Growth in Employment and Wages in Azerbaijan: Dominance of the Public Sector

As of June 1, 2024, a significant number of workers in Azerbaijan's workforce actively contributed to the economy, totaling 1,749.4 thousand people. Of these, 893.1 thousand were employed in the public sector, while 856.3 thousand worked in the private sector, illustrating a balanced employment landscape in the country, reports the State Statistics Committee.

The distribution of hired workers across various sectors showcased diverse economic engagement. Education led the way, employing 18.9 percent of the workforce, followed closely by trade and vehicle repair services at 18.6 percent. The industrial sector accounted for 12.8 percent, while healthcare and social services comprised 8.4 percent. Construction and public administration, along with defense and social security, engaged 6.8 and 6.4 percent of the workforce, respectively. Additionally, transport and storage represented 4.3 percent, and professional, scientific, and technical activities held 3.8 percent.

Wage Growth

From January to May 2024, the average monthly nominal salary of hired workers in Azerbaijan's economy increased by 9.4 percent compared to the same period in the previous year, reaching 1,003.3 Manats. This rise in wages reflects the country's growing economic activities and the increasing demand for skilled labor.

The highest average monthly nominal wages were observed in the mining industry, financial and insurance activities, information and communication, professional, scientific, and technical activities, as well as transport and warehousing sectors. These sectors not only offer higher wages but also signify the areas where economic growth and investments are most pronounced.

Public Sector Employment Dominance

The significant share of the public sector in employment underscores the government's role in driving economic activities and providing stability in the job market. With nearly half of the workforce employed in public institutions, the state continues to play a pivotal role in various sectors, particularly in education and public administration.

Reality: Azerbaijan Faces Employment Challenges Despite Job Creation Efforts

Over the past seven years, Azerbaijan has witnessed a concerning decrease in the number of employed individuals, with official statistics revealing a decline of 150.6 thousand workers. This trend starkly contrasts with the government’s ambitious plan to increase the number of employees to 2.35 million by 2025.

In December 2017, Salim Muslimov, then Minister of Labor and Social Protection of the Population, warned of potential employment issues facing Azerbaijani youth. Speaking at the conference "Labor Market: Reforms, Challenges and Prospects," Muslimov highlighted the looming challenges. "For the period up to 2025, there may be problems with youth employment in Azerbaijan," he emphasized.

Muslimov outlined the need to generate more job opportunities to address this issue. Between 2003 and 2017, Azerbaijan created 1.9 million new jobs, with 1.4 million, or 74 percent, being permanent positions. Looking ahead, the plan was to open another 450 thousand new jobs by 2025, averaging 50 thousand jobs annually.

However, these efforts appear insufficient in light of demographic pressures. The number of young people reaching the age of 18 between 2017 and 2025 is projected to be 2.5 times higher than the number of new jobs being created. "By 2025, 125.2 thousand people will reach the age of 18 every year. During this period, on average, 100,000 youth representatives will be employed for the first time every year," Muslimov noted.

The increasing proportion of young people of working age compounds the issue. From 2000 to 2017, the share of young people among the working-age population rose from 59.5 percent to 68.4 percent. Despite the government’s efforts, the latest data from the State Statistics Committee indicates that job creation has not kept pace with the growing workforce, exacerbating employment challenges, particularly for the youth.

Addressing the employment gap requires more than just job creation. It necessitates strategic planning and investment in sectors that can sustainably absorb the growing number of young job seekers. The government's current shortfall in meeting employment targets underscores the need for a more robust and diversified economic strategy.

As Azerbaijan approaches 2025, the focus must shift towards innovative solutions that align job creation with the skills and aspirations of the youth. This includes fostering entrepreneurship, enhancing vocational training, and attracting investments in high-growth industries. Without such measures, the mismatch between the labor market and the workforce may continue to hinder the country's economic progress and social stability.