Human Capital: Why Russia Still Won’t Invest in Itself

16.03.2017

According to Oksana Sinyavskaya, Deputy Director of Independent Institute for Social Policy and Associate Professor of the HSE Department of World Economy and Policy, Russia is revising its secondary and higher education systems in order to keep up with the pace of technological progress. However, the country’s  market structure must be changed in order to improve human capital.

"We have significant human potential: nearly 40 percent of our young people have received higher education,” Oksana Sinyavskaya said in an interview with Club 2035, a partnership project of Valdai Club and the company RVC. “In terms of formal volume, the picture looks wonderful, but in terms of quality of education and human capital, things are much worse. The current level of investment in education and lifelong learning tells us that the workforce is not being refreshed or retrained. In this sense, we may lose the competition in the sphere of technological evolution.”

“From the point of view of the state, there’s an understanding that we are lagging behind in terms of technological progress, which will make the state look at the entire education system from a different perspective, because it is imperative to revise school and university education and make it more general, so that people can better adapt in life,” Sinyavskaya said.

Nevertheless, it would be incorrect to talk exclusively about the role of the state, she said. Currently, Russian businesses, which should be interested in the professional growth of their employees, benefit from the ability to hire young employees who are always in fresh supply and who do not cost much in terms of capital outlay.

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“The workforce responds to the fact that salaries are not yet responsive to improvements in the quality of human capital,” Sinyavskaya said. “We have better chances of getting a raise if we change jobs, so Russia's employees prefer to go from employer to employer looking for better compensation. Once people realize that they can keep the same job and have their salaries increase as they grow professionally − no matter where the raises come from, the state or businesses themselves − people will begin to invest more in their own training.”

“With regard to additional incentives, there’s a need to change the labor market model,” she explained. “As long as it makes more economic sense to hire new people or change jobs, and as long as salaries in Russia respond to every crisis, unfortunately, there will be few incentives to invest in lifelong learning. However, this is fraught with risks, and changing the labor market model may give rise to unemployment.”

The aging population is another challenge. “In the near future, we will see not just an increase in the number of senior citizens, but also an older employable population,” Sinyavskaya said. “We need to adapt to that. This combination of challenges could spur Russia to embark on a path of innovation-driven development.”

Of the changes that took place in recent years and that could have a positive impact on the labor market, the expert highlights investments in the healthcare sector, and the growing popularity of healthy lifestyles.

As she explained, the healthcare industry focuses on promoting innovation-driven areas, which helps increase life expectancy due to a decrease in infant mortality and disease prevention in older age. “The second element,” she said in closing, “is healthy lifestyles, and I’m more optimistic about the situation than many demographers, because sociological studies show that younger generations are more willing to invest in their health and are less prone to the habits of smoking or alcohol consumption that tend to reduce life expectancy. This is our potential that will help reduce the mortality rate among median working ages and to overcome Russia lagging behind the developed countries in this sense.”

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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