Azerbaijan's Unemployment Crisis

With a large grey economy and poorly observed labour laws, Azerbaijanis who lose their jobs have little support.

Azerbaijan's Unemployment Crisis

With a large grey economy and poorly observed labour laws, Azerbaijanis who lose their jobs have little support.

Placard at a rally in protest of results of snap Presidential election in 2018 in Baku. (Photo: Aziz Karimov)
Placard at a rally in protest of results of snap Presidential election in 2018 in Baku. (Photo: Aziz Karimov)
Thursday, 28 November, 2019

When Ali Aliyev began working at Unibank - one of Azerbaijan’s largest financial institutions - on August 2, 2012, he did everything he could to advance in his new career. His hard work paid off; the 29-year-old’s salary doubled over the course of a single year.

But then in February 2015, the value of Azerbaijan’s currency, the manat, plummeted.

“During that first [devaluation], two of my colleagues who sat next to me were fired, with the reason that there were no sales and borrowers could not repay their loans,” he said. “From that moment on, my colleagues and I began to feel the fear of losing our jobs. When will our turn come?”

On December 21, 2015, Azerbaijan’s Central Bank decided to move the manat to a floating exchange rate. Once more, it plummeted against the US dollar, that year becoming the most devalued currency in Europe and the former Soviet Union. The manat has since stabilised, but the economic hardships continue.

First Ali’s wife Nargiz, who worked at the same bank, was fired. The management apologised, but told her that they had no other choice. Ali hoped that the management wouldn’t make both parents in a family jobless, but he was wrong.

“My career and my dreams stopped there,” he explained. “It was impossible to find a new job; we were left unemployed and with huge debts to the bank we used to work for.”

Ali’s story is far from unusual. A recent report from the State Statistical Committee indicated that unemployment in Azerbaijan had risen by 213.2 per cent compared to last year, although the committee stressed that over two million new jobs had been created in Azerbaijan over the past 15 years.

Other figures are similarly stark. As of October 1 this year, 74,100 people were officially unemployed, more than 35 per cent of whom were women. This shows a massive rise form the same date last year, when 34,760 people were registered jobless.

Large scale unemployment followed the second devaluation of Azerbaijan’s currency. Government agencies and private companies alike started to make cutbacks, with the most serious said to be in the banking sector. Hundreds lost their jobs in state-owned enterprises such as Azeriqaz and Azerenergy, while smaller retail businesses have also been badly hit.

Azerbaijan’s government has attempted to paint a rosier picture of the country’s job market. The state statistical committee noted that following the devaluation, during the first nine months of 2015, approximately 67,000 permanent jobs were created in the country.

President Ilham Aliyev announced during a speech at Davos on January 23, 2018 that the country’s unemployment rate was low.

“By the end of the year, unemployment in Azerbaijan was at five per cent, and poverty at 5.4 per cent,” he told the gathering. “I think this is one of the best results in the world.”

Indeed, a World Economic Forum report this year put the unemployment rate at 5.2 per cent and similarl, according to the state statistics committee, the poverty level in Azerbaijan dropped from 49 per cent in 2001 to 4.9 per cent in 2018.

However, independent experts believe that the real figures are much larger. When the Fakt Yoxla (Fact Check) platform checked official statistics from different sources after the Davos Forum, they discovered that in 2018, Azerbaijan's unemployment rate was actually closer to 21 per cent.

Azer Guliyev, a lawyer working for the Oil Workers’ Rights Protection Organisation and a specialist on labour issues, said that the seeds of today’s job insecurity were planted with the collapse of the Soviet system.

“The closure of factories, the transition to market relations, as well as the emergence of new technologies all affected unemployment,” he said. “Staff reduction created a great psychological tension due to fear of losing a job, while on the other hand, the number of unemployed in the country continues to increase.”

But this wave of unemployment is also a result of global economic patterns, stressed Nijat Garayev, an economic development consultant working for an international organisation in Baku. The volatility of global markets since the crisis of 2008, coupled with deepening income and wealth inequalities and developments in automation had all played a role in increasing job insecurity, Garayev explained.

“These processes have not bypassed Azerbaijan. Since the 1990s, the increasing economic dependency on exports of crude oil and gas have diminished the already uncompetitive Soviet-era industrial and agricultural sectors,” Garayev continued. “As the oil sector was skill intensive and employed relatively few people, the majority of the population faced structural unemployment. A lack of quality vocational education contributes to a slow adjustment to this new labour market demand.”

Given that, according to official statistics, 55 per cent of Azerbaijanis are employed by the state, this makes a significant part of the population vulnerable to cutbacks caused by budgetary constraints. Even in the case of a post-oil economy, Garayev added, the growth of more effective, private-led economic initiatives, primarily in agriculture, could lead to further volatility in the labour market over the next 20 years.

“This implies that job insecurity will certainly increase resulting in brain drain, redistribution of income, and stress-related health conditions,” the consultant concluded.

This insecurity is compounded by the fact that workers have little recourse when they lose their jobs.

Nadir Gasimov, 56, began work at a locomotive depot in the city of Ganja when he was just 16.  As a result of cutbacks, Gasimov was dismissed in December 2017 and considers it an injustice.

“Despite my 40 years of work on the railways, I was fired. When cuts began two years ago, the management kept newcomers and fired longtime experienced employees which created discontent,” he explained.

Gasimov has made multiple appeals to the authorities over his dismissal, but said that despite his membership in the ruling New Azerbaijan Party (NAP), his voice has gone unheard.

“I spent my years, and my health working on the railways, and put my trust in the NAP,” he said. “But I’m left unemployed; at my age, nobody will hire me anywhere else.”

It can be difficult for most employees, but particularly older workers such as Gasimov, to start from scratch. A major part of the country’s revenue comes from a single industry, which employs only a handful of the population.

“The non-oil sector is very small and heavily dependent on government support,” Garayev explained. “As it’s not competitive, salaries are not negotiated...The weakly functioning trade unions and justice system do not provide sufficient legal protection to keep workers from being exploited, abused, or fired.”

The country’s weak tradition of independent trade unions gives workers little hope of further support.

In January 2018, unemployment benefit was replaced by a new concept of so-called unemployment insurance paid to workers who lose their jobs as a result of the liquidation of an enterprise or if they are registered as unemployed with their local employment centre. This essentially means that workers whose contracts expire and are not renewed are not eligible for state support; in a country where the minimum monthly salary is 250 manat (147 US dollars) and the average salary is 581 manat (341 dollars) few Azerbaijanis have savings they can rely on.

While Garayev argued that the country’s labour code was progressive, he also stressed that small enterprises do not always follow it to the letter.

 “Considering the immense share of the shadow economy, the situation is even worse. Having said these, there are positive steps towards transparency and some have started bearing fruits [...] for example, the ministry of taxes and finance have been promoting the formalisation of the labour market, aiming at the protection of employees.” 

As for the Aliyevs, after being dismissed from Unibank they found unskilled work, with Nargiz becoming a cashier at a supermarket while Ali worked at a packing factory.

“I sold my car, gave the money to my parents and told them to pay my debt back to the bank. I left the country with my wife,” Ali said. Husband and wife eventually moved to Warsaw, Poland, where they have at least found work.

“I visited Azerbaijan last year and was very disappointed,” Ali said. “There were unemployed young people everywhere, strolling around by the teahouses, left empty-handed, and destroyed families.”

This article was produced as part of the partnership between IWPR and Chai Khana, a multimedia storytelling platform based in Tbilisi.

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