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Job Creation Plays Key Role in Georgia’s Economic Growth

Sustained economic growth in Georgia over the past two decades has helped reduce poverty and boost shared prosperity, with job creation playing a significant role. At the same time, however, job creation is not keeping pace with economic growth, says a new World Bank report, Georgia at Work: Assessing the Jobs Landscape.

Using unique data, the report analyses the main economic forces driving job creation in Georgia, and attempts to answer four questions: Is the enabling environment conducive to good job outcomes? How are formal sector job creators doing? How does the Georgian workforce measure up? And, what policy reforms can improve jobs outcomes?

The report shows that Georgia’s commitment to business regulation reforms have raised the country’s ranking in the World Bank’s Doing Business report to number 9 out of 190 countries. Reducing the time, cost, and number of procedures required to start a business has directly contributed to the country’s above-average new business entry density.

“Georgia has done a tremendous job in creating the environment for firm entry, but more reforms are needed to help firms increase productivity, grow, and thrive in an increasingly competitive global environment,” said Mohamed Ihsan Ajwad, World Bank Senior Economist and one of the lead authors of the report. “Our analysis shows that small and individual firms fail to grow to medium-sized firms.”

The report presents findings from analysis of Georgia’s Firm Registry, managed by GeoStat. The data reveals important information about firms and their employment patterns. Despite robust firm entry observed in the country, total employment growth is low because firms are mostly small, and employment is concentrated in larger and relatively older firms.

Another important finding of the report is that Georgia’s workforce is shrinking rapidly and that is having an impact on firms’ ability to find and hire workers. Although overall labor force participation rates are relatively high, women’s labor force participation is about 20 percentage points below that of men’s labor force participation. In addition, the proportion of youth who are not in employment, education, or training is unusually high. To counter the rapidly shrinking population, Georgia will have to put measures in place to increase labor force participation among women and youth.

“To improve employment outcomes in Georgia, there are some significant challenges to overcome,” said Cem Mete, World Bank Practice Manager for Social Protection and Jobs. “However, the good news is that there is now a lot of international experience with innovative programs that target employment outcomes, including for specific groups such as women and youth.”

The report elaborates on four areas of policy reform: policies that enable the overall business environment; policies that enable the firm-specific business environment and firms’ capacity to create more inclusive and high-productivity jobs; policies that aim at increasing the size of the workforce; and policies that aim at increasing workforce productivity and skills.

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