Baltic States – CIS, Direct Speech, Economics, Education and Science, Forum

The article was prepared for the conference “Trends of the future education and science” under the World Trends Forum held in the Riga, Latvia on 11 April 2014.

Globally, education spending is increasing both through public and private investment. So companies are increasingly employing teachers to train staff to work more effectively and help in their career growth and general wellbeing.

The crisis phenomena in the Russian economy bared a number of the problems connected with falling production in some spheres, and also scarcity of economic and scientific and technical potential. First of all, it concerns loss of highly qualified staff, inefficient use of human capital, "brain drain" as is quite often observed in a country experiencing hard times when unique experts didn't find for themselves the corresponding application, degrading or at all going abroad. According to the experts Russia directly loses annually about 3 billion dollars because of intellectual emigration, and the total figure taking into account opportunity costs reaches 60 billion dollars. Further decrease in level of potential human capital can lead to the slowing growth of the economy and an increase in the gap between Russia and other leading countries.[1]

Investments in human capital are subject to a considerable lag. The benefits (or downsides) of changes in the level of investment implemented today might not be truly felt for 20 years. If a certain sphere is heavily neglected, the accumulated knowledge diminishes (experts leaving the field, lack of research etc) meaning that the underlying knowledge base has to be rediscovered at considerable time and cost. Despite this, effective investment has in the long-run a positive effect that is long-lasting.

Experts consider that expenses for education shouldn’t be less than 3,5-5% of gross domestic product, on science not less than 2%, and for health care of 8-10%, otherwise  there will be an inevitable deterioration in the education system, science and health care, the intellectual potential will be lost, life expectancy will be reduced and the population will grow old.[2]

According to the World Bank, in 2012 Russia spent from the state budget 4,2% of gross domestic product on education, and on health care and sports – 4,0%.[3] In the USA in 2012 more than 8% of gross domestic product on health care, and on education – about 6% was spent, the same magnitude of expenditures is observed in Great Britain and in Germany.[4]

According to the report, the OECD published in June 2013, "Education at a Glance 2013. OECD Indicators", a good education is still valuable. Education level strongly influences ability to gain employment, and crisis only strengthened this influence. On average, across the OECD countries 4,8% of people with a diploma or other forms of higher education were unemployed in 2011 while the percentage of the unemployed among people without secondary education was 12,6%.⁵ During the period from 2008 to 2011 the difference in unemployment rate between people with a low education level and people with a high education level increased: in all age groups, the unemployment rate of people with a low education level grew almost by 3,8 percentage points while for people with a high education level it increased only by 1,5 percentage points.[5]

For the youth, good education provides a valuable guarantee in case of a lack of experience, even at the time of crisis: in the OECD, on average, 18,1% of aged people of 25-34 years without secondary education were the unemployed in 2011 in comparison with 8,8% of aged people of 55-64 years. Among aged people of 25-34 years with the higher education of 6,8%, on the average, were unemployed in comparison with 4,0% at the age of 55–64 years with a similar education level.[6]

The data say that in 2011 more than a half of the population of Russia from 25 to 64 had the highest education. Also, nearly 95% of adult population had a secondary special education. However, it is worth noting that a larger number of educated people studied in the Soviet system which has a number of changes nowadays and is not at all for the best. The fall in school standards for younger learners combined with a reduced desire for knowledge is already reflected in lower standards at university level. All this will seriously affect the human capacity of the country and to the general standard of living. For comparison, this figure is on average equal in other countries of OECD of 75%.⁶

In 2012 the Higher School of Economics "How much is the human capital?", where the cost of the human capital in Russia for 2002 and in comparison is for the first time estimated 2010. So, it became clear that in 2010 the stock of the human capital in Russia made 20,3 trillion dollars. This indicator exceeded gross domestic product of the country by 13 times and by 5,5 times the volume of the physical capital. At par consumer ability, it was calculated that Russia had the human capital of about 40 trillion dollars in 2010, i.e. 400 thousand dollars per capita were necessary. In real terms these indicators increased almost twice. According to the conducted research, Russian human capital lags behind the corresponding indicators of the developed countries (from the USA, Norway, than Great Britain is stronger, than the others), but is ahead of post-socialist countries, such as Poland or Romania.[7]

Presence of the state at market economy became a necessary element on the way to sustainable economic growth, including in the elimination of "market failures". Wellbeing of the country is often associated with population standards of living, and it is a direct product of the human capital which has its own assessment. Its increase and improvement require close attention of government to the questions concerning the welfare of the country as a whole. Improving the quality of education is one of the major directions in this regard.