Labour markets and employability : Trends and challenges in Armenia, Azerbaijan, Belarus, Georgia, Republic of Moldova and Ukraine

This publication presents a cross-country overview of labour market trends and challenges and the employability of human capital in the six Eastern partners – Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine – during two decades of turbulent transition. These six countries, all of which are transitional economies with a common Soviet heritage, have experienced enormous social, economic and political changes, leading each to take a different pathway towards a free market economy and democracy. The end of the Soviet era and the transitional crises of the early 1990s resulted in a rapid deterioration in living standards and growing political instability in all the countries of the former USSR. The first decade of transition was generally characterised by the destruction of infrastructure; a sharp decline in industrial output, agricultural output, real incomes, consumption and capital investment; and widespread poverty. The countries also faced tangible challenges to their vital national interests, including regional conflicts and civil wars in Georgia (Abkhazia and South Ossetia), Moldova (Transnistria) and Armenia and Azerbaijan (Nagorno-Karabakh). For most of the Eastern partners, the second decade of transition was a period of stabilisation and recovery. However, some continued to experience political changes that ultimately resulted in more reform-minded and Western-leaning administrations, such as the 2003 Rose Revolution in Georgia and the 2004–05 Orange Revolution in Ukraine, and the pro-European shift in Moldova’s foreign policy orientation. The increasingly assertive foreign policy of Russia in the region, which provoked periodic gas disputes with Ukraine (and the EU countries) and involved trade sanctions against Georgia and Moldova, were other factors that absorbed enormous amounts of resources in the countries. Despite the continuing impact of the Russian economy on all the countries, Georgia, Moldova and Ukraine have developed aspirations for a closer relationship with the EU, while Armenia, Azerbaijan and Belarus have their own vision for development and better relations with Russia. This analysis focuses mainly on developments in the Eastern partner countries during the past decade; however, since the study was completed only recently, there is only partial coverage of the impact of the 2009 global financial crisis. The objective of the study is to enhance labour market analysis and forecasting in the Eastern partners and to support evidence-based policy making in employment, education and training in terms of new skills for new jobs. Although the focus is broadly regional, there is full recognition of the fact that the Eastern partners are very different in terms of their economies, economic restructuring policies and opportunities for future socioeconomic development. Belarus and Ukraine have opted for gradual transition to a market economy and protection of their predominantly industrial economies, whereas Armenia, Georgia and Moldova have implemented rapid deindustrialisation and deep transformations. Azerbaijan, meanwhile, has relied largely on its natural resources to support economic development and has not yet managed to diversify its economy