Global recession has sacrificed millions of working places in whole world. Majority of Georgian population has joined million-strong army of jobless people abroad.
What are future prognoses? What one should expect increase or reduction of employment rate? Can Georgian eemigrants provide their unemployed family members in Georgia, in the times, when economic crisis caused losses to youth, emigrants and people with temporary or part time jobs?
The World Bank Report on eve of 20th anniversary of the Berlin Wall’s fall says many countries in Europe, former Soviet Union and Asia are well integrated today into global markets. While this integration brought many benefits and drove the region’s spectacular growth in the decade since financial crisis, it also exposed ECA (Europe and Central Asia) countries to three channels through which the crisis has hit the region hard: financial, market, and labor. The report emphasizes that in order to maintain existing achievement it is necessary to conduct structural reforms. Transition since fall of Berlin Wall shapes the current crisis, says the report.
Excessively rapid catch-up towards Western European living standards by countries that had suffered deep or double transition recessions in the late 1990s, enabled by bank lending at a time of unusually high global liquidity, led to rapid growth, but also created serious macroeconomic imbalances when facing the 2008-09 global crisis.
The poorer countries of the former Soviet Union that are financially less integrated are experiencing the crisis primarily as a result of a downturn in exports and decline in workers’ remittances due to the recession in the Russian Federation. The World Bank report recommends that with capital flows likely to be considerably lower than pre-crisis levels, and financial markets already differentiating across countries, policy makers need to address the most binding constraints to growth in order to improve their business environment and remain competitive.
remittances in Georgia
According to the data of the first quarter the current year, 310,882 people were employed in Georgia. Average monthly remuneration of a person was GEL 512.2. The number of people employed in public sector is – 81,833, while 229,049 people are employed in private sector. The number of local population employed in non-governmental sector is 181,671, while the number of foreigners – 47,378. Most people are employed in industrial sector (78,507), health care (51,804) and in transportation and communication fields (59,299)1. (See table No 1). However, there is nothing new that major part of the population lives at the expense of remittances from abroad. Global financial crisis had negative impact on the volume of remittances in Georgia and whole world. Experts of International Monetary Fund, are noting in their summery of crisis influence on Caucasian and Central Asia countries that energy resources importer countries (Armenia, Georgia, Kirghizia, Tajikistan) are suffering of noticeable reduction of economic growth pace and deterioration of standard of living. IMF experts are explaining such negative changes by reduction of remittances from foreign countries and especially from neighbouring Russia. In the course of the last years, the flow of remittances from foreign countries to Georgia was characterized by increasing tendency. Average annual volume of remittances in 2000-2005YY was $180 million ($15 million per month). This showing increased up to $544.7 million ($45 million per month) in 2006 and $866.2 million in 2007 ($72 million per month) that is 60 percent more than that of 2006 rate. Georgia’s main remittance countries were Russia, USA, Spain, Greece, Ukraine, Turkey and Austria; 87.3 percent of remittances in this period were made from the above-mentioned countries. The remittances in 2008, exceeded $1 billion that is $136 million or 15.7 percent more than the similar showing of 2007. The highest level of money transfers over 2008Y was observed in July and December – $97.4 million and $108.8 million. The least remittances were made in January – $58.5 million.
Remittances are declining in whole world. Despite the fact that only the figures of nine months are published yet, it is hard to imagine that in just three months overall volume of money transfers reaches the figure of 2008. The data of the first nine months in 2009 show that approximately $590 million was remitted in Georgia.2
According to the press releases of National Bank of Georgia, total money transfers from abroad fall on three big donor countries – Russia, USA and Spain. If we take a look to the situations at labour markets of various foreign countries, the prospects of Georgian emigrants becomes clearer.
raging in the world
The number of unemployed people in 2010 might constitute 57 million in OECD countries. This figure was 37.2 million in 2008. Experts forecast that unemployment level in OECD countries will be 9.9 percent in 2010 that is the highest figure since 1970Y. International Labour Organization forecasts that the number of jobless people in 2009 reaches 210-239 million all over the world. Global financial crisis aggrieved every EU country and sharply increased unemployment rate. Those, with relatively low level of proficiency and temporary job contacts were affected the most. The unemployment rate was 9.2 percent in Sep-2009, while in the same period of 2008 the figure made up 7.1 percent. This is the highest rate for twenty-seven member countries since 2000Y. It is anticipated that unemployment might reach its peak (11 percent) next year. However, afterwards some improvements are forecasted. According to the data of Eurostat, 22,123,000 people were jobless in EU member countries in Sep-2009. The increase in unemployment rate made up 5 million people compared with the figure of 2008. The lowest unemployment rate among member countries is observed in Holland (3.6 percent) and Austria (4.8 percent), while Latvia and Spain are the leaders of unemployment by 19.7 percent and 19.3 percent. There are 4.1 million unemployed people in Spain that is 1.5 million more in comparison with the figure of previous year. According to the conclusion made by analytics of Euro Committee, if Spain does not decreases expenses on free medical services, pensions and unemployment benefits, country will run out of funds by 2060Y.
Unemployment rate among male citizens in the EU increased from 6.8 percent to 9.3 percent within the period of Sep-2008 and Sep-2009. The same showings among female citizens is increased from 7.5 percent to 9 percent. Young generation suffered the most, as unemployment rate among young people below the age of 25, has increased from 15.8 percent to 20.2 percent. The tendency is especially noticed in Spain – 41.7 percent and Latvia – 33.6 percent3. Approved method of fhighting against unemployment in the EU is creation of part time working places that enables to employ several people at the same position. Of course, the salary is lower, but fewer employees lose their jobs. Governments of some countries encourage creation of similar working places. Thus, the number of part time jobs in Europe has increased.
“The increased pace of impoverishment among able-bodied population is endangering stability of the country” – declared economists of Russia’s Labour and Social Insurance Service. Russian economists explain the poverty and low standard of living by non-competitiveness of enterprises and various sectors of economy, low level of industry, low salaries and discontent of living wage. The percentage ratio of poor population in Russia was 17.4 percent in the first quarter of 2009. This figure is 4.3 percent more than that of 2008. Economics are anticipating aggravation of the situation with the second wave of crisis.
The jobless rate exceeded 10.2 percent through October of 2010 in USA. That is 0.4% more compared with the previous month. This is the highest level since 1983, according to a Labor Department report. The economy has lost 7.3 million jobs since the recession began in December 2007. The Labor Department said 190,000 jobs were lost in a month. Only in industrial and service sectors, 61,000 jobs were lost. Sixty-two thousand jobs were lost in construction sector. Financial sector also suffered damages and eight thousand people were fired. The figures were worse than the experts anticipated. Their forecast was 9.9 percent margin.
Unemployment problem concerned groups of every ethnicity and social condition. As regards, scale of age, young people below 20 suffer the most both in Europe and in USA. Unemployment among them has increased from 25.9 percent to 27.6 percent. (www.Bloomberg.com)
Seventy-three million people have lost their jobs in USA, since Dec-2007. Fifteen million Americans are unemployed today. About 3.5 million have lost their jobs in the presidency of Obama. Obama said that one of the main priorities for White House today is reduction of taxes for business. This encourages development of SMEs (small and medium enterprises) and thus logically new working places will be created. After support of giant companies, such as General Motors and Goldman Sachs, Obama administration started to think about small business. Development of SMEs has become a high priority matter. Situation is quite grave in this field. The rate of bankruptcies of SMEs in Sep-2009 is 44 percent more than in the same period of 2008. Enterprise is considered as small if 500 or less people are employed in it. One third of fired people in Sep-Oct 2009 were employed in small enterprises. Importance of small business is proved by the fact that during recent economic boom, in 2003-2007YY, 40 percent of new working places in USA were created by small enterprises with number of employees not more than 20 people. Situation is complicated by bankruptcy of another financial giant – Citi Group that was working on financing of SMEs. Besides this, forecasts for USA are not encouraging. Experts are anticipating that state bailouts for stimulation of economy will be stopped and unemployment rate will increase even more – 10.5 percent. Part of experts anticipates the second wave of slump in economy. Specialists reckon that US GDP will be increased by 2.8 percent in 2010Y, but in spite of growth, rapid decrease of unemployment rate will not be followed.
EBRD economic forecasts are even aggravated, as steady economic revival is not anticipated in 2010Y. Bank report says that due to sharp slump of industrial production, 6.3 percent shrink of Eastern and Central Europe an economies is anticipated in the first half of current year. In the third quarter of 2009Y, positive signs of economic growth prove that recession has reached its bottom in many countries. At the same time, economic growth in 2010 will be unsteady and not common. According to bank’s expert Erick Bergloph, it’s obvious that the results of world economic crisis will be seen next year as bankruptcies and unemployment will be increased in the future. Organization of Economic Cooperation and Development has calculated that recession in its thirty member countries might cause the lost 25 million working places.
“Signs of recovery are already noticed, but as it seems the process will be quite moderate in the nearest future” – declared the head of the organization Anhel Guria. According to calculation of the mentioned organization, 15 million working places have been lost and even more 10 million might disappear in the end of 2010Y. The organization is afraid that unemployment rate might reach 10 percent in some of the countries, if economic recovery process does not intensify.
“Unemployment is the last margin of current crisis and one cannot assume that the problem might be solved only at the expense of economic growth” – said Guria.
Increase of unemployment rate was a one-two punch for labour emigrants. They have lost their jobs and governments are trying to prescript them from their countries. For instance, Migration Service of Russian Federation decreased quotas of working places for emigrants from 4 to 2 million. Management of Russian municipality started to oppress emigrants at local levels. For instance, government of Moscow called employers not to hire emigrants any more.
According to the data of Migration Service of Russian Federation, number of emigrants has decreased by 13 percent in the first quarter of 2009. According to the data of Bank of Asia, the number of emigrants in Middle East, including Ukraine, Moldova and Caucasus countries has decreased by 25.5 percent. However, experts are anticipating that official data are not correct and the number of illegal emigrants is still high in whole world. Representatives of Migration Service of Russia declare that 1.8 million emigrants are employed in Russia officially, but according to unofficial data their number is about 4-5 million4.
Estimated number of international emigrants in whole world, in pre-crisis period was 195 million. The same figure in 1960Y did not exceed 75 million. Experts are anticipating that the figure might increase by 9.6 percent in 2010Y and amount 214 million people.
In 1990-2009 YY, the number of international emigrants increased by 80 percent in North America and by 41 percent in Europe5. Emigrants make up 3 percent of world population. According to the data of United Nations, the number of illegal emigrants is 20-30 million people. About 11 million of illegal emigrants live in USA. Emigrants are holding special place at labour markets. For instance, in pre-crisis period, every second newly employed worker was emigrant in USA. In Great Britain, also standing out for the number of emigrants, seven workers out of ten were emigrants. The majority of labour emigrants are unskilled workers that have to work in fields such as motorcar business and construction. These sectors of economy suffered losses in every country and thus huge part of emigrant workers became unemployed. (See, Table No 2).
Despite the fact that unemployment increases in developing countries and first of all, this affects the rate of employment among emigrants, many of them, still does not hurry to return to their homeland as even graver situation is awaiting them here. States are fighting against emigrants by means of various methods. For instance, Spain and Czech are offering reimbursement of airline ticket prices to their homeland. Great Britain prefers to meet emigrants at the country’s borders and induce to return to their countries. However, they are reimbursing the ticket price also. It should be noted that this method is not a novelty. It is known as Pay-to-go method that was first used in France in 1977Y. However, this method has not proved to be effective either then or now. Emigrants are not attracted with the idea of rejoining to the army of jobless people in their home country, where hungry family members are awaiting them.
Higher unemployment among emigrant rather than local population is observed in some of the countries. This might be said about USA – the unemployment rate has significantly increased among emigrants from Mexico and the countries of Central America. Major part of emigrants is left jobless in Spain and Portugal. However, the unemployment growth pace is almost equal among local population and emigrants in some European countries.
“The level of unemployment is increasing in the homelands of emigrants. This is especially noticed in Mexico and Eastern European countries” – declare the experts of IOM (International Organization for Migration)6. According to IOM and ILO (International Labour Organization), today, there are about 100 million emigrants in whole world. This is 3 percent of global work power – able-bodied population in the age above fifteen, the number of such people in whole world is 3 billion. Economic crisis and reduction of working places caused slump in the volume of remittances. Remittances have been decreased in almost every country in the world, especially in Turkey, Moldova, Poland, Ecuador, Morocco, Mexico and Kenya.
Remittances to developing countries were steadily growing up to 2008Y. The increase made up 15% in 2007-2008YY and amounted $328 billion. Average annual growth of the volume of remittances in 1999-2007YY was 18 percent7 (See, table No 3). However, global recession changed the situation in opposite direction. The volume of remittance in Turkey decreased by 43 percent in the first quarter of 2009, the same figure is 37 percent in Moldova and 33 percent in Poland.
As we have already mentioned, the volume of money transferred to Georgia is decreased either. If considering the situation in Russia, USA and Spain, the countries that are most popular for Georgian emigrants, one should not expect growth of remittances in the nearest future.