Unemployment in Azerbaijan: official statistics and reality

One of the most controversial points in Azerbaijani economic statistics is the country’s unemployment data, which independent experts consistently say are dubious.

During the quarantine period, the problem deteriorated even further, as day workers, which make for a large percent of the country’s labour force, were unable to find jobs due to the strict quarantine in the country.

What is the real level of unemployment in Azerbaijan? What does it mean for the economy as a whole.

To begin with, let’s clarify who counts as unemployed.

These are people who are able and willing to work, but cannot find work.

The share of the unemployed in the total number of economically active citizens, that is, their percentage of the adult working-age population, is the unemployment rate.

According to official data, as of January 1, 2020, the number of unemployed in Azerbaijan was 251,600 people, approximately 4.84% of the economically active population.

The government consistently points to this figure, which, on paper, is pretty good. A small percentage of the unemployed in the country is the norm even for a developed economy, and for a developing economy it can go up to even 8.

The problem is that official statistics underestimate the unemployment rate in two ways; firstly, they do not take into account all the people who are truly unemployed, and secondly, it overestimates the number of the economically active population.

We can try to independently calculate the real unemployment rate.

As of January 1, 2020, there were 6.4 million citizens of working age and 160,000 people of retirement age in Azerbaijan who continue to work.

We take into account that able-bodied persons include men aged 15-63.5 years and women 15-60.5 years old.

At the same time, the size of the economically active population for the same period is 5.1 million.

This leaves us with 251,600 unemployed.

If we subtract pensioners from the number of economically active citizens, the working population comes out to 5.02 million.

Subtracting this number from the total number of people of working age, we get 1.37 million people.

In other words, as of the beginning of the year, almost one of five people were completely outside the labor market.

It can be assumed that this includes housewives and other citizens who do not want to work for hire, but the official unemployment statistics do not include the latter.

Concerning the employed: the Azerbaijani Law on Employment offers quite interesting formulations. So, the employed include land owners or members of family and peasant farms, as well as military personnel and full-time students of universities, and many others.

And how many people really work in Azerbaijan? We know that according to the law, if a person works for more than 3 days, then he must be registered in the system of the State Social Protection Fund.

As of January 1, 2020, 3,934,821 people were registered.

Among them, 1,645,436 are hired workers. Another 914,621 are business owners. Thus, there remain 1,374,764 people who are registered in the system, but are currently neither employees nor entrepreneurs. Who are they? Perhaps these are people employed in agriculture. According to official data, 519,674 farmers are registered in the system of the Ministry of Agriculture, with an average of 3 hectares of land. And they, along with their families, are considered ’employed’, but it is quite difficult for more than 3 adults to live off the proceeds of agricultural produce from 3 hectares.

Therefore, we can multiply this figure roughly by 3 (one family unit) to get the number of individuals that fall in this category: 1,559,022. We can assume that some of them have social cards, and some do not. In fact, we check the conclusions of state statistics using the official data by category of employed.

To single out the unemployed, we should subtract the following categories from 5.1 million:

Employees – 1,645,436

Individual entrepreneurs – 914,621

People employed in agriculture – 1,559,022

Full-time students – 164,119

Thus, we have approximately – approximately, because the figures for those employed in agriculture may be slightly more or less – 906,902 people. From this figure, it is worth subtracting military recruits (up to about 50,000 people). We will have somewhere around 857,000. Among them, at the beginning of this year, 251,600 were officially unemployed, and we have no information about the rest.

That is, in fact, real unemployment as of January 1, 2020 was 16.51%.

Along with this, it should be kept in mind that most of the full-time students are also in search of work, and citizens officially employed in agriculture, in reality, may well now be in Baku or somewhere else in search of another job. It is obvious that the agriculture of Azerbaijan cannot “occupy” more than 10 percent of the economically active population, when even in developed agrarian countries this percentage does not exceed six.

These calculations are supported by the fact that, according to the Ministry of Labor and Social Protection of the Population, 1.2 million people applied for temporary unemployment benefits in 2020.

In other words, that is the number of people who consider themselves unemployed. But half of them were refused (only 600,000 people received the payment).

Thus, we come to the conclusion that at the beginning of 2020 there were 900,000 unemployed in the country, of which only slightly less than a third were recorded by the State Statistics Committee. Quarantine has led to the fact that a large part of the employed (as “entrepreneurs”) also found themselves without permanent jobs, and thus this problem was further aggravated.

Moreover, unemployment is in our case not only an economic, but also a social problem. Not to mention the fact that a million unemployed citizens in a country of ten million is, by definition, not the norm for those who care about the fate of these people.