Russia's Persistent Weaknesses Of Human Capital

Russia povertyPhoto by Jeff J Mitchell/Getty ImagesHomeless people eat soup and bread that they received from the Nochlezhka night bus in St Petersburg, Russia.

Russia has a generally well-educated and well-disciplined workforce, not to mention a large number of world-class physicists and mathematicians.

However, Russian exports remains firmly raw-material based, with human-capital-intensive sectors making only a minor contribution.

This pattern, strongly enough delineated in Soviet times, has become further entrenched since transition began. That suggests some fundamental problem of alignment between education and effective human capital endowment.

Only a minority of workers engage in life-long learning

Data from comparative international surveys on general education show Russia scoring well on enrolment, and on basic literacy and numeracy, but much less well on information and communications technology (ICT) and on the ability to apply knowledge to unfamiliar situations. Only around 12% of workers engage in lifelong learning (LLL, meaning continuous, on-the-job learning), compared with over 70% in Sweden. Employer expenditure on LLL in Russia was only 0.3% of payroll in 2007, compared with 1.5% in France, and is showing no tendency to increase. What LLL there is largely concentrated on management workers and skilled workers, with unskilled and semi-skilled workers hardly participating. There are also huge problems with the vocational training system. The old Soviet vocational training system was rigid and inflexible, and weak on the teaching of transferable skills, but it was at least reasonably well funded. Since the demise of the Soviet Union, funding for vocational training has been cut sharply, while the structural problems of the system have persisted. There is no systematic element of enterprise-based training within the vocational training system. Not surprisingly, therefore, most companies find that they have to retrain workers coming straight from school. And the unemployment rate among graduates of technical colleges is comparatively high.

Traditional strengths in maths and physics

So much for the education and training of the general workforce. What about the high-flyers with university education? The Soviet system had great strengths in the traditional academic disciplines of mathematics and physics, and these continue to be strong points of the Russian higher educational system. In newer areas such as biological sciences Russia is still struggling to catch up. But the biggest problem facing Russian higher education, and the biggest impediment to the conversion of scientific knowledge into commercially applicable innovation, is the continued separation of research, which still largely goes on in specialist research institutes, including the institutes of the Russian Academy of Sciences, from teaching, which largely goes on in the universities. The experience of the advanced Western countries confirms that the way to maximise innovative thinking, whether in ‘blue skies’ research or practical innovation, is by nesting research and teaching in the same institutions-not just so that academic staff can enjoy a richer and more challenging intellectual environment, but also so that bright students, including undergraduates, can have the opportunity of hands-on involvement in cutting-edge innovation.

None of this would be news to the Russian government or the Russian Ministry of Education. Indeed, reform of the educational system has been a central element in the drive to switch Russia onto an innovation-based growth path. There is a proposal before the government to stipulate that 25% of vocational courses in technical colleges should be enterprise-based. A federal law from 2009 granted exemptions from corporation tax to company expenditure on training, and from personal income tax on personal expenditure on education. A subsequent law passed in 2012 established that companies might, under certain circumstances, be reimbursed for expenditure on training. An internship programme for engineers involving 500 companies and 5,000 engineers is running over the period 2012-14. The development of research universities is being encouraged, with SkolTech, nested within the new Skolkovo science park, the flagship. And the notion of the ‘entrepreneurial university’ is being strongly promoted under the aegis of the Bologna Process.

Few enterprises engage in innovation

It is perhaps a little early to pass final judgement, but to date, the impact of these various measures and initiatives has been imperceptible. Are there elements in the Russian socio-economic system outside the specific fields of education and innovation that hamper the creation of clear channels running from human capability to human capital? The generally low level of wages, especially for unskilled and semi-skilled jobs, weakens the incentive for workers to become involved in LLL. The rapid rate of turnover of personnel in these jobs makes it look like a very marginal investment for employers. Brain drain is a problem at all levels, and most of the Russians who leave the country for work reasons are highly skilled, whereas most immigrants into Russia are unskilled. One of the reasons for brain drain at the highest level is the lack of opportunity for scientific and technological high-flyers in Russian companies. Only around 10% of Russian manufacturing companies do any innovation at all, by far the lowest figure among the advanced and emerging economies. Those that need highly qualified workers find it difficult to recruit, because the domestic market for highly-skilled labour is too small to compete with alternative job markets, abroad, with foreign companies in Russia, or in blue skies research institutes.

Finally, the traditional view among Russian scientists that commercially applicable innovation is not their business remains strong. The Academy of Sciences, which still dominates Russian scientific life despite recent attempts by the government to limit its financial autonomy, remains a steadfast champion of the conservative view. In the words of one young Russian scientist, “We do not have an innovation culture-no experience, no traditions. Our scientists are still Soviet in their attitudes, for them business is something dirty. Our scientific culture is practically untouched by the business entrepreneurial spirit.”

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