Azerbaijan Faces Youth Employment Crisis Amid Demographic Pressures and Job Creation Shortfalls

The employment landscape in Azerbaijan reveals a complex and challenging scenario. According to the State Statistics Committee, as of June 1, 2024, the number of employees in the economy totaled 1,749.4 thousand people, with 893.1 thousand in the public sector and 856.3 thousand in the private sector. This marks an increase of 239 thousand employees compared to early 2017, when the number stood at 1,510.4 thousand, including 883 thousand in the public sector and 627.4 thousand in the non-governmental sector.

Despite these gains, the current employment growth fails to meet the influx of young people entering the labor market. The former Minister of Labor and Social Protection of the Population, Salim Muslimov, had presciently warned of this impending crisis in December 2017 during a conference titled "Labor Market: Reforms, Challenges and Prospects." He highlighted the potential employment challenges facing Azerbaijani youth up to 2025 and emphasized the need to create an additional 450 thousand new jobs by the end of 2025, averaging 50 thousand jobs annually.

Muslimov's warnings were rooted in demographic trends predicting that from 2017 to 2025, the number of young people reaching the age of 18 each year would be approximately 2.5 times higher than the number of new jobs created. He projected that 125.2 thousand young people would reach working age annually, with an average of 100,000 youth expected to enter the workforce each year.

Today, Muslimov’s predictions seem to hold true. The job creation efforts have been insufficient, resulting in a growing gap between available jobs and the incoming labor force. This mismatch leaves many of the more than 100,000 new able-bodied young people entering the job market each year unemployed.

Azerbaijan now faces a critical question: how to balance employment creation and demographic realities. Two potential solutions emerge:

1. Creation of New Jobs: The government’s past performance suggests difficulty in solving this problem, particularly in a weakening economy heavily reliant on declining oil production. The prospects for short-term job creation through government initiatives appear bleak.
2. Reduction of the Retirement Age: Lowering the retirement age to the 2009 levels, where men retired at 60 and women at 57, could free up numerous jobs, especially in the public sector. This measure would address both youth unemployment and the low average life expectancy in Azerbaijan. Currently, the average life expectancy for men is 69.9 years, and for women it is 75.2 years, which means that many cannot fully benefit from a pension.

A reduction in the retirement age could provide immediate relief to the labor market. The current pension system, where pension savings are distributed over 144 months (12 years) , often results in unspent funds being reabsorbed by the state rather than benefiting the heirs, unlike practices in more developed nations.

Comparatively, countries like Sweden, Switzerland, Norway, and Denmark, with higher life expectancies of 77-78 years for men and 82-84 years for women, have a retirement age of 65-67. The lower life expectancy in Azerbaijan raises the question of whether the current retirement age is practical.

The employment challenges facing Azerbaijan are a testament to the intricate interplay between demographic shifts, economic policies, and social welfare. Without substantial reforms and innovative solutions, the country risks a future where young people remain unemployed dependents and pensioners do not experience a well-deserved retirement. The need for a balanced and sustainable approach to job creation and retirement policies has never been more critical.

But while the government ponders how to balance employment, a new and alarming trend is emerging: a 30% increase in juvenile and youth crime. Official statistics show that unemployment plays a significant role in this surge. International research consistently shows that a 1% increase in unemployment can lead to a 7% rise in crime rates, highlighting a troubling correlation that Azerbaijan is now experiencing firsthand.

This issue extends beyond mere statistics; it touches the very fabric of Azerbaijani society. The involvement of youth in radical groups poses a threat not only to social order but also to national security. The question confronting Azerbaijan is not merely about creating jobs but about fostering an environment where young people can thrive without resorting to crime.