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Big Challenges of Small Labor Market

In a country like Georgia, any changes in the economy will inevitably affect the labor market – in particular, the devaluation of the national currency already demonstrates a new dimension of human resources policy.

EY Georgia conducted a study on the state of wages in the labor market of the country, which also  covers the period prior to the devaluation of the national currency, but even at that time the impact of the economic downturn is evident. Namely, at the beginning of 2015, far fewer companies are planning to increase the salaries of employees.

The study affected 43 companies, most of which are  representative offices of large international companies, occupying a considerable place in the market. Of these, 24%  are operating in the banking sector, 24% – are engaged in consumer goods selling, 11% – in trade, 8% – in energy, 8% – in heavy industry, 5% – in pharmaceuticals, 3% – in  insurance.

It was found that 77% of the company’s employees salaries are denominated in the national currency, 23% get salaries  in dollars. The dollarization is more common in  the banking sector – 33% of employees receive salaries in foreign currency, which is significantly higher than, for example in consumer goods  selling – 9%. It is not surprising that top management mainly receives wages in dollars that means they are more protected from the devaluation of GEL – when you consider that in 2015 during the Georgian national currency has lost 32% of its value, it is quite important.

In addition to the exchange rate , inflation also greatly influences on wages – a factor is  taken into account  by 53% of the companies. In 2014, according to Georgian Statistics Service, inflation was 3.1%, however, often a feeling with  respect to the real purchasing power of the salary recipients is slightly different from the statistics.

Recently, frequency of revision of wages by companies has become more frequent . If in 2013 45% of the companies reviewed wages in average once a year, now the figure totaled  55%. 68% of the survey participants increased salaries by  10% in 2014, the remaining  32%-  left the salary unchanged. This is lower than the 2013 figure , when wages were  increased by 76% of companies  but above the planned  for 2015, when only 55% of companies plan to increase revenues for personnel.

According to the Georgian Statistics Service, the unemployment rate in the country is 12, 4%, which is 2, 2% less than last year. According to the study EY Georgia, 42% of the surveyed companies intend to recruit  new staff in 2014, whereas in 2015 only 27% of companies have such plans.

A turnover of staff is also an important factor which in 2014 was 7%. Based on the business specifics, this figure varies – for example, turnover of staff is high in retail and call centers, but it is much smaller in sectors requiring specialized knowledge and skills. Especially in a situation when the country is experiencing a shortage of qualified technical personnel. In Georgia, mostly people over 40 are employed at enterprises, which is also a major challenge for the country in need of urbanization.

The unpopularity of technical professions among young people is probably due to the idea of ​​low wages in this sector. When companies have to rely on technical specialists of older age, who often cannot master new technologies, they have to hire specialists  from abroad, which is much more expensive than hiring the appropriate Georgian specialists. Against this background, based on the dynamics of supply and demand, the growth of wages in the technical field is inevitable. The study found that wages of technical directors are not less than the more popular CFOs.