Kaktus.media conducted an interview with one of the authors of this document, Farid Talyshly, who shared the main trends and identified vulnerabilities, as well as offered recommendations for improving the labor market in the country.
Job Search for All
In Kyrgyzstan, there is a youth population where about 32% are 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 grow according to forecasts. Since 2000, the country's population has increased by almost 2% per year, and a growth of 1.4% is expected in the medium term.Informal employment prevails in sectors such as small retail trade, domestic work, and subsistence agriculture, where workers often do not have official labor contracts and social protection.
In the formal sector, only about 600,000 people are employed, including workers in state enterprises (SE), which accounts for approximately 60% of the total number of employed in the official economy. This underscores the high dependence of the economy on the public sector.
Farid Talyshly noted: "Low labor productivity is explained by several factors, including the concentration of the workforce in less productive sectors such as agriculture, transport, and construction, as well as a significant share of the informal economy, where access to training and organizational efficiency is limited. For example, capital-intensive sectors such as gold mining, which accounts for 6.5% of GDP, employ only 0.2% of the workforce. Therefore, the average output per worker in sectors that create more jobs remains low. Agriculture, which provides employment for 24% of the workforce, contributes less than 9% to GDP."
Although there has been a rise in wages in Kyrgyzstan in recent years, low labor productivity and significantly lower productivity growth compared to real wages reduce the competitiveness of labor costs compared to similar countries in the region. The IMF supports the "National Development Program of Kyrgyzstan until 2030," which identifies increasing labor productivity as one of its priorities.
Limited Opportunities for Women
The IMF analysis showed that gender inequality in the labor force in Kyrgyzstan is pronounced and is increasing rapidly. About 70% of men of working age are employed, while among women, this percentage is only 45%.Farid Talyshly asserts: "Inequality is partly related to parental responsibilities, as women are often forced to leave work to care for children. Limited availability of childcare services further restricts women's employment opportunities and leads to a higher unemployment rate among them compared to men. Additionally, remote work, which developed actively during the COVID-19 pandemic, has not yet gained widespread acceptance in Kyrgyzstan, making it difficult for women to find employment from home. Gender inequality in the country remains high compared to other regions since 2014 and has been exacerbated by a decline in employment in agriculture, traditionally the main employer for women."
The IMF believes that the activation of digitalization, as outlined in the "National Development Program of Kyrgyzstan until 2030," as well as the adoption of the "National Strategy for Achieving Gender Equality until 2030," will help address this issue.
Although the gender gap in the formal sector is small, it remains significant in the informal sector. In both sectors, men hold leading positions in areas such as services, manufacturing, and construction. In the public sector, women make up a large portion of the workforce, which is linked to their significant presence in education and healthcare.
Tough Conditions in the Labor Market
Why do many prefer informal employment? 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 simplified procedures for hiring qualified foreign workers.Farid Talyshly comments: "Complex and time-consuming hiring and firing procedures create additional difficulties for employers. They have to follow strict documentation and justification requirements for dismissals, which increases compliance costs. This contrasts with the situation in Kazakhstan and Uzbekistan, where employers have more flexibility."
Complex conditions increase compliance costs, which can pose a serious burden for small and medium-sized enterprises and contribute to the growth of the informal economy."The labor market needs more flexible conditions for hiring and retaining employees, with an emphasis on protecting workers rather than jobs. Such an approach could enhance market flexibility, reduce the level of informal employment, and promote economic growth, allowing companies to manage their workforce more effectively and develop formal employment. Simplifying procedures for hiring foreign specialists will also lead to knowledge transfer and increased efficiency in the private sector," emphasizes the IMF's resident representative.
However, the problem does not end there. In the Caucasus and Central Asia region, including Kyrgyzstan, social programs in the labor market have limited impact. Establishing and verifying rights to unemployment benefits is complicated by the high share of informal employment. It is difficult to track informal workers and their wages, which increases the risk of improper claims for benefits. As noted earlier, digitalization in Kyrgyzstan could significantly reduce these risks.
The IMF study states that additional complexities arise from limited technical and administrative capabilities in providing assistance with job search and vocational training, which are key elements of an effective unemployment benefits system. Unlike developed economies, where benefits automatically increase during economic crises to stabilize income and consumption, 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 unemployment insurance system should expand during economic downturns and contract when the economy recovers. Additionally, employment, career, and skills enhancement services will provide significant support to job seekers," concluded Farid Talyshly.
