Russia Has the Resources for a Budget Manoeuvre That Helps Education, Healthcare, and Social Welfare

Issues concerning changes pertinent to key social spheres were discussed during the ‘Human Capital and Social Policy’ plenary session of the XIX April International Academic Conference on Economic and Social Development.

HSE Director for Social Studies Lilia Ovcharova presented the paper ‘How to Boost Human Capital and Its Contribution Towards Economic and Social Development,’ which was prepared by experts from HSE based on joint papers with the Centre for Strategic Development. According to Ovcharova, the researchers focused on problems that have a ‘large potential for positive change,’ and all of the proposed solutions are supported by ‘adequate resources.’

The situation surrounding human capital in Russia is actually not as bad as it often seems. Russia is ranked 16^th out of 130 on the human capital development index, which is compiled for the Davos Forum. Russia is also ranked fourth for formal level of education, but only 42^nd for the ability to use the newest knowledge and competencies in the workplace.

At the same time, properly resolving existing issues could serve as a serious impulse for development. For example, average life expectancy has great potential for improvement. One of the main problems is a very high mortality rate for working-age men (things are worse only in war-torn countries). In addition, a lot can be done to fight poverty, particularly as concerns reducing the risk of poverty for children. Currently, one out of every five children in Russia grows up poor.

Lilia Ovcharova has identified three priority areas that require a fundamental change in policy. The first is immigration policy, which must become ‘friendly for qualified specialists and students studying in Russia.’ A change in employment policy is also necessary. Increasing the minimum wage to the level of the living wage is a departure from Russia’s traditional labour market model, where employment has been maintained thanks to a low salary. Finally, it is necessary to rethink housing policy, which has long emphasised the actual purchase of housing. It is, however, dangerous to expand mortgages further, as these mortgages may attract individuals objectively unable to repay them, which could lead to something similar to the crisis that occurred in the U.S. over 10 years ago. This is why it is necessary to develop non-mortgage components within the housing policy, e.g., social and rental housing.

Russian Presidential Advisor Alexandra Levitskaya noted that we must do away with the binary approach – is a person dead or alive – when assessing the demographic situation

Three additional priorities – education, healthcare, and social policy – require a budget manoeuvre. Experts suggest taking concrete steps in each of these areas. In education, it is necessary to finish building a system of continuing education, particularly early (with children) and later on (retraining seasoned workers). It is also necessary to develop a modern digital school and a way of furthering professional education (in particular, universities could become centres of innovation in their regions and in particular areas).

Measures to improve the healthcare system include creating a new model of district medical services, which would increase public access to such care; creating an effective drug supply system; and boosting efficiency in managing and financing medical care, for which an insurance model must finally be created.

To improve social welfare, it is necessary to focus on supporting poor families with children. In addition, the pension system must be changed, which includes raising the retirement age.

To accomplish all of this by 2024, additional spending is needed totalling 0.8% of GDP for education, 0.7% for healthcare, and 0.2% for social welfare.

According to Centre for Strategic Development Chairman Alexei Kudrin, the proposed budget manoeuvre is much more modest than the one that occurred de facto starting in 2010, when spending grew by 4.5% of GDP in two areas – military and social (above all pensions). Spending on education fell in relative terms during this period, while healthcare spending remained practically unchanged. The previous ‘defence-retirement’ manoeuvre took away 0.5% of GDP growth, while the proposed manoeuvre would contribute 0.5% growth over the course of three years and nearly 0.8% in the longer-term perspective. Alexei Kudrin is certain that Russia has the opportunity to carry out such a manoeuvre and that these expenditures are ‘feasible without raising taxes.’

Russian Presidential Advisor Alexandra Levitskaya noted that we must do away with the binary approach – is a person dead or alive – when assessing the demographic situation. It is important to assess the quality of life and quality of health. She noted that Russia has 12 million disabled individuals, and this number has not changed significantly. Childhood disability, however, has been growing over the last four years, and there are currently 651,000 disabled children in Russia, the majority of whom suffer from mental disabilities. ‘If we are saying that every individual is important to the country, then it is important to work with these children and their families as well,’ Levitskaya added. There is still not even a single intergovernmental policy for this, however. Each agency dealing with social welfare develops its own mechanisms without agreeing on them with one another and sometimes contradicting one another. As a result, the problem is not resolved and ineffective government spending rises.