Labor Market Situation and Policies in the Kyrgyz Republic

Roman Mogilevsky

Center for Social and Economic Research CASE-Kyrgyzstan

Presentation on official launch of the BSECAO, Bucharest, 23 June 2008

KYRGYZSTAN

Key Facts on the Kyrgyz Economy GDP per capita – US$720 @ current

exchange rate or US$2100 @ PPP (2007) GDP growth rate – 8.2% (2007) The largest economic sectors (2007):

- Agriculture (29% of GDP)- Trade (18% of GDP)- Industry (13% of GDP)

Government expenditures per capita – US$200 (2007)

Poverty rate – 40% (2006)

Employment and Unemployment Population – 5.2 million, labor force – 2.3 million,

participation rate – 65.5% (2007) Unemployment rate – 8.3%; registered

unemployment rate – 3.1% (2006)

Change in sector structure of employment

50.038.5

8.710.2

11.914.5

12.0 17.8

17.4 19.0

2002 2005

Agriculture IndustryTrade Other market servicesNon-market services

Employment and Unemployment (2)Dynamics of unemployment

0

5

10

15

20

2002 2006

Un

em

plo

ym

en

t ra

te,

%

All population Urban Rural Men Women

Average monthly wage – US$107 (2007) Real wage growth rate – 19% (2007)

Government Labor Market Policies Liberal labor legislation with some safeguards for

vulnerable groups (youth, women etc.) Labor taxation: 27% payroll tax and flat 10% income

tax Preferential taxation regime for small businesses,

agriculture and services Unrestrictive minimum wage: US$9 per month or

12% of minimum consumption basket (2007) Limited use of active labor market policies:

government expenditure on these policies are less than 0.1% GDP

Very limited use of passive labor market policies: only 5% of all unemployed received unemployment benefit (while more people receive different social benefits)

Coping Mechanisms on Labor Market Informality

- Share of informal economy in GDP: 53% (2006)

- Share of official employment in total employment:

24.5% (2006)

- Key sectors with informal employment: agriculture, trade, market services, light industry

Migration- Number of labor migrants: 250-500 thousand (11-22% of total labor force)

- Remittances: up to US$1 billion or 27% of GDP

- Main destinations: Russia and Kazakhstan

Conclusions Kyrgyzstan, similarly to many other CIS countries,

faces serious challenges of unemployment and low wages

Limited resources of the government substantially reduce its ability to implement and effectiveness of active and passive labor market policies

Key government strategy is to let people help themselves

Informal employment and labor migration are main adjustment strategies of the population; these strategies are effective for poverty alleviation in the mid-term, but may create problems for long-term economic development of the country