Azerbaijan reforming labour market with focus on human capital Caliber.Az review

The global recession and inflationary pressures that have sharply reduced economic growth even in developed countries have a very negative impact on the global labour market. At the same time the next phase of the STR (scientific and technical revolution), digitalization boost, and introduction of artificial intelligence leads to the displacement of a number of professions. Directly or indirectly, this also affects Azerbaijan, where work is being done to change the structure of human capital and improve the skills of the workforce as part of an adjustment process in the field of employment.

On June 21, the prospects of the local labour market were discussed at the "Human Resources Summit 2023", held in Baku under the motto "Back to the Future".

According to the World Economic Forum (WEF), presented in The Future of Jobs 2023 report, the number of jobs in the world in the next five years will reduce by 14 million.

The WEF document, based on the results of a survey of 803 companies from 27 industry clusters and 45 economies, says that 69 million new jobs will be created by the end of 2027, but at the same time 83 million people will lose their jobs. The job losses will be concentrated in finance and administration: cashiers, including ticket clerks and bankers, post-office clerks, accountants, secretaries and other clerks, as well as legislators and civil servants in the top 10 of job losses.

The usual state of affairs in the labour market will change qualitatively in the next decade in view of the impact of the scientific and technological revolution (STR) of the fourth generation in developing countries. In particular, due to the transition to green energy, the widespread introduction of electric transport with an intelligent control system, and the mass digitalization of the industrial sector, the need for blue-collar jobs will decrease significantly.

At the same time, these difficult changes are creating significant opportunities for wage earners by increasing the demand for specialists in artificial intelligence, machine learning, sustainability, business intelligence, information security, and other areas of the IT sector, including through the rapid development of start-ups, software businesses, and systems integration.

Of course, only those countries that create conditions for the development of human capital in a timely manner and introduce incentive mechanisms for business entities willing to introduce know-how and other elements of the digital economy will benefit.

In this sense, Azerbaijan is making only its first steps towards the digital transformation of the economy, the development of Industry 4.0, and related labour market reforms.

The aim of the "Human Resources Summit 2023" held on June 21, which was organized by the State Employment Agency under the Ministry of Labour and Social Protection of Population, was to outline the main vectors contributing to the formation of a future-ready society based on human capital. The forum also featured panel sessions and workshops with representatives of a number of ministries, MPs, and domestic and foreign experts.

"Today in Azerbaijan there are extensive discussions on increasing employment, development of human resources, and we must together identify ways to address new global challenges," said Sahil Babayev, Minister of Labour and Social Protection of Azerbaijan, speaking at the summit on June 21.

"Azerbaijan has come a long way during the years of independence, its economy has been developing dynamically, and large-scale social projects covering 4 million people have been implemented in the last five years," he added.

The Minister stressed that about $4 billion allocated from the state budget for social projects is mainly directed to increase the population's employment, solution of social issues and development of labour market.

"The growth of population in Azerbaijan makes great demands for an increase of employment, and today the private and public sectors are working on the problem of provision of youth with the job and administrative reforms are implemented for this purpose," Babayev said.

Meanwhile, transforming the decades-old system of labour relations and adapting to changes in market demand for certain professions seems to be a very challenging task, and there are many risks in this area. The Ministry of Labor and Social Protection of Azerbaijan realizes that the rapid development of technology creates new challenges, as to some extent it reduces the need for physical labour, and therefore it is necessary to strengthen the unity between human resources and the labour market.

On the other hand, it is necessary to accelerate the labour market administration processes. According to Minister Babayev, despite the increase in the number of employment contracts by 450,000 over the past four years, not all employed people in Azerbaijan are working under labour contracts that meet all the legal requirements.

Nevertheless, significant progress has been made here as well, believes Elnur Aliyev, Deputy Minister of Economy: "For the first time since the independence of Azerbaijan the number of labour contracts in public and private sectors is equal, and it is important in terms of economic diversification, stable work of the private sector and GDP growth of the country. Today all the processes in the Ministry of Labor are digitalized, and 140 services are rendered to citizens through the electronic platform, including those related to employment and conclusion of employment contracts".

The most important vector of development of the domestic labour market in the long term perspective is the creation of new jobs for 140 thousand citizens, who in the coming decade will return to their homes in the Karabakh region.

"In the territories liberated from occupation, various privileges are provided for private sector activities, also the programs of vocational training are applied to the displaced persons. We have to impart knowledge and skills to many thousands of IDPs, and various preferences will enable citizens with modern knowledge and skills to build successful businesses there," Labour and Social Protection Minister Babayev said.

However, as already noted, the task of developing the economy on the basis of human capital is far from easy, and today, the employed workforce is still dominated by personnel with a relatively low level of qualifications. In other words, raising the overall professional level is one of the key long-term goals for our country.

Every year, hundreds of thousands of young people enter the labour market in Azerbaijan, and it is crucial to prepare them in universities and colleges for current professions, for which new programmes linking the education system to the current and future needs of the labour market must be proposed.

"As the quality of teachers' knowledge increases, so will the quality of personnel in the labour market. Today, thanks to diagnostic assessment and certification, we are able to obtain certain information on the level of qualification of the teaching staff," said Minister of Science and Education Emin Amrullayev.

Thus, according to Maleyka Abbaszadeh, chairman of the State Examination Centre (SEC), 15-16% of students completing their compulsory education enter the labour market annually, and a special state programme is needed to enable this youth to be engaged in any sphere of work. It is for this purpose that the Republic is expanding career guidance counselling programs for high school students: about 100-120 thousand high school graduates receive them annually, and these figures are planned to increase.

In general, modern human capital development mechanisms have been introduced in Azerbaijan in recent years: transformations are being carried out in higher education institutions and specialized scientific centres to improve personnel qualification and train new specialists in IT and electronic technologies, mathematics, physics and other exact sciences.

Türkiye and Israel are providing considerable support to our country in these tasks, helping to develop human capital, particularly in the sphere of cybersecurity, as well as participating in the development of the "government cloud" - G-cloud.

Azerbaijan's Centre for Cyber Security was founded with the support of the Technion University of Israel, where the training of specialists has begun. A branch of the Centre for Industrial Revolution IV was recently established in Baku with the assistance of several European countries and the World Economic Forum (WEF) structures.