries. However, some critics say it is not an effective metric because it does not reflect other factors, like economic inequality or overall feelings of security. To address those shortcomings, the U.N. also publishes more specific figures that can provide a more granular view of human development.

## 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?

From the 2023/2024 Human Development Report, Switzerland finished first with an HDI value of 0.967. Norway, Iceland, Hong Kong, and Denmark rounded out the top five. Meanwhile, the United States was ranked 20th with an HDI value of 0.927.

## 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.

> **Article Sources**
>
> 1.  United Nations Development Programme, Human Development Reports. "[Human Development Index (HDI)](https://hdr.undp.org/data-center/human-development-index#/indicies/HDI)."
>     
> 2.  United Nations Development Programme, Human Development Reports. “[Technical Notes: Calculating the Human Development Indices—Graphical Presentation](https://hdr.undp.org/sites/default/files/2021-22_HDR/hdr2021-22_technical_notes.pdf).” Pages 2–3.
>     
> 3.  United Nations Development Programme, Human Development Reports. “[Technical Notes: Calculating the Human Development Indices—Graphical Presentation](https://hdr.undp.org/sites/default/files/2021-22_HDR/hdr2021-22_technical_notes.pdf).” Page 2.
>     
> 4.  United Nations Development Programme, Human Development Reports. “[Human Development Insights](https://hdr.undp.org/data-center/country-insights#/ranks).”
>     
> 5.  Cahill, Miles B. “[Is the Human Development Index Redundant?](https://www.jstor.org/stable/40326318),” _Eastern Economic Journal_, vol. 31, no. 1, Winter 2005, pp. 1–5.