State, challenges and prospects of Azerbaijani labour market Review by Caliber.Az

In the year 2022 drawing to a close, Azerbaijan has recorded positive changes in the labour market and overcoming a number of negative factors caused by the pandemic crisis and decline in business activity. Export demand and the resulting growth in non-oil sector output have generally increased labour demand. The growing scale of infrastructure and construction projects in the Karabakh region, as well as self-employment initiatives, has contributed to the creation of new vacancies. Azerbaijani Labour and Social Protection Minister Sahil Babayev highlighted the positive changes in employment on December 21 during a forum on career development entitled "Get ready for the future!".

The year 2022 is approaching and can be described as rather complicated and controversial, but generally positive for the revival of economic and labour activity in Azerbaijan. Macroeconomic stability was multi-directionally affected by high imported inflation, rising transportation costs, and adjustments in the tariffs of natural monopolies. On the other hand, narrowing trade opportunities, complications in transport logistics, and access to the Ukrainian and Russian labour markets have had a very negative impact on the geographical diversification of our country's idle labour force. The Russian and Ukrainian markets have traditionally played an important role for local guest workers and seasonal traders, but with the ongoing war since February, demand for such services has declined markedly.

However, according to the International Labour Organization (ILO), the war in Ukraine has led to similar labour market problems in many post-Soviet countries, affecting even the formerly prosperous European countries, where the energy crisis and high prices for gas, minerals, and ores have caused many energy-intensive enterprises in the heavy industry sector to close. Overall, according to the ILO, the number of unemployed worldwide increased by 207 million in 2022, 21 million more than in pre-crisis 2019, and global unemployment is expected to remain above pre-pandemic levels until at least 2023, and possibly beyond. Also, the authors of the ILO's Cross-Country Working Time report, published the other day, found average wage levels falling as the work week shortened.

Nevertheless, Azerbaijan has managed to partly compensate for the external negative by expanding the capacity of its domestic labour market. The most important growth driver has been a relatively high export performance, which has provided orders to local industrial, processing, and farming enterprises, thereby increasing demand for labour. In January-November 2022, domestic non-oil exports exceeded $2.688 billion, up 14% from the previous year. In turn, the total exports of agricultural products for the 10 months amounted to $672.1 million, an increase of 11%. Growth in these sectors had a multiplier effect, increasing employment in transportation and services. The increase in personnel demand in the tourism and hospitality sector is also significant. For 11 months of the current year, more than 1.458 million foreign tourists visited Azerbaijan, which indicates 2.1-fold growth in comparison with the same period of last year.

A significant contribution to the opening of new jobs was made by the development of technology parks, industrial zones, industrial clusters, and other production clusters, where more than 10,000 jobs have been created so far. And this process continues, in the next year or two new projects worth more than 370 million manats will be implemented in industrial zones, which will enable to create more than 2400 permanent jobs.

The segment of small and medium-sized business (SMB), financed by the Business Development Fund (BDF), which last year allocated concessional loans for 130.6 million manats and created about 3.2 thousand jobs, contributes to the increase of vacancies in the labour market. This work continued this year as well: 119,6 million manats were allocated in 11 months through BDF new jobs were created, and by the end of the year these figures will increase even more.

Another important tool for reducing unemployment has been the self-employment programme: the 2016 decree of the head of state "On Additional Measures to Ensure Self-Employment" was the starting point for the country's most massive micro-business financing programme. The number of citizens involved in the programme grew smoothly, rising from 1,232 in 2017 to more than 16,200 last year. And in 2023, some 17,000 Azerbaijani citizens will be involved in the self-employment programme, with the Unemployment Insurance Fund budget of 212.7 million manats contributing to the expansion of self-employment programmes, attracting the unemployed to mass public works, especially in the country's regions.

The role of the most significant driving force for supply growth in the local labour market has been played for more than two years by the big "Karabakh construction", which is impressive both by the scale of infrastructure works, involvement of many thousands of specialists and the volume of capital investments. Azerbaijani Finance Minister Samir Sharifov recently noted that the total cost of reconstruction of the liberated territories for the period from 2021 to 2023 will amount to 9.7 billion manats. Such significant state injections became a catalyst for the revival of the construction industry: in particular, in January-November 2022 the production of construction materials in the country grew by 14.5%, and over the past two years this industry recorded a noticeable personnel demand. The volume of financing of Karabakh projects will multiply by 2027, taking into account plans to build about three and a half thousand flats and individual houses in the liberated territories, where 34.5 thousand families of internally displaced persons are planned to be gradually settled. Tens of thousands of builders, engineers, and specialists from service, design, consulting, and transport companies will be involved in the implementation of large-scale housing construction as well as the laying of the distribution and utility infrastructure, the construction of social and commercial facilities in the towns and villages to be revived.

The above-mentioned factors have played a basic role in supporting the recovery of the labour market in Azerbaijan in the post-pandemic period. Thus, according to the statistical data for the three quarters of this year, the unemployment rate has improved to almost the pre-pandemic level of 5.7%. By comparison, during the peak COVID 2019 pandemic in 2020, the figure was 7.2%. A more optimistic forecast for the decrease in the level of unemployment in Azerbaijan is given by the specialists of the international rating agency S&P Global Ratings: according to their data, in 2022 this figure will be 5%, in 2023 - 4.9%, and in 2024-2025 the level of unemployment in the country will not exceed 4.7%.

"Today Azerbaijan pursues a multi-vector policy in labour market: so, efforts of employment services have contributed to the creation of small business for more than 60,000 families, the number of employment contracts in the past 4 years has increased by over 400,000," Labour Minister Sahil Babayev said speaking at the forum "Get ready for the future!". According to the minister, today all processes of the agency's activities are being digitized and 140 services are provided to citizens through an electronic platform, including in the field of employment. "Nevertheless, there is a lot of work ahead and we have new challenges: there is a low level of qualified labour among employees and increasing professionalism of labour force is one of our main goals. Every year, hundreds of thousands of young people enter the labour market in Azerbaijan, and it is important to attract them to relevant professions, for which we need to offer new employment programmes," Sahil Babayev stressed. As an example, he reminded that today only a little more than half of the graduates of pedagogical universities can be employed immediately after graduation. In this regard, the minister stressed the importance of expanding career counselling programmes for high school students: "Around 100,000-120,000 graduates receive career guidance counselling every year and this number needs to be increased."

In turn, Minister of Education and Science Emin Amrullayev said that one of the greatest needs is to involve students in relevant internship programmes during their studies, and, in his opinion, each university should have its own strategy for working with future employers.