Labour productivity has been on a declining trend in the Caribbean. An examination of this trend revealed a growing concern of skills mismatch in the labour market. At the same time, youth unemployment is high in many countries, with young women and girls twice as likely not to be in education, employment or training. These are troubling signs for human capital formation at a time when Caribbean economies are experiencing low growth, the global economy is becoming increasingly knowledge-based, and a new tariff regime is threatening global trade. In this study, we identify falling quality of education and the inadequate preparedness of school leavers and graduates for the world of work as notable challenges to human capital formation in the Caribbean. We also identify a role for productive development policies to drive transformation by creating an enabling environment for the key drivers of human capital formation in the Caribbean —population dynamics, education, and employment— to shape the workforce, enhance labour productivity and create a path to sustainable development. However, this will not be achieved unless the subregion addresses the gender disparities in education and employment, the debilitating effect of non-communicable diseases, and the looming social protection burden of ageing from the demographic transition. Amidst these challenges, investment in information and telecommunication technologies offers the Caribbean a path to develop and earn dividends from its human capital.