Azerbaijan's private sector: driver of employment and wage growth

By Sabina Alizade

According to the latest data from the State Statistics Committee of Azerbaijan, in January-April 2024, the average nominal monthly salary of hired workers in the country increased by 10.2% against the same period last year and amounted to 1,007.5 manats. This growth reflects the general improvement in the economic situation in the country and the increase in household incomes. Particularly high salaries are observed in key sectors such as mining, financial and insurance activities, scientific and technical activities, information, and communication. This indicates the significant contribution of these sectors to the overall economic growth in the country and their importance in shaping wages.

As of May 1, 2024, the total number of hired workers in the economy of Azerbaijan was 1,749,100 people. Of these, 897 thousand people work in the public sector, and 852.7 thousand in the non-state sector. Interestingly, in 2024, 2,100 public sector workers were laid off, reflecting changes in employment structure and the government's effort to optimize budget expenditures.



MP and economist Vugar Bayramli notes that one of the main goals is to increase the average monthly salary in Azerbaijan, and it is expected that the average monthly salary in 2024 will be higher than projected. The increase in the average monthly salary also positively affects the revenues of the State Social Protection Fund. "It is expected that revenues of the State Social Protection Fund will be 190 million manats more than projected. This will allow more funds to be redistributed through the fund, leading to savings on transfers from the state budget," he said.

Bayramli noted that several sectors are leading in operational increases. This is especially true for the energy sector, financial sector, and banking sector, where higher salary offers are observed. "Even in sectors where salaries are lower than the average monthly salary, we see a trend of growth. In particular, the education sector currently has an average monthly salary below the national average, but a positive trend in salary growth is also observed in this sector. It is expected that the average monthly salary in the education sector will soon reach the national average," he said,

Bayramli also mentioned that there are currently about 1.8 million hired workers in Azerbaijan working under labor contracts, with about half of them working in the public sector and the other half in the private sector. The goal is to increase the number of those working in the private sector. "Current policies are aimed at making the private sector the driver of employment. This means that in the next period, the private sector will play a larger role in creating new jobs and providing employment. Increasing the number of jobs and employment stability are important aspects. The main challenge is to increase the share of the private sector. In this context, there are two challenges. The first is to ensure that the share of those working under labor contracts in the private sector is higher, and considering international practice, it is advisable that about 70% of those working under labor contracts work in the private sector. Currently, this share is about 50%. The goal is to increase it to 70%. The second challenge is that the number of economically active citizens exceeds 5 million people. Of these, 35.5% work under labor contracts. Therefore, increasing the number of labor contracts is also an important challenge. Steps need to be taken in this direction. The improvement of legislation indicates that these two important challenges are at the center of government policy, and measures to address them are expanding, contributing to the strengthening of labor market resilience," he said.



In his latest statement, Minister of Finance Samir Sharifov noted that the state's measures to develop the labor market, create new jobs, and "whiten" the economy have yielded productive results, which have been reflected in reducing the budgetary burden. "Clear results have manifested themselves in a steady decrease in the state treasury's expenditures for the needs of the specialized fund. If you look closely at the stable trend, the expenses of the State Social Protection Fund are increasingly covered by growing social contributions from working citizens and entrepreneurs. This year was no exception: the government continued its course of consistent increases in social payments. Part of the budget expenditures was initially planned for transfer to the State Social Protection Fund. However, according to incoming data, revenues of the State Social Protection Fund increased by 190 million manats, so there is no need for an additional allocation of 160 million manats from the state budget to this fund," he added.

Statistics show that job growth in the country is mainly due to the private sector as the number of those officially employed in the non-state sector over the last four months has increased by 10 thousand people, reaching 852.7 thousand, while the number of those working in the public sector has decreased from 899.1 thousand to 897 thousand.

Changes in the employment structure reflect a desire for more efficient use of resources and maintaining the competitiveness of the economy. However, despite positive trends in wage growth and job creation, issues such as improving workforce quality, social protection, and fair income distribution remain. Overall, the increase in wages and employment dynamics in the Azerbaijani economy indicate positive trends in the country's development and the need for continued reforms to ensure sustainable economic growth and social stability.

News.Az