Unemployment in rural areas of Uzbekistan: Reasons and Suggestion

Ali-Gulam Sadanov (Research assistant at Innovative Centre ali.sadanov@innovativecentre.org)

Scientific Supervisor: Mukhammadkhon Soliev (Director of Innovative Centre)

Abstract- This research empirically demonstrates a comprehensive overview of the challenges surrounding rural unemployment in Uzbekistan, focusing on factors such as youth unemployment, poverty rates, labor migration, informal employment, and gender disparities. It highlights the significance of the agricultural sector as a potential source of employment and discusses various initiatives and reforms aimed at addressing the issue. The paper underscores the importance of targeted interventions, such as skills development, vocational training, and empowering women economically, while also advocating for broader policy measures to stimulate job creation and promote sustainable development. Ultimately, it emphasizes the need for a holistic approach to tackling rural unemployment in Uzbekistan, one that integrates both national and international efforts to foster inclusive growth and improve the well-being of rural communities.

Key words: Unemployment, rural area, sustainable development, 

Introduction

Unemployment in rural areas of Uzbekistan is a significant issue that affects the country's economic development and the well-being of its citizens. Despite various efforts and reforms, rural unemployment remains a challenge, with a considerable portion of the population, especially women and youth, facing limited job opportunities. The unemployment rate in Uzbekistan was around 6,01 percent in 2022, with the slight decrease of 0,01 percentage points compared to 2021. (statista) 

The agricultural sector in Uzbekistan holds substantial potential for growth and job creation. The World Bank has been focusing on projects that aim to increase the efficiency of irrigation infrastructure, promote sustainable land and water management, and improve labor practices These efforts are crucial as agriculture employs a significant portion of the labor force and generates a considerable part of the GDP: agriculture alone generates 28 percent of GDP and employs more people than any other industry—27 percent of the entire labor force, or over 3.65 million people. Despite the severe implications of the COVID-19 pandemic, Uzbekistan’s agri-food sector remains an important driver of economic growth and export. It is projected to grow by 2.8% in 2020, compared with 0.6% growth in national GDP (wordbank.org) In Uzbekistan, the agri-food sector, containing of agriculture, food and light industries (textile, garment, apparel, and leather industry), plays a vital role in the domestic economy. In 2019, it was the largest contributor to GDP (41 percent) and producer of export revenue (19 percent). It is estimated that by 2030, well-targeted public policies and investments could support the annual creation of 0.7–1.3 million new jobs in this sector, more than enough to absorb the 0.6 million young people who enter the country’s labor market annually.

An estimated 9.6 percent of the country’s population (3.2 million people) were living below the $3.2/day poverty line in 2019, which is the international definition for lower-middle-income countries like Uzbekistan. Roughly 80 percent of them were living in rural areas with livelihoods that depend largely on agriculture. Thus, jobs in this sector have been found to be among the most poverty reducing and inclusive, and Uzbekistan should be no exception. What, then, should be done to achieve these important goals?

Until recently, policy distortions and under-investment were significantly reducing potential employment growth in Uzbekistan’s agriculture sector. Under the state production system, farmers were required to engage in monoculture production of cotton or wheat, two of the least profitable and least labor-intensive crops.

All of these constraints have depressed incentives for greater investments and efficiency increases in agriculture, thereby reducing the demand for labor in the sector. But these gaps have also created an opportunity for quick wins in Uzbekistan, once more favorable policies, the kind that many other countries have long supported, are put in place. Since 2017, the government has been implementing bold economic reforms that have begun to create conditions that could turn the agri-food sector into an engine of much higher and better-quality employment. Going forward, Uzbekistan should capitalize on these and other reforms in the state’s order system and land use, and also on its comparative advantages in labor-intensive and competitive horticulture production, which is hard to mechanize, and the wider adoption of modern technologies.

The Uzbekistan youth bulge offers opportunities. The total and working‐age population in Uzbekistan is growing and is expected to grow until 204535 (Figure 1). The share of the population younger than 25 years old is 45 percent, and the total fertility rate is 2.4 (one of the highest in ECA, where the average fertility rate is slightly less than two children per woman), with projections around 2.2 in 2040. These demographic trends offer the potential to increase domestic production and growth but also increase the pressure on the domestic labor market and push some Uzbeks to migrate to other countries in search of (better) employment and income opportunities. Given the youth bulge in Uzbekistan, youth unemployment is a serious concern for policymakers, as it limits the country’s potential to reap the economic benefits of the demographic dividend.

Uzbekistan compares favorably with other Central Asian countries and lower‐middle‐income countries in the ECA Region for the labor force participation rate36 (Figure 2). According to HBS 2017, 61.2 percent of individuals age 16 and older participate in the labor force, of whom over 56 percent are employed. The labor force participation rate in Uzbekistan is also higher than the average rates (excluding high‐income countries) of lower‐middle‐income countries in the ECA Region. The HBS‐based estimate of labor force participation is somewhat smaller than the International Labor Organization (ILO) modeled estimate used in the Word Development Indicators database: 61.2 versus 65.4 percent.

The country's rapid population growth (2021: 2 per cent) is a significant challenge. About 45 of the approximately 36 million inhabitants are under 25, and 500,000 people enter the labour market every year. The economy is unable to keep pace with such rapid growth. This leads to problems in the areas of education and employment, which ultimately drive poverty.A concerning 24% of young people aged 16-24 and 26,4% of induviduals ags 16-29 are not in education, employment, ot training. The situation is even more dire for young women, with an unemployment rate of around 38.2%. This is high rate of youth unemployment is a pressing issue that requires targeted interventions to improve job prospects for the younger generation 

According to the World Bank, over the past two decades, real GDP growth in Uzbekistan has averaged 5% per year. While the poverty rate in Uzbekistan has decreased from 28% in 2000 to 11% in 2019, most of the poverty still affects rural areas. Official statistics in 2020 estimated the unemployment rate at 10.5% of the active labor force, with another 34% being inactive. The unemployment rate among youth and young adults was reported at almost 16% in 2021. High unemployment and low wages have led to labor migration, primarily to Russia. This migration is often a result of the lack of local opportunities and the search for better economic prospects abroad.

 Informal employment in Uzbekistan is pervasive and is around 60% (over 6mln), while substantial share of workers is under-employed. Informal economy has been growing already before the pandemic and has been further accelerated by the economic crisis caused by theCOVID-19 pandemic, which has resulted in dismissal of an additional 1.9 million persons (over 14% of total employment) and the return of thousands of Uzbek labour migrants. In the private sector, 61% of women employees and 73% of men employees lack social security coverage. In small private enterprises, 80% of women employees and 87% of men employees lack social security coverage. Despite certain progress achieved, problems with decent work and productive employment persist. According to the Ministry of Employment and Labour Relations, number of employed in the economy in 2020 reached 13.23 million with only 5.7 million employed in formal sector of economy.Ambitious reforms and development agenda of the Government of Uzbekistan highlights promotion of employment and decent working conditions for all, improvement of social protection and social inclusion among the key priorities. The relevant aims and objectives are formalized in the overarching policy documents of the Government – The Strategy of Actions on Further Development of Uzbekistan in 2017-2021. The recent Voluntary National Review (VNR) confirms the Government’s intention to further integrate national SDGs into national development programmes and rely on SDG framework to monitor and evaluate progress in implementation of reforms. VNR also highlights national SDG 1 and 8 among the most exposed to various risks and thus in need of specific attention of the Government and development partners.( international labor organizations)

Technical Vocational Education and Training (TVET) is being promoted to enhance employability in rural areas, particularly in the modernized agriculture sector Projects like the EU-UNESCO partnership aim to improve the quality and effectiveness of the TVET system in selected regions of Uzbekistan (deleation to the European Union to Uzbekistan)

Regarding women’s employment in rural areas, they ace limited employment opportunities outside of agriculture. They are often engaged in low-skilled manual labor and seasonal work without formal contracts USAID is working to empower rural women economically by providing skills development training and linking them to private sector opportunities (usaid supporting Uzbek’s rural women)

Government Reforms and Development Agenda

The Government of Uzbekistan has ambitious reforms and a development agenda that highlights the promotion of employment and decent working conditions for all.The  recent Voluntary National Review (VNR) confirms the government's intention to integrate national Sustainable Development Goals (SDGs) into development programs and use the SDG framework to monitor progress (internatioal labour organization ‘Transition from Informal to Formal Employment Project Uzbekistan’)

Recommendations for Job Creation

To create more jobs and reduce poverty, Uzbekistan needs to focus on allowing the private sector to grow, privatizing smaller state-owned enterprises (SOEs) and banks, and empowering regions to determine their local development priorities Addressing skills shortages, investing in health and education services, and improving environmental sustainability are also key strategies (World bank ‘Uzbekistan Can Halve Poverty by Creating More and Better Jobs’) The agri-food sector is a major employer and has the potential to create numerous jobs. Public policies and investments targeted at this sector could support the creation of 0.7–1.3 million new jobs annually by 2030 .The government's role is crucial in promoting growth in the agri-food sector, facilitating women's inclusion, and supporting small dehkan farms and firms in supply chains.

Conclusion

Unemployment in rural areas of Uzbekistan is a multifaceted issue that requires a comprehensive approach, including investment in agriculture, skills development, and support for women's economic participation. With targeted policies and reforms, Uzbekistan can significantly improve employment opportunities in rural areas and contribute to the country's overall economic growth and development.