Month: February 2014

Russia’s Economy

Mark Tuminello’s latest blog post –

Mark Tuminello Russian moneyI read an interesting article on the Project Syndicate website about Russia in light of the current Winter Olympic Games in Sochi.  It turns out the country is on solid economic footing.

There is a prevalent belief in the United States that Russia, after the collapse of the Soviet Union in the 90′s, is in economic despair.  Certainly Russia is a world behind China’s booming and growing economy.  This is incorrect.  Russians currently enjoy a per capita income average of nearly $20,000 per year.  China’s is $10,000.  Extreme poverty?  Close to zero percent.  In China?  Extreme poverty is over 10%.

For some, this may be startling information.  How did Russia get ahead of China so quietly?  With high oil prices and excellent top-level economic policies.  Changes began in the early 90′s, as the government was fighting high inflation and shortages leftover from Soviet days.  In order to become a market economy, they stabilized their macroeconomic policies and reached out for financial assistance from the west.  Many countries wanted Russia to remain weak, and so money was not forthcoming.  It could be here that our misunderstanding begins.  Russia was working to improve their economy, and in turning them away, they were conceptually frozen in time as a struggling loser.

But as the years went on, Russia bounced back from those hard times.  Amidst extreme government corruption, a market economy managed to emerge.  Economic growth soon hit 4% average annual rate, which was nearly a miracle for the country.  Now inflation is at a recent low of 7% and unemployment just a little over 5%.  Their deficit is less than half a percent of their gross domestic product.  All of a sudden, we are seeing a country that actually seems to be in good shape, particularly at a time when so many countries are dealing with much worse than usual numbers.

The country is not resting on these laurels, though.  Oil and gas are expected to continue providing a serious engine for growth in the region, particularly as they are next door to the new consumer market in China.  Down the road, Russians are looking to develop global tech business, hoping this will be a second mighty engine to propel them into the the next centuries.  Under Soviet rule, Russia was a hotbed of industrial technology.  Because of global politics, this industry was pretty much completely cut off from the rest of the world markets.  Russia still has the potential to be a major global player in these industries.  Once they sort out a way to encourage private domestic investment and open their doors a little more to foreign investors, requiring an overhaul of sorts in the political environment, the road may be shorter than some would expect.

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Education Job Skills Gap

Mark Tuminello unemploymentIf you’re a young person entering the job market, this has probably happened to you.  You’re applying for jobs that require job experience, and so can never get the job experience required.  This catch-22 is all too common these days, and it’s a result of an education system that isn’t truly supplying students with appropriate experience and skills to get hired.

This gap between education and job readiness was addressed in a Huffington Post editorial.  Gone are the days when your college degree means there will be jobs waiting for you.  Only 27% of graduates are reporting being hired for positions related to their main course of study.  There is now a growing population of indebted grads accepting employment below their level of education.  So why is the return on investment for a degree so low at the moment?  Part of the reason is certainly the lack of new jobs being created coupled with an increasing number of college grads entering the workforce…or at least trying to.

But there’s something else going on here.  Employers are reporting skepticism to hire recent college graduates.  Recruiters are finding that recent graduates are not prepared for a job related to their major.  And you may have heard recent news about entire industries reporting extreme difficulty finding available, qualified workers.  5% of jobs in the country are unfilled due to a lack of capable candidates!  It’s a paradox, and one that requires attention.  Failing to meet the education needs of industry could become a major impediment to the national economy, as well as all the other problems that arise when unemployment remains high.

Much of the disparity, the unrequited need for skilled labor, is in the manufacturing industry.  The energy industry is also facing a wall, with a large percentage of their workers about to retire, booming new alternative energy jobs about to open up, and a set of required skills seldom addressed in the typical liberal arts program.

One of the solutions on the table is a marriage of two educational styles.  Vocational training is valuable in the direct application of skills for industries that are hiring.  Online education is convenient and inexpensive.  Together, these two styles may provide a solution that could have a major impact.  What needs to happen before we reap the benefits of this idea is for an entire educational industry to be developed around it.  There is currently no infrastructure for marking, curriculum, enrollment, etc.  There is also a negative perception to fight against.  Vocational programs are often viewed as gritty and purely mechanical.  Communicating the creativity, the problem-solving, the teamwork will be necessary to attract young professionals looking for a sense of fulfillment from their education and work life.

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