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FORMATION OF THE INNOVATION MODEL OF UKRAINIAN ECONOMICAL DEVELOPMENT ON THE BASIS OF EFFICIENT USE OF HUMAN CAPITAL

Olievska M.,

PhD (Economics), Associate Professor, Research, Financial Institute of Academy of Financial Management

Kyiv, Ukraine Koval V.

PhD, International University of Economics and Humanities named

after Stepan Demianchuk Rivne, Ukraine

ABSTRACT

Relevance of the study is to consider that in the modern society the role of Human Capital is so increased that they begin to occupy a decisive place in the innovative economic growth. The purpose of this article is to show the importance of saving and development of human capital not only at the micro level but also at the level of the whole economy. The study task is to examine the role of Human Capital in the creation and development of an innovative economy. In this paper used the system and structural method to identify the impact of human capital on the efficiency of economy, along with tabular, graphical and statistical methods to conduct economic research. As a result of the research were defining prioritized ways of formation of the innovation model of Ukrainian economical development on the basis of efficient use of human capital at the micro level and at the level of the whole economy in Ukraine.

Keywords: innovative economic growth, production factors, information, knowledge, human capital, education, financing of education, indicator of human capital financing.

1 Introduction

The main means of forming the economy of the emergent type is the innovative economic growth. Support for innovation processes can be achieved through the creation of innovative infrastructure objects.

Information and knowledge, which the bearer of a person plays, plays an important role. It is natural that human resources and their quality are the motive (stimulus) for the development of information technology and sustainable development in general. Man becomes the most important economic asset that brings a steady income.

Taking into account global challenges, in Ukraine formation of the innovation model of economical development on the basis of efficient use of human capital is one of the main development goals including:

To solve ensure healthy lives and promote well-being for all at all ages;

To ensure inclusive and equitable quality education and promote lifelong learning opportunities for all;

To solve the problem of full and productive employment and decent work for all [1];

To achieve the international competitiveness of goods (work, services) in order to ensure its presence in foreign markets, etc.

2 Problem Statements

Human Capital is a prerequisite for the creation and development of an innovative economy.

Insufficient attention to the development of human capital leads to significant social costs, damages people's well-being, limits the opportunities for sustainable growth and management efficiency. It is impossible to ensure a strong economic development of the country without investments from its citizens [2].

Increasing tendencies of saving and development of human capital are directly connected with challenges of new technological order.

Technology provides opportunities to create new jobs, increase productivity, and deliver effective public services. Through innovation, technology generates new sectors and new tasks [3].

These technologies are produced by people with lots of human capital; we need human capital to build and then make effective use of these technologies.

Investing in human capital is the priority to make the most of this evolving economic opportunity. Three types of skills are increasingly important in labor markets:

Advanced cognitive skills such as complex problem-solving,

Sociobehavioral skills such as teamwork,

Skill combinations those are predictive of adaptability such as reasoning and self-efficacy.

Building these skills requires strong human capital foundations and lifelong learning.

According to modern scientific assessments human capital is one of wealth of the country and a prerequisite for the creation and development of an innovative economy.

3 Research Questions

1. Defining of the human capital as the collective stock of skills, attributes, knowledge, expertise of employees which plays an integral role in increasing the productivity of companies and ensuring sustainable development of countries.

2. Detecting common factors and problems of development human capital in terms changing nature of work.

3. Defining prioritized ways of formation of the innovation model of Ukrainian economical development on the basis of efficient use of human capital at the micro level and at the level of the whole economy in Ukraine.

4 Purpose of the Study

The purpose of this article is to show the importance of saving and development of human capital not only at the micro level but also at the level of the whole economy.

The authors of the article used the system and structural method to identify the impact of human capital on the efficiency of economy, along with tabular, graphical and statistical methods to conduct economic research. Accounting data from the World Bank, the State Statistics Service of Ukraine, and the results of own research constituted the information basis of the present research.

5 Findings

5.1 WHATIS HUMAN CAPITAL?

In the 21st century, world leaders are countries that use the competence of people, their ability to further education - all this is covered by the category of "human capital".

University Professor of Economics and Sociology at the University of Chicago Gary S. Becker believed that in the New Economy and technologically more advanced world, skills conferred by college education have become more important. Becker studies of over one hundred countries and there's hardly a country that has achieved rapid economic growth without significant investments in elementary and secondary schools, and finally in higher education [4]. Becker's research on human capital was considered by the Nobel committee to be his most noteworthy contribution to economics.

Human capital is:

1)The knowledge, skills, and health that people accumulate over their lives, enabling them to realize their potential as productive members of society. It has large payoffs for individuals, societies, and countries [5].

2)The collective stock of skills, attributes, knowledge, and expertise of employees which further plays an integral role in increasing the productivity of the organization. Every organization invests its money and resources to train new employees. Employees in turn work hard, upgrade their existing knowledge and contribute in their own way to increase the productivity of their organization.

3)The values of households that are formed during a long period of time through financing; human capital used in the labor market; human capital is a source of income in the future [9].

The people are the basic resource in any company and human capital is the key success factor. The level of human capital development is determined by three components:

1) Education, high-quality education, mass education, not elitist education.

2) Health care, quality medical services (people are more productive when they are healthier)/

3) Welfare infrastructure, including high paid jobs and administrative services [6].

So, the development of human capital implies developing sociobehavioral skills such as an aptitude for teamwork, empathy, conflict resolution, relationship management, and saving health.

The concept of human capital recognizes that not all labor is equal. But employers can improve the quality of that capital by investing in employees - the education, experience, and abilities of employees all have economic value for employers and for the economy as a whole.

Given the rate of change in technological progress, there's an ongoing need for investment. Skills don't last a lifetime; they depreciate. Any company has to recognize that not only is the human capital of their employees a major asset, it is also a depreciating asset that needs continuing investment [7].

These individual returns to human capital add up to large benefits for economies - countries become richer as more human capital accumulates. Human capital complements physical capital in the production process and is an important input to technological innovation and long-run growth.

The benefits of human capital transcend private returns, extending to others and across generations.

5.2. Development human capital in terms changing nature of work

Formation of the innovation model of economical development and increasing competitiveness on the basis of efficient use of human capital is one of the main development goals of our country is the most important goal of development of all countries of the world.

According to The World Bank, the country's prosperity depends on investments in future employees. In 2018 the top ten includes Singapore, South Korea, Japan, China, Finland, Ireland, Australia, Sweden, the Netherlands and Canada. Ukraine closes the top 50, standing ahead of countries such as Mongolia, Turkey, Georgia, and Romania [3].

The index considers five indicators:

The survival rate of children under five years old;

Survival rate of adults from 15 to 60 years old;

The duration of school years for children; quality of education;

Percentage of children without developmental delays.

The value of human capital in the ranking varies from 0.8 to 0.88 points. The country in which the newborn is provided with an ideal level of education and health care scores 1 point.

For individuals, an additional year of school generates higher earnings on average. These returns are large in low- and middle-income countries, especially for women.

Human capital can be raised by financing or by investing in education and health.

Education and health is funded by states (from state and local budgets), companies, households, and other (for example, international organizations) [9].

The indicator of human capital financing can be calculated as the average of two synthesized indicators that characterize the level of state and non-state financing of human capital.

Indicators are determined on the basis of updated data on public expenditure on education and health

care, company expenditures on human capital development, private transfers, global fund grants, etc.

Indicator of human capital financing we propose to calculate according to the formula:

SFHC+NSFHC

1FHC =--(1)

IFHC - an indicator of human capital financing; SFHC - an integral indicator of state financing of human capital (public expenditures on education and health care);

NSFHC - an integral indicator of public financing of human capital (company spending on human capital development, private transfers, grants, etc.); n - Population of the country. Comparison of Human Capital Development and human capital financing is presented in the table 1.

Table 1.

Comparison of Human Capital Development and human capital financing

Economy Analyzed by The World Bank [3] Calculated by authors [9-12]

HCI score Rank Indicator of human capital financing

Singapore 0,88 1 0,00609

South Korea 0,84 2 0,00625

Japan 0,84 3 0,00601

China 0,82 4 0,00597

Finland 0,81 5 0,00551

Ukraine 0,65 50 0,00112

Leading countries have a higher level of human capital financing.

Investing in people in the form of food, health care, quality education, creation of jobs and professional development helps to develop human capital, which is crucial for elimination of extreme poverty and forming a more socially cohesive society [3].

The Indicator of human capital financing allows to determine the level of dependence of human capital development on the level of financing of human capital, to determine the priorities of financing of human capital at the micro level and at the level of the whole econ-

omy, and to increase the efficiency of making managerial decisions in choosing the directions, mechanisms and tools for financing education and health care.

So, the most successful companies and the most successful countries are companies and countries which:

First, manage human capital in the most effective and efficient fashion;

Secondly, invested in workers;

Thirdly, encouraged workers to invest in themselves;

Finally, provided a good learning environment.

However, today the nature of work is shifting (table 2).

Table 2.

Development human capital in terms changing nature of work

Problems and challenges Decision

Technology is changing how people work and the terms on which they work. Even in advanced economies, short-term work, often found through online platforms, is posing similar challenges to those faced by the world's informal workers. Invest in human capital especially in disadvantaged groups and early childhood education to develop the new skills that are increasingly in demand in the labor market, such as high-order cognitive and sociobehavioral skills Invest in human capital especially in disadvantaged groups and early childhood education to develop the new skills that are increasingly in demand in the labor market, such as high-order cognitive and sociobehavioral skills Enhance social protection to ensure universal coverage and protection that does not fully depend on having formal wage employment Increase revenue mobilization by upgrading taxation systems, where needed, to provide fiscal space to finance human capital development and social protection.

Problems and challenges Decision

Companies can grow rapidly thanks to digital transformation, which blurs their boundaries and challenges traditional production patterns. The rise of the digital platform firm means that technological effects reach more people faster than ever before. Employers can improve the quality of that capital by investing in employees - the education, experience.

Technology is changing the skills that employers seek. Workers need to be good at complex problem-solving, teamwork and adaptability. Add that most investments in learning for employees should be in company-specific knowledge. If workers acquire a general knowledge while employed, they'll benefit more than the company if and when they leave; accordingly, workers themselves should pay for that knowledge through lower wages initially. Companies should be willing to pay for company-specific knowledge because it helps lock the worker into the organization.

Human capital tends to migrate, especially in global economies. Manage human capital in the most effective and efficient fashion

[8; 9].

The World Bank challenges governments to take better care of their citizens and calls for a universal, guaranteed minimum level of social protection. It can be done with the right reforms, such as medical reform and education reform, improving labor market regulations; and, globally, overhauling taxation policies [8].

So, investing in human capital is not just a concern for ministers of health and education; it should also be a top priority for heads of state and employers.

5.3. Prioritized ways of formation of the innovation model of Ukrainian economical development on the basis of efficient use of human capital at the micro level and at the level of the whole economy in Ukraine.

Governments have a vital role to play in building human capital: as providers of health, education, and financing to ensure equitable access to opportunities and as regulators of accreditation and quality control of private providers [8]. Ukrainian governments commit a significant share of their budgets to education and health, but public services are often too low quality to generate human capital [9].

In Ukraine, as in some other countries shortfalls in quality persist for two reasons.

First, pursuing good policies does not always pay off politically.

Second, bureaucracies may lack the capacity or incentives to convert good policies into effective programs.

If public health is not politically relevant until there is a health crisis, politicians have little reason to prepare for future pandemics. Even when politicians and voters agree on the importance of an issue, they may disagree about the solution. Rarely is it popular to fund public health programs by raising taxes or by diverting money from more visible expenditures, such as on infrastructure or public subsidies.

The authors agree with an idea [14; 15] on the necessity to reforming education and vocational training in Ukraine. The reason for such an adjustment is connected with its disadvantages: the quality of preparedness of the work force in most cases does not meet the needs of the labor market.

The role of human capital determines the tasks and functions of Ukraine as regards:

1) Ensuring comprehensive and equitable quality education and encouraging lifelong learning for all [1];

2) The development of education that meets the needs of the economy and the labor market [10];

3) Access to high-quality education [13];

4) Comprehensive human development, its talents, intellectual, creative and physical abilities, formation of values and competences, as well as raising the educational level of citizens in order to ensure sustainable development of Ukraine and its European choice.

Education should be promoted to meet the needs of a particular industry. For example, if the Ukrainian economy is targeted at the agricultural sector, then the government should be focused on vocational education for agrarian complex.

The concept of cooperative education should be extended by providing opportunities to obtain working experience by students during their formal education.

The concepts of community education and continuing education (post-secondary education) should be promoted by using formal and informal methods and by involving uneducated/less educated people in the community to enhance their skill levels, which may increase such people's participation of in doing jobs and business afterwards.

The government of Ukraine should focus on human capital and invest in the education sector (schools, colleges, universities and vocational institutes). The government should also grant subsidies/financial support to organizations initiating training programs to enhance the skill level of their employees, as training can be very productive in developing HC and human resources.

Next, people are the main capital and the driving force of economic success and breakthrough at the micro level. The success of a company depends on how firmly and effectively you invest in your people, in managerial culture and organizational development.

Human Capital Management refers to the management of an company's employees for them to contribute significantly in the overall productivity of company.

There are five major drivers of human capital management:

1. Leadership Practices. Senior executives should support, lead and influence the workforce so that they contribute effectively towards the company.

2. Employee Engagement. It assumes that key responsibility areas of an individual should be designed in line with his education, skills, expertise, experience and also area of interest.

3. Knowledge Accessibility. Companies must organize various training programs to constantly upgrade the existing skills of employees and acquaint them with new learning.

4. Workforce Optimization. A company needs to provide excellent working conditions to the employees to expect the best out of them.

5. Learning Capacity. Employees must be encouraged to come out with new and innovative ideas which might benefit the company.

So, the concept of human capital highlights the importance of soft skills and personality development for employees.

Summing up, we note that human capital is relevant to investments in education, training, and other skills and knowledge by individuals and firms, but also to understanding economy-wide changes in inequality, economic growth, unemployment, and foreign trade.

Conclusion

Our research has proved that human capital for economic growth have a positive impact, especially in terms of the formation of new skills of workers in accordance with the needs of the labor market.

Without human capital, countries will not be able to achieve sustainable economic growth or form a contingent of employees who are ready to take jobs that require advanced qualification and skills in the future, or compete effectively in the global economic arena.

Investing in people in the form of food, health care, quality education, creation of jobs and professional development helps to develop human capital.

At the same time, Ukraine still has significant reserves for the development of human capital.

There is huge hidden potential in the Ukrainian labor market, which may support the country's economic growth, if properly and timely applied in developing the human capital at the micro level but also at the level of the whole economy.

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