Perestroika Minus - Human Capital in Russia
The concept of human capital does not simply refer to education, but to effective education that, combined with experience, generates income. In Russia, 15% of people are useless as labor, despite their education. It is easy to understand why rich countries spend enormous amounts of money on education, universities, and teachers.
One of the ministers of Saudi Arabia once said: "The Stone Age did not end because the stone ran out, and the oil age will not end because the oil runs out. Innovation brings new eras." Middle Eastern countries are investing significant sums in human capital, in case the demand for oil decreases. Something is needed to maintain prosperity and provide for the population when oil revenue decreases. This is something Russia should also consider. Russian experts have already recognized that Russia's future cannot rely solely on mineral resources, and greater emphasis should be placed on human capital.
In terms of years spent in school, Russian education is leading, but when it comes to how much the state spends on education, Russia is ranked 98th in the world. Today, Russian human capital does not enrich the Russian economy. A poorly developed economy does not need highly skilled workers and drives them out into the world. This is not just a trend of the last 10-15 years, but has been going on for 150 years. The brain drain causes great losses for the country. It is not just higher wages or comfort that attract people, but also better opportunities for realizing their specialized knowledge or new scientific ideas. Since the war in Ukraine, the outflow of people has intensified, which is a serious problem because human capital is only slowly generated. It would take 7-10 years to replace the current losses if the war were to end now. The country is losing human capital very quickly and easily.
The loss is tragic: highly skilled people are needed for the information economy, which has replaced the service sector. Lifelong learning has never been more relevant. Education has become a key factor in the world economy, and human capital is now more important than physical or natural capital. The more educated people are, the wealthier a country becomes. Russia bases its economy on its natural resources, with human capital being the least important. The quality of human capital is declining, and in fact, it hinders development. Margaret Thatcher saw that the amount of goods produced, which ensures the current standard of living, is enough for 15 million people. The Russian economy is inefficient, the workers are poorly skilled, it is poorly managed, and the human reserve is poorly utilized. It slows down growth, and human labor destroys the wealth provided by natural resources.
Why is human capital in such a difficult situation?
- The workforce, scientists, and specialists are leaving the country.
- The death rate is high, medical care is poor, medical imports are lacking, and Russian-made equipment is of low quality.
- The quality of education is weak. 50 years ago, there were good high schools, but now, the higher the level of education, the weaker the quality, and no great professors are being produced.
It is no longer possible to boast about what the world owes to Russian scientists. Let's see who first introduced a new product to the market or started manufacturing a new product. Russia is no longer an innovative country; it ranks 47th in the world. They create few new things, and those are not in demand. In terms of patents, the country ranks around 60th; no new ideas or products are emerging. Most countries cleverly concentrate human capital, inviting foreign specialists, offering incentives and visas. Foreign minds enrich their countries. Russians, on the other hand, are donors—they send their scientists away, who no longer work for the Russian economy.
The population is shrinking, and the educational pyramid should widen at the bottom. If we want to train elites, it matters how many people are at the bottom of the hierarchy. Russia's demographic situation is tragic. Due to the ongoing war, fewer children are being born, and those children will have fewer children themselves. Many are fleeing from mobilization, and many are being disabled. The war is not over yet, but we can already account for a loss of 1 to 1.5 million people, which will have long-term effects until the end of the century. Fewer children will be available to educate.
Currently, it is migrants who are saving the country. Every year, 390,000 people arrive and stay. Against this, the Russian Church is trying to reduce the number of migrants in order to protect the culture. Due to the bad economic situation, migration to Russia decreased in 2023. By the end of the century, the population is projected to decrease by half, which could be offset by migrants, but due to the war, they are no longer coming willingly. Due to low birth rates, other countries are easing migration. Labor from Central Asia is now more likely to go to the UK or South Korea, not to Russia. The shrinking population means more uninhabited, uncultivated land. Where there are fewer people, it is not worth or profitable to build schools. Poverty will increase due to the depletion of the workforce, lower demand, and reduced production. The annexation of occupied Ukrainian territories could also be costly, as there are 6 million people there, most of whom are elderly and need pensions. Russia loses 700,000 working-age people every year, and 4.8 million are already missing, meaning 12 million people will be missing from the economy in 10 years. One option is to employ 14-year-olds and retirees, but this would increase the number of unskilled workers. Another idea was to bring in unskilled Kenyan workers, but their labor is unlikely to benefit the economy. In an aging society, even though there are more educated elderly people, they are generally not healthy. People over 60 make up 26% of the population, and the trend is growing. More and more elderly people must be supported by the working-age population. Where will the money come from to support them if fewer people are in production? The demographic situation and, therefore, the labor situation, are catastrophic. The situation has worsened since the outbreak of the war, and we do not know how long the war will last. Skilled workers need good teachers, but due to the shrinking population, this is impossible, and it is difficult to bring in foreign scientists for universities due to strong competition. In addition to skilled professors and teachers, there is a shortage of skilled workers. Only 5% of Russian workers are highly skilled (in the USA, it's 43%, in Japan, it's 75%). Russian scientists are isolated, while Arabs are hunting scientists worldwide, and the state plays a negative role in the process.
Perestroika Minus: We are losing everything we built over 30 years. The state intervenes ideologically in education, but does not provide funding. The isolated economy must be rebuilt in a hostile environment, but there is no money for that. The state is only worsening the situation of human capital; it is not interested, and the apparatus survives by selling natural resources. In the meantime, the country is losing its scientific potential. The problems may persist until the end of the century. The standard of living will decrease when demand for oil decreases (in 15 years). Wheat and sunflower can still be sold, but that does not ensure a high standard of living. This dramatic future could only be avoided with state intervention, but the state has chosen war instead of investing in human capital.
Профессор Липсиц объясняет СУТЬ внутренней политики Путина