Kaktus.media spoke with Farid Talyshly, one of the authors of this report. He revealed key trends, identified vulnerabilities, and offered recommendations for increasing the flexibility and convenience of the labor market for both employers and employees.
How to Ensure Jobs for All
The country is experiencing rapid population growth, with 32% of the population being children and adolescents under 15 years old. The share of youth among the working-age population is one of the highest in the region and continues to grow. Since the early 2000s, Kyrgyzstan's population has been increasing by nearly 2% annually, and this growth is expected to be 1.4% in the future.Informal employment prevails in areas such as retail, domestic work, and subsistence agriculture, where workers often lack formal employment contracts and social protection.
In the formal sector, only about 600,000 people are employed, including workers in state-owned enterprises (SOEs). The public sector accounts for about 60% of all formal employment, indicating a high dependence of the economy on the public sector.
“Low labor productivity can be explained by several factors, including the concentration of the workforce in less productive sectors such as agriculture, transport, and construction. Moreover, a large part of the economy remains in the informal sector, where access to training and effective organizational practices is limited. For example, capital-intensive sectors like gold mining account for only 6.5% of GDP, yet they employ just 0.2% of the workforce. As a result, average labor productivity in sectors that create more jobs remains low. Agriculture, where 24% of the workforce is employed, contributes less than 9% to GDP,” noted Farid Talyshly.
In recent years, wages in Kyrgyzstan have been rising. However, since labor productivity remains low and its growth significantly lags behind the increase in real wages, the relative labor costs are becoming less competitive compared to other countries in the region. The IMF supports the adoption of the “National Development Program of Kyrgyzstan until 2030,” in which increasing labor productivity is one of the key priorities.
Limited Opportunities for Women
The IMF analysis shows that gender inequality in the labor sphere in Kyrgyzstan is significantly increasing. About 70% of men of working age are employed, while among women this figure is only 45%.“Such inequality is partly explained by childcare responsibilities. Women often have to leave work to care for children. The lack of affordable childcare services further limits their employment opportunities and contributes to a higher unemployment rate among women compared to men. Additionally, remote work, which rapidly developed during the COVID-19 pandemic, has still not gained traction in Kyrgyzstan, making it difficult for women to work from home. Gender inequality in the country is significantly higher than in other countries in the region and has become even more pronounced due to the contraction of the agricultural sector, which has historically been the main employer for women. Men manage to switch to other sectors, while many women face difficulties in finding alternative employment,” the report states.
The IMF believes that active digitalization, as outlined in the “National Development Program of Kyrgyzstan until 2030,” as well as the adoption of the “National Gender Equality Strategy until 2030,” will help address this issue.
The gender gap in the formal sector is minimal but remains noticeable in the informal sector. In both cases, men are more often employed in services, manufacturing, and construction. In the public sector, the share of women is higher, largely due to their numbers in education and healthcare, where they play a key role.
Strict Regulation of the Labor Market
Why do so many people choose informal employment? According to the IMF, labor market regulation in Kyrgyzstan is stricter than the average in the Caucasus and Central Asia. For example, in Kazakhstan, there are simplified procedures for hiring foreign specialists.“The procedures for hiring and firing in Kyrgyzstan are complex and time-consuming. Employers are required to comply with strict documentation and justification requirements for dismissals, which increases compliance costs. This is different from the situation in Kazakhstan and Uzbekistan, where employers have more freedom,” noted Farid Talyshly.
Strict conditions increase compliance costs, which can be particularly burdensome for small and medium-sized enterprises, contributing to the growth of the informal economy.“The labor market needs more flexible rules for hiring and retaining employees, with a focus on protecting workers rather than jobs. This could enhance the flexibility of the labor market, reduce the scale of informal employment, and stimulate economic growth, allowing companies to manage their workforce more effectively and promote formal employment. Additionally, simplifying the hiring of foreign specialists will aid in knowledge transfer and improve the efficiency of the private sector,” emphasized the IMF's resident representative.
However, this is not the only issue. In the region, including Kyrgyzstan, labor market social protection programs play a limited role. Defining rights to unemployment benefits is a complex task due to the significant number of informally employed workers. Tracking informal workers and their wages is challenging, increasing the risk of abuse in receiving unemployment benefits. As mentioned earlier, digitalization in Kyrgyzstan could significantly reduce these risks.
The IMF report highlights that additional difficulties arise from limited technical and administrative capacities to assist in job searching and vocational training, which are important components of an effective unemployment benefits system. Unlike developed economies, where benefits automatically increase in times of economic shocks to stabilize family incomes, in Kyrgyzstan, these benefits remain fixed.
“Establishing an unemployment insurance system and expanding vocational training and employment assistance programs can help better align worker training with market demands and improve employment levels. The unemployment insurance system should increase during economic downturns and decrease when the economy stabilizes. Employment services, career counseling, and opportunities for upskilling will also provide support in job searching,” concluded Farid Talyshly.
