Kaktus.media spoke with one of the report's authors, Farid Talyshly, who discussed key trends and vulnerabilities, as well as necessary changes to create a more flexible and convenient employment system for workers and employers.
How to Ensure Jobs for All
Kyrgyzstan is experiencing a growing young population, with about 32% consisting of children and adolescents under 15 years old. The share of youth in the working-age population is one of the highest in the region and is expected to increase. Since 2000, the country's population has been growing by nearly 2% per year, with a projected medium-term increase of 1.4%.Informal employment is particularly widespread in areas such as retail, domestic services, and subsistence agriculture, where workers often operate without formal labor contracts and social protection.
About 600,000 people work in the formal sector, including employees of state enterprises. The public sector accounts for about 60% of employment in the formal economy, underscoring the high dependence of the economy on state control.
“The reasons for low productivity may be related to the concentration of labor resources in less productive sectors, such as agriculture, transport, and construction, as well as the large volume of the informal economy, where access to training and organizational efficiency is limited. Moreover, capital-intensive sectors, such as gold mining, which accounts for 6.5% of GDP, engage only 0.2% of the workforce. As a result, the average output per worker in these sectors is lower. Agriculture, which provides employment for 24% of the workforce, contributes less than 9% to GDP,” noted Farid Talyshly.
Despite wage growth in recent years, low labor productivity and its slow increase compared to real wages make labor costs less competitive compared to other countries in the region. The IMF supports the implementation of the “National Development Program of Kyrgyzstan until 2030,” in which increasing labor productivity is marked as one of the main priorities.
Limited Opportunities for Women
The IMF study showed that gender inequality in the labor sphere in Kyrgyzstan is significantly pronounced and is growing faster than in other countries in the region. About 70% of men of working age are employed, while among women this figure is only 45%.“Inequality is partially due to family responsibilities. Women leave work to care for children, and the lack of accessible childcare facilities further limits their employment opportunities, contributing to a higher unemployment rate among women. Additionally, remote work, which has actively developed after the COVID-19 pandemic, has not yet gained proper distribution in Kyrgyzstan, making it difficult for women to work from home. Gender inequality has remained high compared to other countries since 2014 and has increased due to the contraction of the agricultural sector, which has traditionally been a major employer for women. Men have been able to switch to other sectors, while many women have not found alternative employment options,” the report emphasizes.
At the International Monetary Fund, it is believed that active digitalization, as outlined in the “National Development Program of Kyrgyzstan until 2030,” as well as the implementation of the “National Strategy for Achieving Gender Equality until 2030,” will help address this issue.
In the formal sector, the gender gap is relatively small, but it remains significant in the informal sector. In both sectors, men are primarily employed in services, manufacturing, and construction. In the public sector, the percentage of women is higher, which is explained by their numbers in education and healthcare, where they play a key role in the country's workforce.
Strict Labor Market Regulations
Why do so many people prefer to work in the informal sector? 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 established simplified procedures for hiring qualified foreign workers.“Hiring and firing processes in Kyrgyzstan are complex and time-consuming. Employers are required to follow strict documentation and justification requirements for dismissals, which increases compliance costs. This differs from the conditions in Kazakhstan and Uzbekistan, where employers have more freedom,” comments Farid Talyshly.
Strict labor conditions increase compliance costs, which can become burdensome for small and medium-sized enterprises, contributing to the growth of informal employment.“The labor market needs more flexible hiring and retention rules, where the priority is on protecting workers rather than just jobs. Such an approach can enhance market flexibility, reduce the scale of the informal economy, and promote economic growth, allowing companies to manage their workforce more effectively and encouraging the creation of formal jobs. Simplifying procedures for hiring foreign specialists will also facilitate knowledge exchange and improve the efficiency of the private sector,” added the IMF representative.
However, the challenges do not end there. In the Caucasus and Central Asia region, including Kyrgyzstan, “social protection” programs in the labor market play a limited role. Defining rights to unemployment benefits is complicated due to the significant number of workers in the informal sector. Tracking informal workers and their earnings poses challenges, increasing the risk of improper claims for benefits. As noted, digitalization in Kyrgyzstan will help significantly reduce these risks.
The IMF report also mentions that additional difficulties arise from limited technical and administrative capabilities to assist in job search and vocational training, which are important aspects of an effective unemployment benefits system. Unlike developed economies, where benefits are automatically expanded during economic hardships, in Kyrgyzstan they remain static.
“Creating an unemployment insurance system and expanding vocational training and employment assistance programs can improve the alignment of training with labor market demands and increase employment levels. The insurance system should expand during economic downturns and contract when the economy stabilizes. Additional employment services, career counseling, and skills enhancement will provide significant support to those seeking work,” concluded Farid Talyshly.
