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Labor Market Trends Report No. 35361-AM Armenia Report No.35361-AM Labor MarketDynamics II Volume Report No. 35361-AM Armenia Labor Market Dynamics (In Two Volumes) Volume II: Main Report Public Disclosure AuthorizedPublic Disclosure Authorized May 2007 Human Development Sector Unit Europe and Central Asia Region Public Disclosure AuthorizedPublic Disclosure Authorized Public Disclosure AuthorizedPublic Disclosure Authorized Document of the World Bank Public Disclosure AuthorizedPublic Disclosure Authorized SSP Social Support Program TFR Total Fertility Rate ULC Unit Labor Costs UNDP United Nations Development Program UNICEF United Nation’s Children Fund USAID United States Agency for International Development USSR Union of Soviet Socialist Republics VET Vocational Education and Training Vice President: Shigeo Katsu Country Director: Donna M. Dowsett-Coirolo Sector Director: Tamar Manuelyan Atinc Sector Manager Arup Banerji Task Team Leader: Arvo Kuddo ACKNOWLEDGMENTS This report was written by Arvo Kuddo (Task Team Leader; ECSHD). It relies on the contributions prepared by the team of Armenian experts fiom AVAG Solutions Ltd. led by Vahram Avanesyan. Background papers on particular topics were prepared by the following authors: (a) macroeconomic developments and the labor market: Armen Yeghiazaryan and Vahram Avanesyan; (b) rural employment: Armen Yeghiazaryan, Vahram Avanesyan, and Nairuhi Jrbashyan; (c) youth employment and unemployment: Vahram Avanesyan, Melik Gasparyan and Nairuhi Jrbashyan; and (d) labor legislation and labor market institutions: Vahram Avanesyan and Melik Gasparyan. The fieldwork on conducting labor market surveys was supervised by Ruben Yeganyan and Norayr Gasarjyan. The report uses the contributions provided by Sona Harutyunyan (Director), Anahit Parsadanyan and Hasmik Tadevosyan from the State Employment Service, Louisine Qalantaryan, Head of Labor Market Division of the National Statistical Service of the Republic of Armenia (administrative and Labor Force Survey data), and Gorana Krstic (Integrated Living Conditions Survey data). Tatyana Bogomolova and Asta Zviniene (HDNSP) provided assistance in preparing population forecasts for Armenia. The team is grateful for the support of Donna M. Dowsett-Coirolo, Country Director (ECCU3), Arup Banerji, Sector Manager (ECSHD), and Aleksandra Posarac, Country Sector Coordinator for South Caucasus (ECSHD). The team benefited from comments of peer reviewers Verdon Staines (AFTH3) and Carlos Silva Jauregui (MNSED), as well as Christian Peterson (ECSPE), Saumya Mitra (ECSPE), and Anthony Cholst (ECCU3), Special thanks to Diane Stamm, who edited the document. a ARMENIA LABOR MARKET DYNAMICS Contents Page Acknowledgments .................................................................................................................................. a Contents ................................................................................................................................................... i Introduction............................................................................................................................................. 1 Chapter I: Macroeconomic Developments and the Labor Market......................................................... 5 1.1. Economic Growth and Employment ..................................................................................... 5 1.2. Job Flows, by Industry ........................................................................................................ 11 1.3. Productivity Improvements ................................................................................................. 18 Chapter 11: Labor Market Trends ......................................................................................................... 23 2.1 . Labor Force Participation .................................................................................................... 23 2.2. Employment Ratio............................................................................................................... 28 2.3. Unemployment Trends ........................................................................................................ 34 2.4. Inactive Population .............................................................................................................. 38 2.5. Older and Disabled Workers ............................................................................................... 39 2.6. Child Labor ......................................................................................................................... 41 2.7. Gender Segregation ............................................................................................................. 42 2.8. Urban-rural Dimension and Regional Disparities .............................................................. -44 2.9. Education Level and Labor Market Outcomes., .................................................................. 46 Chapter 111: Wage Dynamics and Unit Labor Costs ........................................................................... -50 3.1. Wage Dynamics .................................................................................................................. 50 3.2. Unit Labor Costs ................................................................................................................. 56 Chapter IV: Rural Employment ........................................................................................................... 58 4.1 . Output and Employment in Agriculture ............................................................................. -58 4.2. Landownership and Land Use ............................................................................................. 63 4.3. Income from Agriculture..................................................................................................... 64 Chapter V: Youth Employment and Unemployment ........................................................................... 66 5.1. The Level and Structure ofunemployed Youth ................................................................. 66 5 .2. Sociodemographic Characteristics of Registered Unemployed Young People and their Households ....................................................................................................................................... 68 5.3. Past Interactions ofUnemployed Youth with the Labor Market......................................... 72 5 .4. Students in Primary Professional Schools and in Secondary Specialized Education Establishments .................................................................................................................................. 75 Chapter VI: Labor Migration............................................................................................................... 78 6.1. Outflow ofPopulation ......................................................................................................... 78 6.2. Current Labor Migration ..................................................................................................... 80 6.3. Urban-rural Migration ......................................................................................................... 82 6.4. Remittances ......................................................................................................................... 83 Chapter VII: Business Environment and Labor Markets ..................................................................... 86 7.1, Importance of the Business Environment............................................................................ 86 7.2. Challenges to Creating a Business ...................................................................................... 88 7.3. The Role of Labor Regulations ........................................................................................... 91 7.4. The Role of Skill Level and Education ............................................................................... 91 Chapter VIII: Labor Legislation and Labor Market Institutions .......................................................... 94 8.1. State Intervention in the Labor Market ............................................................................... 94 8.2. Employment Protection Legislation .................................................................................... 96 1 8.3. The Capacity ofthe State Employment Service ................................................................ 101 8.4. Active Labor Market Programs ......................................................................................... 103 8.5. Unemployment Benefits .................................................................................................... 107 8.6. Social Dialogue ................................................................................................................. 109 Chapter IX: Policy Recommendations .............................................................................................. 111 References........................................................................................................................................... 120 Annexes .............................................................................................................................................. 128 Tables Table 1. 1. Volume Indexes of Gross Domestic Product (constant prices). 1991 = 100 ........................ 6 Table 1.2: Employment Dynamics in Health. Education. Science. And Public
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