Why does Russia need high productivity?

Why does Russia need high productivity?

The constant increase in the labor productivity is one of the foundations of sustainable economic growth, however, Russia is much inferior to more developed countries, the head of the Russian Central Bank Elvira Nabiullina said on Sunday.

"We have a production slump but there are not many efficient free capacities. Unemployment is low in the country because labor productivity is low. We have a vast potential to boost labor productivity. Potential growth is a growth the country can ensure by loading the existing labor force and loading existing free capacities," she said.

It is understandable, a low labor productivity requires more people to produce a particular product, hence the unemployment rate is lower than in developed countries. At the same time, the existing capacities are fully loaded with inefficient work, which deprives the economy of any potential for profitable growth. The increase in productivity, in turn, will reduce the number of hours needed to create a particular product and, therefore, add working hands and industrial powers for more efficient and competitive production.

But how to achieve this? Vestnik Kavkaza talked with the professor of the Department of Labor and Social Policy at the Institute of Public Administration and Management of RANEPA, Alexander Shcherbakov, and a leading researcher of the Center for Macroeconomic Research of the Institute of Applied Economic Research of RANEPA, Olga Izryadnova. First of all, the experts noted that productivity growth is an elusive goal.

"Virtually all national economies in the world compete in this direction, and yet there is no universal solution to this difficult problem. There are only two general directions, the observance of which should give the expected result," Alexander Shcherbakov noted in the first place.

"The first direction is to improve the efficiency of the organization of labor. The second is a research and technological development, I mean the scientific and technological innovation, as well as investment in fixed assets. In my opinion, the dominant role should belong to the state in both directions," he believes.

At the same time the expert pointed out that productivity should not be understood only as an increase in production. "We should understand the increase in sales volume under labor productivity. And if this figure grows, the employment of the population also increases," Alexander Shcherbakov pointed out.

"In fact, not only new methods of work organization, but also increase in its intensity is needed in order to increase labor productivity. There are large reserves for this in Russia. Of course, there is a danger that too active use of our human capital can lead to depletion of the workforce, although it is too early to talk about it," the professor of the Department of Labor and Social Policy at the Institute of Public Administration and Management of RANEPA concluded.

Olga Izryadnova, in turn, said about the need to improve the skills of workers. "For the economy, the increase in labor productivity is linked to the need to change the education system in accordance with its needs. This is our main reserve for increasing labor productivity in conditions of limited labor resources due to demographic problems," she explained.

"We have to give children good education in schools, preparing skilled workers. Certainly, the qualification of workers is increasing now, but they are subjected to even higher standards. And this is the main problem to be solved in Russia to achieve labor productivity growth," Olga Izryadnova summed up.