Kaktus.media discussed key trends and vulnerabilities with one of the report's authors, Farid Talyshly. He also shared recommendations for improving the labor market for both workers and employers.
Job Search for All
Kyrgyzstan has a young and growing population, with children and adolescents under 15 years old making up about 32%. This percentage of youth among the working-age population is one of the highest in the region and is expected to grow. Since 2000, the country's population has increased by almost 2% annually, and growth is projected at 1.4% in the coming years.Informal employment predominates in sectors such as small retail, domestic work, and subsistence agriculture, where workers often lack formal employment contracts and social protection.
In the formal sector, which includes about 600,000 people, the majority of employment is concentrated in state-owned enterprises (SOEs), which account for about 60% of employment in the formal economy. These figures highlight the high dependence of the economy on the public sector.
“Low labor productivity is due to several factors, including the concentration of the workforce in low-productivity sectors (such as agriculture, construction, and transport), as well as a high share of the informal economy, where access to training is limited. Additionally, capital-intensive sectors, such as mining, which accounts for 6.5% of GDP, employ only 0.2% of the workforce. This results in even lower average output per worker in sectors that generate more jobs. Agriculture, which provides employment for 24% of the workforce, contributes less than 9% to GDP,” commented Farid Talyshly.
In recent years, wages in Kyrgyzstan have been steadily rising; however, due to low labor productivity and its slow growth, labor costs are becoming less competitive compared to other countries in the region. The IMF supports the measures taken under the “National Development Program of Kyrgyzstan until 2030,” where increasing labor productivity is a key priority.
Limited Opportunities for Women
The IMF analysis showed that gender inequality in women's participation in the labor force in Kyrgyzstan is significantly high and is increasing faster than in neighboring countries. About 70% of working-age men are employed, while among women, this figure is only 45%.“This inequality is partly related to childcare responsibilities. Women are forced to leave work to take care of children. The lack of affordable childcare services further limits women's opportunities, increasing the unemployment rate among them compared to men. Moreover, remote work, which gained popularity after the COVID-19 pandemic, is still underdeveloped in Kyrgyzstan, making it difficult for women to work from home. Gender inequality in the country was high even before 2014 but has worsened due to the contraction of the agricultural sector, which traditionally served as a primary source of employment for women. Men have been able to transition to other sectors, while women often face difficulties in finding alternative work,” the report notes.
The IMF believes that active digitalization, as outlined in the “National Development Program of Kyrgyzstan until 2030,” and 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 minimal, it is significant in the informal sector. In both sectors, men are more likely to work in services, construction, and manufacturing. In the public sector, women make up a large part of the workforce, especially in education and healthcare, where they play a key role.
Tough Conditions in the Labor Market
Why do many prefer to work informally? According to the IMF analysis, labor market regulation in Kyrgyzstan is stricter compared to the average in the Caucasus and Central Asia. For example, Kazakhstan has more streamlined procedures for hiring qualified foreigners.“The procedures for hiring and firing are complex and time-consuming. Employers must adhere to 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,” says Farid Talyshly.
The existing rigid conditions increase compliance costs, which can be burdensome for small and medium-sized enterprises, contributing to the growth of the informal economy.“The labor market requires more flexible hiring and retention rules, focusing on protecting workers' rights rather than jobs. Such an approach can positively impact labor market flexibility, reduce the volume of informal employment, and promote economic growth by allowing companies to manage their workforce more effectively and increasing the level of formal employment. Streamlining the hiring procedures for foreign specialists will also contribute to knowledge transfer and efficiency in the private sector,” added the IMF's resident representative.
However, the problem does not stop there. In Kyrgyzstan, as in other countries in the Caucasus and Central Asia, “social protection” programs in the labor market play a limited role. Determining eligibility for unemployment benefits becomes a challenging task due to the significant share of informal employment. Tracking informal workers and their wage levels is difficult, increasing the risk of improper claims for unemployment benefits. As mentioned earlier, the ongoing digitalization in Kyrgyzstan could significantly reduce these risks.
The IMF report also emphasizes that additional complexities arise from limited technical and administrative capabilities necessary to assist in job search and vocational training, which are critical for an effective unemployment benefits system. Unlike developed economies, where benefits automatically increase during economic crises, in Kyrgyzstan, they remain static.
“Establishing an unemployment insurance system and expanding vocational training and job search 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 stabilizes. Moreover, significant support for job seekers will be provided through employment services, career counseling, and upskilling opportunities,” concluded Farid Talyshly.
