EMPLOYMENT RATE

According to the International Labour Organisation (ILO), the World Economic Forum (WEF) and the World Bank (WB), current trends suggest that employment levels will decline in the coming years. Geopolitical instability in Eurasia, global recession and inflation that have sharply reduced economic growth even in developed countries, as well as the displacement of a number of professions due to digitalisation and the introduction of artificial intelligence could have a very negative impact on the labour market. Nevertheless, in Azerbaijan, business activity and employment have been increasing in recent years on the back of increased production and exports in the non-oil sector, large-scale infrastructure and construction projects in Garabagh, and self-employment projects. 

Robots vs humans?

Last year's ILO report noted that the war in Ukraine has led to serious labour market problems in many post-Soviet countries. Even the formerly prosperous European countries have been affected, with the energy crisis and high prices of fuel, minerals and ores causing the closure of many energy-intensive heavy industry enterprises. Overall, according to the ILO, the number of unemployed in the world increased by 207 million in 2022, 21 million more than in pre-crisis 2019. Global unemployment is expected to remain above pre-pandemic levels until at least 2023, and possibly beyond. The ILO report 'Working Time in Different Countries' released at the end of December last year also shows average earnings falling as working hours decrease. This negative trend will continue in 2023. The January edition of the ILO Global Employment Trends report indicates that global employment will only grow by 1% this year, half the rate of growth of 2.3% a year earlier. At the same time, the number of unemployed will increase by 3 million to a total of 210 million people. Employment will remain just as low in 2024, growing by a mere 1.1%. The research notes that the economic slowdown and instability will force the increasing number of people to accept lower quality jobs with worse pay and less attractive terms. Crises and inflation are increasing the cost of living, which threatens households and can lead to a reduction in aggregate global consumer demand.

Global recession, inflation and geopolitical conflicts are far from the only factors affecting the labour market. The recently published WEF's report The Future of Jobs 2023 estimates that the number of jobs in the world will fall by 14 million, or 2%, over the next five years. The report is based on a survey of 803 companies in 27 industry clusters and 45 economies. It claims that 69 million jobs are expected to be created by the end of 2027 but 83 million people will lose their jobs. Layoffs will primarily affect the financial and administrative sector: cashiers, bankers, as well as postal and accounting workers, secretaries and other clerks. Lawmakers and civil servants are also among the top 10 professions set to shrink. The transition to a green economy and digital industry 4.0 will disrupt the usual state of the labour market over the next decade. But these changes will create significant opportunities for workers. There will be increased demand for specialists in artificial intelligence, machine learning, sustainability, business intelligence, information security and other areas of the IT sector, including start-ups.

A similar statement is indicated in the World Bank (WB) report. Introduction of artificial intelligence (AI) in traditional professions, as well as the massive use of digital technologies, shift to clean energy and redistribution of supply chains will change almost a quarter of global jobs over the next five years. WB analysts estimate that the emergence of technologies such as ChatGPT will automate or replace positions that involve communication and process coordination. About 75% of 800 companies surveyed by the WB intend to adopt AI technology within the next five years, resulting in an expected 26 million job losses.

New professions = new jobs

These processes will take place not only in highly developed countries, but will gradually appear in developing countries as well, including in the post-Soviet space. To what extent is Azerbaijan's labour market ready for qualitative changes? How does Azerbaijan tackle the employment issues during the current global crisis?

Global trends in the digitalisation of business and social life will inevitably affect Azerbaijan, and the government is already taking precautionary measures. "Thanks to the reforms implemented by the government in recent years, there has been tangible progress in human capital development: according to our report for 2010-2020, the percentage of human capital in the country has increased from 50% to 58%," Fadia Saada, WB Regional Director, said at the launch of the Human Capital Review of Azerbaijan.

One of the five basic points of the National Socio-Economic Development Priorities: Azerbaijan 2030 is the development of human capital and the introduction of modern technologies. Medium-term socio-economic development strategy of Azerbaijan for 2022-2026 currently implemented as part of this document, provides for the further growth of industry 4.0 components and increasing the share of knowledge-intensive, innovative production in the non-oil sector, active introduction of IT technologies in agriculture, trade and services, finance, transport, utilities and urban services, medicine. All these steps are designed to improve the competitiveness of the national economy and redirect domestic business towards innovation, which will enable the country to enter the system of international division of labour. "In the past, key trends and globalisation were measured by the size of GDP. Now they are measured by the development of human capital. Accordingly, improvements in human capital and labour market actors need to be coordinated in the fourth and forthcoming fifth industrial revolutions. These factors will determine the further development of Azerbaijan," said Jamaladdin Guliyev, Deputy Chairman of the Azerbaijan State Employment Agency, during the Global HR Summit in Baku.

Today the main task is to train qualified personnel and support pilot high-tech businesses. The first steps in this direction are already underway. Development of a friendly environment for IT start-ups and specialised incubation centres for software business training have started. A group of specialists receive training to be able to implement IoT (Internet of Things) technologies, robotisation projects and developing other know-how. For example, energy efficiency systems and zero-waste, environmentally friendly production for green energy.

Certainly, all these achievements would not be possible without the development of human capital mechanisms. Higher education institutions and specialised scientific centres are being reformed to upgrade the qualifications of staff, as well as to train new specialists in IT and electronics, mathematics, physics and other exact sciences.

Türkiye and Technion University of Israel have supported these developments through the creation of the Azerbaijani Cyber Security Centre, which provides training to specialists in this field. In addition, thanks to the assistance of several European countries, as well as WEF, a branch of the Centre for Industrial Revolution IV has been established in Baku. "We must combine our efforts to align economic development and innovative production with education, practical and applied science, as well as with other areas so that we could form the capital to promote education," Azerbaijani Minister of Economy Mikayil Jabbarov said.

Business vs unemployment

The government's key objective is to expand the labour market and compensate for lost jobs in obsolete spheres of the national economy. This includes the development of technology parks, industrial zones and quarters, free economic zones and other production clusters, where more than 10,000 jobs have been created so far. This process continues even today. In the next year or two, new projects worth over ₼370m will be implemented in industrial zones, which will create additional 2,400 permanent jobs. Last year, the share of industrial zones in the production of non-oil industrial products in Azerbaijan reached 16.7%, and its share in exports to more than 50 countries was 29.5%.

The small and medium-sized entrepreneurship (SME) segment should also help to increase vacancies in the labour market. The number of active entrepreneurs in the country is growing and currently exceeds 720,000. 282,000 people have been employed in the last five years through SMEs and employment services. By 2026, it is planned to increase the share of the SME production to 35% of GDP, while the employment rate in non-mineral oriented enterprises will reach 60%. It is therefore necessary to further optimise the business climate by creating an ecosystem with effective tax, financial and other incentives, as well as expanding export opportunities for the SME sector.

Another important tool for reducing unemployment in the republic has been the self-employment programme. The number of people involved in it has been rising smoothly, from 1,232 in 2017 to more than 16,200 last year. Presently, about 17,000 citizens are expected to participate in the program, which should be assisted by the increased budget of the Unemployment Insurance Fund up to ₼212.7m. Over the last five years, thanks to the self-employment program, it has been possible to assist more than 60,000 unemployed families in starting micro and small businesses.

Regeneration programme in Garabagh has been implemented for three years, being a major catalyst for the growth of the local labour market, impressing with the involvement of many thousands of specialists and the amount of capital investment. As Finance Minister Samir Sharifov noted, the total cost of the recovery of the liberated territories in 2021-2023 will reach ₼9.7b. Given the implementation of the Great Return programme, the creation of residential and social infrastructure in the liberated areas, development of agro-industrial clusters will lead to the gradual return of over 35,000 former internally displaced persons and will be an important source for new jobs for many years to come.