Return on Education and Assessment of Human Capital in Belarus

BISS begins publications of a series of studies in the framework of the project “Human Capital as a Source of Competitiveness and Modernization” that we will continue to focus on in 2013.

The first research paper “Return on Education and Assessment of Human Capital in Belarus” by IPM Research Center experts Gleb Shymanovich and Alexander Chubrik defines human capital as “a stock of competencies, skills and personal attributes underlying the ability of a human to produce economic value.” The paper focuses on the assessment of qualitative and quantitative characteristics of the Belarusian system of education, as well as the assessment of the influence of workers’ educational attainment on their earned incomes and labor productivity.

The experts analyzed the methods to gauge human capital employed for cross-national comparison of human capital volume. Building on their analysis, they came up with a model to assess human capital ‘inside’ a particular country. Making use of the findings of the Sample Household Living Standards Survey, the authors identified the educational structure of Belarus labour force, estimated return of education on the income level and integrated it into a time series of human capital. They also draw conclusions concerning the impact of various levels of training on the ‘stockpile’ of human capital in Belarus and economic expansion.

Key findings of the study

1. Based on the amount of state spending on education, a conclusion can be drawn about the potentially high competitive capability of the Belarusian system of education compared to most of the CEE countries. However, it is only definite that this competitive capability is potentially high, because most of the methods used to assess the parameters of the education system fail to provide a tool to effectively measure the quality of education.

Furthermore, the analysis of the education financing pattern in Belarus shows certain imbalances, including the relatively high financing of secondary education at the expense of preschool and primary education, the consistently decreasing financing of tertiary education and the low student-to-teacher ratio. Also, the high share of compensations in the overall volume of financing of tertiary education leads to a slow renovation of the infrastructure of educational institutions.

2. Given the almost 100% participation in primary and secondary education in Belarus, there is no sense using them as indicators to assess the human capital. Therefore, tertiary education proves to be the most informative indicator to demonstrate the impact of educational attainment on economic growth.

Based on UNESCO data, Belarus has seen a consistent marked increase in the number of citizens with higher education since 1993. Furthermore, as of 2011, the average training time for Belarusian citizens amounted to 14.6 years.

However, these indicators alone cannot be considered unambiguous evidence of a growth in human capital in Belarus, since there is no effective method to assess the quality of education of specific citizens. Therefore, the most adequate way to measure the impact of educational attainment on the stocks of human capital is to calculate earned incomes. The choice of this method is justified by the assertion that a worker’s wage depends on his labor productivity. (Additional analysis showed that despite state incomes policy wage dynamics strictly follow productivity in the long-run)

3. In 1995-2011, the country saw a marked reduction in the shares of the employed with general basic education and a lower education level, by 5.9 and 11.3 points, respectively. The reduction was caused by the redistribution of the number of the employed in favor of those with vocational secondary education (their proportion increased by 11.8 points) and higher education (a rise by 5.9 points).

4. The econometric analysis of data showed that an increase in the level of education leads to a pay rise (the annual compensation of a worker with higher education is on average 135% above the annual wage of a worker with general basic education). This means that a higher level of education implies higher labor productivity; therefore a growth in the number of citizens with higher education results in an ‘accumulation’ of human capital.

Furthermore, the length of service produces an impact on labor productivity, albeit not a very significant one: overall, every additional year of service results in an average 1% increase in compensations.

Full version of the research paper is available in Russian, English translation will follow soon.