Anatomy of Georgian Unemployment
24 November, 2011
Anatomy of Georgian Unemployment

The increasing unemployment rate of Georgia contradicts the economic growth of the country and bespeaks of serious structural problems.

It is an open secret that GDP growth confirms the economic growth and generally it is followed by increased employment level. However, these two intertwined indicators contradict each other in Georgia.

Georgian unemployment rate has been steadily increasing since 1998 from 12.4% all the way up to 16.3% as of 2010 against the backdrop of increasing GDP; it speaks of problems in economy.

 The IMF resident representative in the latest regional outlook also stressed that in spite of economic growth in Georgia, the unemployment level did not diminish.

Unemployment imposes a number of costs for a nation, such as economic, physiological and social ones, the Economic Policy Research Center (EPRC), stated in its research published on November 16, 2011.

According to the survey, conducted by National Democratic Institute (NDI), out of 16 161 polled  persons, 67% of the respondents consider themselves unemployed. This number includes non-active labor force and persons not looking for a job. The NDI study highlights the importance of employment for the Georgian society. According to the results observed in September 2011, 62% of the population believes that “jobs” is a number one national issue, while 74% believes it to be the number one local issue.

When considering unemployment education level of the unemployed workforce also matters. According to the UN Human Development Report (2010), 81% of unemployed have secondary or higher education that means the educated workforce is idle and cannot contribute to the country’s economy.

The World Competitiveness Report (2011-2012) assures inadequately educated workforce is a major constraint to doing business in the country. It is largely believed that changes in economic structure cause high unemployment level. Most of the countries in the transition economies suffer from the so-called “structural unemployment”. This type of unemployment is a long-term one, caused mainly by a mismatch between the skills of workers and the available jobs on the market.

Another unemployment type that the EPRC finds in Georgian reality is cyclical unemployment: kind of a short term job that occurs during economic recessions, when economic output falls and business cycles are affected by low market demand.

A possible way to determine the type of unemployment in the country is the correlation of the Foreign Direct Investments (FDI) inflow in major economic sectors and the number of employees where FDIs go. FDIs account for the bulk of total investments in Georgia, as domestic savings are inadequate to meet local financing needs. Therefore, FDI is believed to be one of the key channels to output and employment growth. The statistical analysis proved a mismatch between the employment growth and FDI in relevant sectors. In Georgia that is the reason why employment level does not increase in compliance with the GDP growth.

“This might be explained by time lags, as well as the fact that not all the sectors possess link term employment generation potential. Probably, the idea is that for sustainable increase in formal employment permanent and steady flows of FDIs is necessary. In short FDI in Georgia does not influence employment at its highest potential. The reason might lie once again in structural unemployment; this also explains that even in 2007 when GDP growth level was as high as 12%, unemployment was still at a considerable level of 13.3%,” the EPRC experts say.

Contradictions prevail in employment structure too. More than 50% of Georgian employed people is self-employed and largely concentrated in agriculture, whereas this sector makes just around 9% of the country’s GDP.

“No need to argue that a sector which employs about 50% of the total number of employed, should contribute more than 9% in the total GDP figure,” Irina Guruli, Program Coordinator at the EPRC, said.

To further strengthen the statement, unemployment rate in rural areas is 7.9%, as compared to 27.2% for urban areas. Out of total people employed in rural areas 80% are self-employed, i.e. employed in agricultural sector that frequently means that they can meet only their family needs and do not produce any extra output to contribute to the entire economy, Davit Narmania, an economic analyst said.

According to the statistics, the only category with demonstrated growth is the category of self-employed, whereas the number of employed people who are “hired” has been declining. Self employed population is mostly concentrated in the regions for a clear reason: the agricultural land.

Another sore issue is incomes of employed people. According to the UN Human Development Report, 17.4% of the employed people live on less than USD 1.25 USD per day. The figure is zero in the developed countries however it is an issue of importance in developing world. Compared to some post soviet countries Georgian indicator is lower, but it does not solve the problem.

Boosting entrepreneurship is believed to alleviate the unemployment related problems. The top three barriers Georgian government has to address to this end is access to finance, inflation, and inadequately educated workforce.

Print
Other Stories
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Winemakers to produce Kvanchkara in its place of origin - Racha
Khvanchakara is a semi-sweet Georgian red wine which originates from Racha, in the western part of Georgia. Kvanchkara is made of two types of grape Mujuretuli and Aleksandrouli.
The level of Georgian wine and Chacha exported has increased
The National Wine Agency of Georgia has recently published statistical information about the level of Georgian wine and Chacha exported between January and July, 2018.
New fire engines to be Manufactured in Georgia
The Acting Head of the Emergency Management Agency Shalva Khutsishvili said that the old Zili fire engines (which were made in the USSR) will be phased out and replaced with new ones, manufactured in Georgia.
Georgia witnesses a record number of tourists
The Georgian National Tourism Administration publishes statistical information about international visits to Georgia.
Canadian businessman plans to build a hotel in Bakhmaro
Canadian businessman Vadim Malishev plans to build a hotel in Bakhmaro resort, Guria, in the western part of Georgia.
Coffee Factory will open in Tbilisi in October
The first coffee factory (which will be located on the Kakheti highway) in Tbilisi will open in October.
Places in Georgia where real estate is the most expensive
The real estate market in Georgia is growing annually. In Tbilisi as well as other regions of Georgia new developments are increasingly taking place.
How much does a vacation cost in Tbilisi?
It is the middle of summer and those who have not yet taken a vacation are looking for an appropriate place for sure!
The price for extreme sports in Georgia
Georgia offers a variety of options to extreme sport lovers.
The number of Georgians who own property abroad increases
The number of foreign properties owned by Georgians is increasing.
How much does Taxi cost in Tbilisi?
Stories how Taxi drivers try to deceive passengers and charge them with more money than they should pay are known for everybody all over the world.
What are the highest paid areas in Georgia
According to the data collected by the National Statistics Office of Georgia in the first quarter of 2018 the highest paid jobs in Georgia are found in the financial and insurance fields.
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
20.09.2018
21.09.2018
USD
1
USD
2.6179
2.6193
EUR
1
EUR
3.0606
3.0693
GBP
1
GBP
3.4517
3.4651
RUB
100
RUB
3.9087
3.9538
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.6193
EUR
1
EUR
3.0693
GBP
1
GBP
3.4651
RUB
100
RUB
3.9538