Human Capital in Russia: Measurement Accuracy and Limitations of the Method

Abstract

Developed by the US economists human capital theory has become widespread in the social sciences. However, its application and critical revision are mainly related to relatively stable highly developed societies. The article discusses difficulties in applying this theory to Russian society, which went through deep structural social and economic transformations in the late 20th – early 21st centuries. The data of the International Program for the Assessment of Adult Competences (PIAAC) show distinctive features of human capital in Russia, its difference from those in OECD countries, and the retrospective dynamics of its accumulation. Three related issues are consecutively analyzed in the article. The first is consistency/inconsistency of formal diplomas and measured literacy. This is an attempt to determine how accurately the standard technique for measuring human capital works in the country. The second issue is how the loss or, on the contrary, the acquisition of skills occurs throughout life in several cohorts. These ongoing processes affect current state of human capital and may be particularly associated with deep socio-economic changes. And finally, the third problem is related to how efficiently obtained diplomas and competencies can be converted into wages in the Russian economy, what is the return on knowledge and skills on the labor market. The limitations of the theory of human capital application in Russian conditions are demonstrated.