Kaktus.media contacted one of the authors of this document, Farid Talyshly, who spoke about key trends and vulnerabilities, as well as the steps that need to be taken to improve the labor market in the country.
Job Search for Everyone
Kyrgyzstan is characterized by a young and growing population, where about 32% are children and adolescents under 15 years old. The share of youth in the working-age population of the country is one of the highest in the region and continues to increase. Since 2000, the population of Kyrgyzstan has grown by nearly 2% annually, and medium-term growth is expected to be around 1.4%.Informal jobs are prevalent in sectors such as small retail trade and agriculture, where many workers do not have official employment contracts and lack social protection.
In the formal sector, which includes about 600,000 workers, employment in state enterprises accounts for about 60% of the total number of workers in the official economy. These figures indicate a significant dependence of the economy on the public sector.
Farid Talyshly notes: "Low labor productivity is explained by several factors, including the high concentration of the workforce in less productive sectors such as agriculture and construction. Moreover, capital-intensive industries, such as gold mining, which accounts for 6.5% of GDP, employ only 0.2% of the workforce. Thus, the average productivity in sectors that create jobs remains extremely low. For example, agriculture, which employs 24% of the workforce, contributes less than 9% to GDP."
Despite the recent growth in wages in Kyrgyzstan, low labor productivity and significantly lower productivity growth compared to real wages make labor costs less competitive compared to other countries in the region. The IMF supports the "National Development Program of Kyrgyzstan until 2030," in which increasing labor productivity is one of the key priorities.
Limited Opportunities for Women
According to the IMF analysis, gender inequality in the labor force in Kyrgyzstan remains significant and is rapidly growing. About 70% of men of working age are employed, while among women this figure is only 45%."This inequality is partially explained by parental responsibilities. Women are forced to leave their jobs to care for children, and the lack of accessible childcare services exacerbates the situation, increasing the unemployment rate among women compared to men. Additionally, remote work, which became popular after the COVID-19 pandemic, is underdeveloped in Kyrgyzstan, further complicating women's employment. Gender inequality in the country has been quite high compared to other regions, and since 2014 it has increased further due to a reduction in employment in agriculture, which has traditionally been the main employer for women. While men have been able to transition to other sectors, many women have not managed to find alternative jobs," the report emphasizes.
The IMF believes that the increased digitization outlined in the "National Development Program of Kyrgyzstan until 2030," as well as the adoption of the "National Gender Equality Strategy until 2030," should help address this issue.
Although the gender gap in the formal sector is relatively small, it remains significant in the informal sector. In both sectors, men are most often employed in services, manufacturing, and construction. The public sector has more women, which is explained by their significant presence in education and healthcare, where they play an important role.
Strict Regulation of the Labor Market
Why do many prefer informal work? The IMF analysis shows that labor market regulation in Kyrgyzstan is stricter than the average in the Caucasus and Central Asia. For example, Kazakhstan has a simplified procedure for hiring qualified foreign workers."The processes of dismissal and hiring in Kyrgyzstan are complex and time-consuming. Employers face strict documentation and justification requirements for dismissals, which increases compliance costs. Unlike Kazakhstan and Uzbekistan, where employers have more flexibility," explains Farid Talyshly.
Strict conditions increase compliance costs, which particularly complicates life for small and medium-sized enterprises, contributing to the growth of the informal economy."The labor market requires more flexible hiring and retention rules, where the protection of workers takes precedence over job security. This approach will enhance labor market flexibility, reduce the scale of informal employment, and stimulate economic growth, allowing companies to more effectively manage staff levels and maintain formal employment. Additionally, simplifying the hiring procedures for foreign specialists will facilitate knowledge transfer and increase the efficiency of the private sector," added the IMF representative.
However, the problem is not limited to this. In the Caucasus and Central Asia region, including Kyrgyzstan, "social protection" programs have limited impact. Verification of rights to unemployment benefits is complicated due to the high share of informal employment. It is difficult to track informal workers and their wages, which increases the risk of improper claims for benefits. The digitization being implemented in Kyrgyzstan may help reduce these risks.
The IMF report also points out additional challenges related to insufficient technical and administrative capacities to assist in job search and vocational training, which is critically important for an effective unemployment benefits system. Unlike developed countries, where benefits automatically increase during economic crises to stabilize income and consumption, in Kyrgyzstan they remain static.
"Creating an unemployment insurance system and expanding vocational training and employment assistance programs can help better meet labor market demands and increase employment levels. The unemployment insurance system should be adaptive, increasing during economic downturns and decreasing when the economy stabilizes. Employment services, career counseling, and upskilling opportunities for job seekers are also important," concluded Farid Talyshly.
