A profile of the LABOUR MARKET IN GEORGIA

Author: Sabine Bernabè, London School of Economics

This report provides a study of the labour market in Georgia based on an analysis 1998-1999 data of the Georgia Labour Force Survey, which has been carried out by the State Department for Statistics with the assistance of UNDP and the ILO. Additional information on survey sampling procedure, instruments and implementation can be found in the ‘Labour Force in Georgia: 1998-1999 Statistical Report’ prepared by the Georgian State Department for Statistics .

It begins with a historical background, briefly describing the Soviet labour market and the early years of transition to a market economy. It reveals that by the end of the 1990s, almost 10 years after the disintegration of the Soviet Union, the massive collapse in output had not been matched by an increase in open unemployment, as had been widely predicted. This was initially due to labour hoarding within enterprises, and then to a reallocation of labour from paid-employment into self-employment in small-plot agriculture. Contrary to expectations, privatisation and restructuring have not led to a growth in small and medium enterprises, which were to be the driving force of economic growth.

The report goes on to discuss the misleadingly high levels of labour force participation, which disguise considerable age, urban/rural and regional dimensions. It then provides an overview of employment, which reveals a considerable fall in the rate of employment since the beginning of the transition period and a dramatic change in its structure, with a large-scale reduction of workers in industry and a doubling of those in agriculture. We highlight the generous definition of employment in Georgia, which results in most rural dwellers being considered self-employed. Although there has also been a shift from state to private sector employment, we reveal that the majority of those working in the private sector are self-employed in small plot rural agriculture, whilst paid-employees are still largely urban, and in the State sector. A closer look at self-employment finds high participation rates for old-age pensioners, very low incomes and considerable underemployment. Paid-employees are found to have high levels of education and to suffer from very low wages and wage arrears. Finally, we analyse the urban/rural, age and educational dimensions of unemployment and discuss how unemployment rates are artificially low, disguising substantial amounts of hidden unemployment.

The collapse of the centrally planned economy also led to a disruption of the enterprise-based social security system and its replacement with a universal benefit system, financed by tax revenue. We discuss its chronic financial difficulties, which have resulted in very limited eligibility, extremely low benefit levels and persistent payment arrears. Consequently, the labour market has become the only provider of livelihoods, however employment does not guarantee a minimum standard of living, as the majority of the employed are now living below the poverty line.

The report concludes with a summary of the major labour market issues and some general policy recommendations.

This report has been published with the financial assistance of UNDP Georgia within the UNDP/ILO project "Technical Assistance to Georgia in the Field of Labour Statistics."