HSE Experts Discuss Human Capital at World Bank Office in Moscow

On January 29 HSE experts participated in a seminar on ‘Skills and Returns on Education in the Russian Federation’ at the World Bank office in Moscow. The seminar was held as part of the analytical support programme for Russia’s national priority project ‘Education’.

Seminar participants discussed their research findings regarding the returns on different levels of education: general, secondary professional, and higher. Studies that were discussed analyzed regional and gender factors in human capital, the impact of skills on wages, and seniority ‘bonuses’ in the Russian labour market. These and other issues were considered within the context of a presidential decree in May outlining Russia’s national goals, as well as other issues of economic and human capital development in Russia and in the world.

Representatives of the World Bank, the Russian Ministry of Labour, the Russian Presidential Academy of National Economy and Public Administration (RANEPA), the National Agency for the Development of Qualifications, the All-Russian Society for the Protection of Consumer Rights of Educational Services, and HSE University spoke at the seminar. The University was represented by Vice-Rector Lilia Ovcharova; Isak Froumin, Academic Supervisor of the Institute of Education; Vladimir Gimpelson, Director of the Centre for Labour Market Studies; and others. Based on the conclusions drawn in the seminar, a team of young researchers from HSE who study education and the labour market participated in a brainstorm.

In his opening remarks to the seminar, Christopher Miller, Acting Director of the World Bank and Permanent Representative to the Russian Federation, said that education changes life for the better. It is education that serves as the foundation for achieving the World Bank’s goals: the eradication of poverty and achieving universal prosperity. According to World Bank studies, the share of human capital is two-thirds of world wealth, and human capital plays a more important role in the development of countries than natural and industrial capital.

Investing in human capital is the best investment a country can make

Professor Isak Froumin recalled that when the Centre for Strategic Research under Alexei Kudrin had a discussion about sources of growth and drivers of development in Russia, several groups had been studying issues related to the labour market, education, and human capital. Their studies revealed a peculiarity of Russia: in terms of secondary vocational and higher education, Russia ranked among the top ten countries in the world (sharing 4^th and 5^th places). However, in terms of labour productivity and per capita GDP, Russia lagged behind its peers significantly. Therefore, HSE researchers proposed to separate the concepts of ‘human potential’, which is characterized, among other things, by individuals’ formal level of education, and ‘human capital’, i.e., the use of human potential. And now this topic is being discussed together with experts from the World Bank, and the experience of Russia and a number of other post-Soviet countries is allowing experts to take a fresh look at various aspects of educational returns.

Harry Patrinos, Practice Manager for the Europe and Central Asia region of the World Bank's education global practice, spoke about new research findings on the economic returns to education. He noted that if, at the beginning of the century, the average person spent about two years on education, by 2050 they will spend five times that amount. Education contributes to the reduction of social inequality, and less developed countries show higher returns on education. According to Aleksey Oshchepkov, Senior Research Fellow at the Centre for Labour Market Studies, the lowest returns on higher education were recorded in Moscow and St. Petersburg at less than 1%, while the highest returns were recorded in Western Siberia and the Far East at more than 7%.

Tatyana Klyachko, Director of the Centre for Economics of Continuing Education at RANEPA, cited data regarding the demand for university graduates in the Russian labour market: the weaker the region, the more people there work in their fields of specialization. Suhas Parandakar, a senior economist at the World Bank, discussed the factor of gender in human capital returns. Women, the economist said, have higher returns than men due to discriminatory factors in the labour market. Vladimir Gimpelson discussed the effect of seniority on salaries. For example, if the nature of the work is simple and does not involve accumulating human capital, then a person’s labor productivity decreases over time due to health problems and other factors. Therefore, in this case the seniority bonus disappears.

At the seminar’s conclusion, Harry Patrinos asserted that education research is of utmost importance for the World Bank, and a series of discussions covering recent findings on the topic will be held. He also noted the importance of partnerships with HSE University. One project resulting from HSE’s partnership with the World Bank is the HSE-World Bank Summer School, which is projected to be held in July.