Russia / Human capital development is the challenge says OECD

To pursue economic growth, Russia must develop its human capital, which requires structural reforms in education, healthcare and pensions. These, in turn, must respond to major trends in service provision, including the increasing role of individual choice, the need to deliver lifelong learning and healthcare, and the risk that Russians will increasingly buy services abroad, rather than work to develop their own national systems.

Russians have now reached a consensus on the crucial importance of developing their country’s human capital– the skills, education, health and overall capacity of the individual. This, of course, is a challenge for all relatively developed countries, and to date, none has fully succeeded in developing a response that meets all its needs.

According to the traditional industrial model, the sectors most relevant to the development of human capital belong to the social sphere. In reality, in modern developed countries they also carry fiscal and political implications. Unlike in previous centuries, education, healthcare, and pension systems now involve the entire population, if only as taxpayers and consumers.

The demographic crisis has added to the complexity of this situation. Funding the development of these sectors has become a dilemma for national budgets and can undermine the financial stability of any developed country. Furthermore, funding has to be long-term, which has significant implications for any country’s investment resources. Finally, the political and social stability of societies depends upon the efficient functioning of these sectors. In short, if human capital is to be developed, policy measures should address both financial and structural issues.

All this carries two sets of consequences: the first is that a way must be found to allocate additional budget resources. Compared with the average OECD country, Russia currently spends 1.5 to 3 times less on education and 3 to 4 times less on healthcare as a percentage of GDP. The second is that there is a real need for structural reforms. The quality of education and medical services depends not so much on the level of employee salaries, but rather on making improvements in how those systems operate.

Financial measures and structural reforms should not be implemented separately; it would be politically dangerous and economically inefficient to do one while ignoring the other. Above all, funding should come only once institutional reforms have been implemented.

In thinking about structural reforms, we need to understand the nature and function of the institutions that deliver services in this area in contemporary post-industrial societies.

Chosen excerpts by Job Market Monitor

via Russian Federation:- Russia’s human capital challenge – Organisation for Economic Co-operation and Development.