Azerbaijan's Pension Crisis: A System Under Strain

Historian Jamil Hasanli's recent Facebook post has reignited debates over Azerbaijan's pension system and labor market, exposing significant shortcomings in social welfare and employment policies. The sharp critique followed Minister of Labor and Social Protection Sahil Babayev's parliamentary statement that individuals who have never worked or contributed to social insurance should not be eligible for pensions. The statement has drawn attention to entrenched structural issues in Azerbaijan's labor and pension frameworks, where employment gaps and limited social safety nets exacerbate inequality.

Hasanli’s remarks highlight unresolved historical inequalities. In the 1950s, Azerbaijan's government found that Russian and Armenian pensioners outnumbered their Azerbaijani counterparts due to discriminatory hiring practices. While efforts were made to address this imbalance, Hasanli argues that similar disparities persist today, disguised by questionable unemployment statistics. Official reports claim unemployment has dropped to 5.4%, but international estimates suggest the actual figure exceeds 24%, with youth unemployment reaching 35–40%. This gap between official rhetoric and reality underscores systemic dysfunction.

Hasanli's critique focuses on the pension system's inability to serve its citizens effectively. Nearly half of the male population reportedly does not reach retirement age, and those who do often receive pensions for only 3–5 years. With the retirement age raised to 65 for both men and women—compared to 60 and 55 two decades ago—Azerbaijan now has one of the highest thresholds in the post-Soviet region. Meanwhile, mandatory contributions are calculated for a 12-year pension period, a duration increasingly impractical given life expectancy trends.

Moreover, citizens' accumulated pension savings are not inheritable, raising questions about fairness and transparency. These funds, deducted directly from wages, should ostensibly remain the property of the contributors or their families. Instead, they are absorbed by the state, fueling widespread dissatisfaction.

Despite a mandatory insurance tariff of 25%—among the highest globally—Azerbaijani pensioners receive meager payouts. Data shows that 50% of pensioners receive less than 350 AZN ($205) monthly, with 100,000 receiving as little as 280 AZN ($164). By contrast, neighboring Georgia and Armenia—countries without Azerbaijan's energy wealth—offer comparatively robust social protection systems.

This disparity is stark given Azerbaijan's hydrocarbon riches. Hasanli highlights the irony: while oil and gas revenues have driven economic growth and bolstered state budgets, they have not translated into significant improvements for ordinary citizens. Instead, the erosion of pension rights and growing inequality underscore a failure in governance.

Employment Challenges and Statistical Manipulation

Employment, a prerequisite for pension eligibility, remains out of reach for many. With over 5 million working-age citizens, Azerbaijan's labor market appears incapable of absorbing its workforce. During the COVID-19 pandemic, over 1.3 million people registered as unemployed in a matter of days, overwhelming government systems. This episode illustrated the gap between official statistics and reality.

Hasanli also points to inconsistencies in voter registration data as evidence of broader statistical manipulation. Between February and December 2024, the number of registered voters reportedly dropped by 602,000—an unexplained discrepancy in a country without significant emigration or mass casualties. This inconsistency, Hasanli argues, reflects attempts to downplay unemployment and poverty levels.

For over two decades, Azerbaijan's pension system has undergone repeated reforms, yet the results have been regressive. The number of pensioners has declined by 160,000 in recent years, and more than half of workers earn below the threshold required to accumulate sufficient pension savings. Meanwhile, the government has resisted calls to establish private pension funds, perpetuating a state monopoly over retirement savings.

Hasanli's critique raises broader questions about governance and accountability. Why, he asks, does a resource-rich nation fail to provide basic social protections? Why are children denied benefits, while members of the ruling elite amass vast wealth?

Hasanli's post casts a spotlight on a system that fails to meet its stated goals of improving social welfare. As calls for reform grow louder, Azerbaijan faces a pivotal choice: address the systemic flaws undermining its labor and pension structures, or risk further alienating a population increasingly disillusioned with its government’s priorities. As neighboring countries progress despite fewer resources, Azerbaijan’s path forward will require not only political will but also a commitment to equitable economic development.