Central Asia’s unemployment challenge: trends, causes and impact of AI

Experts say labour market in Europe and Central Asia has stabilized. Photo credit: Midjourney
Experts say labour market in Europe and Central Asia has stabilized. Photo credit: Midjourney

In the face of a looming global employment crisis, Central Asia stands at the crossroads of uncertainty and opportunity. The International Labour Organization (ILO) warns in 2024, an additional 2 million will be looking for a job, which will propel the global unemployment rate to 5.2%. In this analytical piece, Kazinform News Agency delves into the state of the global labor market, the unemployment rate in Central Asian countries, its causes, and the measures being taken to reduce it.

Global labor market trends

ILO’s World Employment and Social Outlook: Trends 2024 report indicates that while unemployment and the job gap have fallen below pre-pandemic levels, the global unemployment rate is expected to rise in 2024.

According to the ILO, the global unemployment rate in 2023 was 5.1%, a slight improvement over 5.3% in 2022. However, this conceals underlying instabilities due to new vulnerability factors. For the Eurasian continent, this includes geopolitical conflicts, disruptions in supply chains, and uneven post-pandemic recovery.

The ILO forecasts an additional 2 million job seekers in 2024, pushing the global unemployment rate to 5.2%. The level of informal employment is expected to remain steady, accounting for about 58% of the global workforce.

Significant disparities persist between countries with higher and lower income levels. In 2023, the unemployment rate in high-income countries remained at 4.5%, while in low-income countries it stood at 5.7%.

The labor market also shows imbalances in gender and age aspects. A notable gender gap persists, especially in countries with emerging market economies and developing countries.

Youth unemployment continues to be problematic. The proportion of individuals defined as NEET (not in employment, education, or training) remains high, especially among young women, posing challenges for long-term employment prospects.

As for the region of Europe and Central, ILO notes that the labor market in Europe and Central Asia has stabilized.

“In the region as a whole, employment is continuing to expand in line with growth in the working-age population. The unemployment rate decreased to 5.7% in 2023 from a recent high of 7% in 2020. The labor force participation rate is also at around the same level as in pre-pandemic and long-term trends, around 58.5%,” says the report.

Unemployment in Uzbekistan at 1.3 million

According to the Ministry of Employment and Poverty Reduction of Uzbekistan, the unemployment rate in the country decreased by 2.1% to 6.8% by the end of 2023. The labor force numbered 19.7 million people as of January 1, 2024, an increase of 207,000 people (1.1%).

The main causes of unemployment in Uzbekistan include a lack of and uneven distribution of jobs, low competitiveness in the labor market, insufficient investment in the economic sector, a lack of qualified specialists, and demographic factors. These issues are exacerbated by regional imbalances, namely a high labor market index in Tashkent and the Tashkent region compared to lower levels in other regions.

Experts highlight several characteristics of Uzbekistan's labor market that contribute to the specificity of unemployment. A notable feature is the professional-qualification imbalance between labor demand and supply. There is a shortage of highly qualified personnel to meet existing demand, while there is a surplus of less qualified labor.

Photo credit: cabar.asia
Photo credit: cabar.asia

 

Demographic pressure is a significant cause of unemployment. Uzbekistan's population at the beginning of 2024 was 36.8 million. Over the last five years, population growth rates accelerated to 2.1% or approximately 700,000-800,000 people annually. This indicates a short- to medium-term increase in demographic pressure, which could lead to a greater need for job creation in the long term.

Another specific feature is the high degree of the shadow economy, which contributes to persistent frictional unemployment. President of Uzbekistan Shavkat Mirziyoyev has called the shadow economy the most pressing issue, as nearly 5 million people work in informal sectors. The shadow economy costs Uzbekistan’s GDP $10.8 billion, with government budget losses estimated at $2.4 billion. Employment without formal labor agreements contributes to the chaotic release of socially vulnerable labor.

According to the Ministry of Employment and Poverty Reduction of Uzbekistan, 4.1 million citizens were employed in 2023, including 2.3 million in permanent and seasonal jobs, 112,800 in paid public works, and another 1.6 million became self-employed. Under the program titled 20,000 Entrepreneurs and 500,000 Qualified Specialists, agreements were signed with 6,700 business entities, creating jobs for 455,000 residents.

In 2024, Uzbekistan plans to create 5 million new jobs as part of the employment assistance program. Officially, the nation has 1.3 million unemployed. This year, another 2.4 million people will enter the labor market. In particular, conditions are being created to employ 2.5 million people in the service sector, 2.1 million in agriculture, 250,000 in investment projects and industry, and 140,000 in construction.

Economic crises affect the labor market in the Kyrgyz Republic

According to the Ministry of Labor, Social Security, and Migration of the Kyrgyz Republic, the population of the country at the beginning of 2024 was 7.14 million people. Of these, 2.71 million are economically active. The employed population numbers 2.58 million, with 131,600 unemployed.

The overall unemployment rate is 4.9%. As of February 1, 2024, the official unemployment rate in the country was 2.4%. The number of unemployed registered with the employment service as of February 1, 2024, was 90,500 people. The number of officially registered unemployed was 66,200.

Experts identify economic and social causes of unemployment in the Kyrgyz Republic. The main economic factor is a lack of investment. Moreover, economic crises, both domestic and global, negatively affect the labor market. The country's high dependence on agriculture and extractive industries makes the economy vulnerable to changes in global commodity and product prices. The main social factors include a lack of appropriate education and qualifications among the population and demographic population growth, which puts pressure on the labor market.

In the Kyrgyz Republic, government measures to combat unemployment include programs for active employment, support for youth and migrants, development of professional training and retraining, support for entrepreneurship, and the creation of new jobs.

According to the ministry, 1,008 unemployed citizens were employed with the assistance of the employment service in 2023. In addition, assistance in employment is provided through active measures in the labor market. With the increase in unemployment and the shortage of jobs, the priority direction is the training of unemployed citizens. To improve the competitiveness of the unemployed in the labor market, considering the labor market's needs for labor in certain professions, employment services directed 402 unemployed citizens for professional training as of February 1, 2024. The training of unemployed citizens was mainly conducted in professions in demand in the labor market, ranging from computer operators, translators, accountants, and car drivers to tailors and beekeepers.

More than 46% of the unemployed in Tajikistan are women

According to the Ministry of Labor, Migration, and Employment of the Population of Tajikistan, the economically active population in December 2023 was 2.67 million people.

The number of officially registered unemployed at the end of 2023 was 48,300 people, a decrease of 9.7% compared to the same period in 2022. The officially registered unemployment rate is 1.8%. Analysis of this process showed that of the total number of officially registered unemployed, 22,400, or 46.3%, are women.

According to the Agency of Statistics of Tajikistan, 230,000 new, additional, and restored jobs were created by legal and physical persons in 2023.

In particular, 155,284 (67.3%) jobs were created in the real sector of the economy and 75,463 (32.7%) in the service sector of the economy. The majority of jobs in the real sector are in agriculture, hunting, forestry, fishing, mining, and manufacturing industries, construction, and services.

Photo credit: Pexels
Photo credit: Pexels

According to the ministry, of the total number of people leaving the country, 627,000 went to Russia, 18,400 to Kazakhstan, and 6,500 to other countries.

To provide employment for labor migrants abroad, the country has 46 business entities licensed by the Migration Service of Tajikistan and engaged in exporting labor abroad.

To diversify labor migration and prepare in-demand labor, Tajikistan is negotiating at the government level with Canada, Germany, Japan, Kuwait, Latvia, Poland, Russia, Saudi Arabia, Singapore, South Korea, the Philippines, the United Kingdom and the United States.

Unemployment in Kazakhstan decreased by 0.2%

According to the Bureau of National Statistics of Kazakhstan, by the end of 2023, the number of unemployed people in the country —according to the ILO methodology—was 445,900, or 4.7%. Compared to the previous year, the indicator decreased by 0.2%.

At the same time, officially, at the end of December 2023, 127,800 people, or 1.8% of the labor force, were registered as unemployed in the Ministry of Labor and Social Protection of the Population of Kazakhstan.

Unemployment dynamics in Kazakhstan. Infographics designed by Kazinform.
Unemployment dynamics in Kazakhstan. Infographics designed by Kazinform.

The unemployment rate among youth aged 15 to 34 was 3.4%. The share of NEET youth who are not working and not engaged in education or vocational training was 7.1%.

Each region of Kazakhstan has a unique labor market influenced by various factors, such as the sectoral structure of the economy, population density, migration processes, the level of professional training, the activity of enterprises, and the activity of the public sector.

In terms of regional breakdown, the highest number of unemployed live in Almaty (51,700 people), as well as in the Turkistan (41,600 people) and Almaty (34,400 people) regions. These regions have a labor surplus, where self-employment is widespread, and the level of training of the unemployed population does not meet the needs of employers. The lowest number of unemployed was in the Ulytau (4,500 people), North Kazakhstan (12,800 people), and Abai (14,300 people) regions.

According to the selective survey of employment of the population in 2023, 9 million people were employed in various sectors of the economy of Kazakhstan, of which 6.9 million people (76.4% of the total number employed in the economy) worked for hire, and 2.1 million people (23.6%) were self-employed.

Forecast of demand for personnel

According to the medium-term forecast prepared by the Center for the Development of Labor Resources, in the most likely scenario, the demand for hired workers for 2023-2030 will total 1.832 million people. The peak demand for hired labor is expected in 2028 - 240,500 people. This is partly due to the fact that the increase in the retirement age for women will be suspended from 2023 to 2028.

During 2023-2030, the largest cumulative demand for hired workers will be in the fields of education (380,000 people), trade (206,900 people), and agriculture (175,200 people). The high demand for personnel in the field of education is due to the baby boom observed in the country since the beginning of the 2000s.

Demographic factors will affect the growth of the labor force

According to the demographic forecast of the center until 2050, by 2026, the labor force in Kazakhstan will stabilize at 9.5 million people, will actively begin to grow from 2028, and will reach 12 million people by 2050.

“More or less active growth of the labor force is expected, starting from 2028. By 2031, we will approach 10 million people, by 2040 – to 11 million. The labor force will grow by approximately 100,000 people per year. By 2050, we will take the bar of 12 million people, which means that compared to 2023 (9.256 million), the increase will be 28%,” said Dmitry Shumekov, the director of the center’s Department of Forecasting and Research.

The Impact of technological progress on the labor market

According to estimates by experts, almost 30% of functions performed by people can be automated with a high or moderate degree of probability. The largest part of the functions that can be performed through the automation of processes is characteristic of the group of managers and civil servants, where it reaches 59%, as well as employees in the field of administration - 48%, professionals - 46% and technicians - 29%. In general, according to the analysis, it was found that 29% of functions performed by people can be automated. At the same time, 13% of functions can be performed by generative artificial intelligence.

Large cities and industrially developed regions are particularly vulnerable to the risks stemming from automation, where, as a result of its process, from 33% to 36% of jobs can be automated. At the same time, directly due to generative artificial intelligence, the biggest risks arise in Almaty as a central hub for finance and information and communication technologies, which are most vulnerable in terms of employment impact.

How Kazakhstan reduces unemployment

According to the Ministry of Labor and Social Protection of the Population of Kazakhstan, as a result of the implementation of active employment assistance measures in 2023, more than 900,000 Kazakh citizens were employed. Among them are the application of the mechanism of social partnership, stimulation of self-employment of the population, support for small business, retraining of personnel, organization of public works, quota of jobs, economic support of employers, and information support of the labor market.

Unemployment dynamics in Kazakhstan. Infographics designed by Kazinform.
Unemployment dynamics in Kazakhstan. Infographics designed by Kazinform.

By the end of 2023, more than 963,000 citizens were employed in Kazakhstan.

Another direction of employment assistance measures is the provision of state grants for socially vulnerable categories of the population and concessional microcredits for youth aimed at supporting citizens' entrepreneurial initiatives. Last year, microcredits were issued to 5,733 citizens. In 2024, it is planned to issue microcredits to 5,800 people, with 29 billion tenge ($64.9 million) allocated for these purposes.

The Electronic Labor Exchange provides a wide range of employment opportunities, but there is also the possibility of independent online learning. The website posts 475 online courses in 181 specialties, of which 241 are free. To date, 307,100 people have received certificates of completion.

While combatting unemployment doesn’t have a one-size-fits-all solution, each country has to use different paths to solve this problem. Unemployment cannot be eliminated entirely, yet it is within each government’s power to reduce the likelihood of job loss.

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