International Monetary Fund: unemployment rate in Georgia has dropped to historic low

The International Monetary Fund (IMF) published an updated report on Labor Market Implications of Skill Mismatches and Non-Labor Income in Georgia, saying the unemployment rate in the country dropped to a historic low.

As the report noted, structural unemployment in the country remained a challenge, with limited productive jobs and a mismatch between the skills needed in the market and market demand.

“Georgia faces challenges in the labor market. These include high unemployment, especially among young people, and growing signals from businesses about a shortage of qualified personnel. Unemployment has fallen to a historic low, but remains above comparable rates, especially among young people. At the same time, companies increasingly cite the shortage of qualified workers and labor as one of the main factors hindering business activity”, it added.

Study showed that both overqualification and skills shortages were widespread in the country, reflecting a structural surplus of personnel with general and higher education compared to the skills that were actually in demand in the workplace, especially in technical and practical areas.

“In 2024, 27% of working-age workers and 36% of young people worked in jobs that required qualifications below their educational level. Additionally, 40% of workers with tertiary education were employed in jobs with medium or low qualifications”, the IMF said.

“In contrast, under-qualification was particularly evident in high-productivity sectors, such as information technology (ICT), finance, and managerial and professional activities. There was also a significant mismatch between the field of specialisation and the field of employment: only about one-third of workers worked in a field that matched their education and vocational training”, it continued.

The report highlighted that these trends indicated a weak link between the education system and labor market demands, as well as a limited ability of high-productivity sectors to absorb skilled labor.

“The employment structure has gradually shifted from agriculture to the trade and construction sectors. At the same time, the number of vacancies has increased in high-skilled sectors such as information technology (ICT) and finance, while the demand for medium-skilled jobs in trade, sales and construction has decreased”, the study added.

“Data at the company level show that around 8% of the surveyed businesses employ foreign workers, which accounts for around 2% of total employment. This is partly due to a shortage of local qualified personnel, especially in professional positions. In addition, the share of companies that cite relatively low wages as the main reason for employing foreign workers is increasing”, it continued.

The IMF underlined two complementary priority areas for promoting job creation: reducing skills mismatches and better matching them with labor market needs, and ensuring social protection for the population and strengthening employment motivation.

• Priority steps to reduce skills mismatches and better align them with labor market needs include;
• Improving the quality of education and making curricula more relevant to labor market needs;
• Strengthening the vocational education and training (VET) system;
• Expanding opportunities for employer-led training, internships, and practical training;
• Improving employment-support institutions, including public employment services and career counseling.

According to the report, before further increasing the volume of social assistance in the direction of ensuring social protection of the population and strengthening the motivation for employment, it was important to assess their impact on the labor market and strengthen the link between social support and employment promotion measures, such as vocational training, job search support and career counseling.

Additional measures, especially to increase the economic activity of women, may include:

• Expanding child and elderly care services;
• Increasing access to skills development programs;
• Promoting the introduction of flexible working conditions.