The consequences of geo-economic fragmentation for the productivity of human capital in the Russian labor market

Chernenko I.M.¹, Kelchevskaya N.R.¹
¹ Уральский федеральный университет им. первого Президента России Б.Н. Ельцина, Russia

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Journal paper

Russian Journal of Labour Economics ^{(РИНЦ, ВАК)}
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Volume 10, Number 12 (december 2023)

Citation:

Indexed in Russian Science Citation Index: https://elibrary.ru/item.asp?id=59554834

Abstract:
Geo-economic fragmentation has led to disruptions in supply chains. It has influenced both national technological progress and the labor market. The article explores the issue of decreasing human capital productivity in economic sectors amidst sanctions and proposes strategies for the development of the national labor market. Using regression and structural analysis at the industry level, the authors propose a new method for assessing productivity based on the sectoral decomposition of human capital in the context of accumulated relevant education and industrial experience. The results have indicated a gap between the growth of gross domestic product and human capital productivity, pointing to a decline in the effectiveness of investments in human capital. This phenomenon is explained by the increase in the proportion of older cohorts in the labor market and a decrease in the influx of young talent. The financial sector emerges as a key sector contributing to growth, whereas high-tech industries show no significant changes. The proposed approach could be applied by regional authorities to analyze changes in productivity to substantiate investments in human capital. Practical recommendations for the development of labor market policies are offered. They include harmonizing strategies for international professional technological cooperation, enhancing competencies among older population cohorts, and implementing human-centric digitalization. Geo-economic fragmentation has not only caused disruptions in the supply chain but has also inhluenced the technological development of the national economy and the labor market. The aim of this article was to examine trends in the change of human capital productivity during recent sanctions and provide recommendations for the development of the national labor market. The research methods employed include regression analysis and the analysis of structural changes in human capital productivity through industry decomposition. A novel approach in this study involves using the indicator of the cumulative years of education and production experience to evaluate structural changes in productivity at the industry level. Data from Rosstat and RLMS HSE have been used. The results reveal a modest 5% growth in human capital productivity during the observed period, which differs from the GDP growth rate by nearly 2%. Demographic challenges contribute to a reduction in the efficiency of investments in human capital for the national economy. The financial sector makes the most significant contribution to this growth, whereas high-tech industries show limited dynamics. Based on these findings, practical recommendations for labor market development policies are proposed. They include the harmonization of strategies for international professional technological cooperation, the enhancement of competencies among older population cohorts, and the implementation of human-centric digitalization. Acknowledgments: The research was carried out at the expense of a grant from the Russian Science Foundation No. 23-78-10165, https://rscf.ru/project/23-78-10165/

Keywords: human capital, added value, productivity, geo-economic fragmentation, labor market, sanctions

Funding:
Исследование выполнено за счет гранта Российского научного фонда № 23-78-10165, https://rscf.ru/project/23-78-10165/

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