Toil and trouble: A statistical snapshot of labor in Kazakhstan

Is Kazakhstan’s booming economy creating as many jobs as it should?

Real investment in Kazakhstan is floundering, probably because the economy has yet to work off the excess supply of buildings that it had accumulated in the real estate bubble that burst in 2007. But the labor market is mildly encouraging. In the first half of 2011, the national rate of unemployment was 5.5%, well below the 6% of early 2010. Indeed, the nation’s unemployment rate has been dropping steadily since 2003, when it was 8.8%. Employment looks almost as good: Since early 2010, the number of employed persons in the first half of 2011 had increased 1.2% to 8.2 million.

Nevertheless, some puzzles about Kazakhstani labor are troubling. Although Almaty's unemployment rate has been dropping for years, it has been increasing relative to the nation's unemployment rate, peaking at a sixth higher in 2009. Almaty’s rate has also been consistently higher than Astana's. In fact, Almaty's rate has generally been among the highest in Kazakhstan since 2006, rivaled only by the Mangistau area. Among the lowest unemployment rates since 2006 is that in the Aktubinskaya oblast.

These facts suggest that unemployment in Kazakhstan may be mainly urban. Perhaps Almaty’s unemployment rate is high because it attracts overly optimistic migrants. But in reality, the areas with the highest rates of unemployment over the long run are not concentrated heavily in any particular region or industry, although they emphasize the south of the country a bit: Kyzylordinksaya oblast (14% above the national unemployment rate, both expressed as averages for 2003-2010), in the Aral Sea region and near the Uzbek border; Mangistauskaya oblast (13% above the national rate), east of the Caspian Sea in oil country; Zhambylskaya oblast (11% above), southwest of Lake Balkhash and bordering Uzbekistan; and the city of Almaty as well as Akmolinskaya oblast which surrounds Astana (each 7% above).

Similarly, the areas with the lowest rates of unemployment for 2003 through 2010 do not suggest any clear trends beyond a mild emphasis on northern Kazakhstan: Karagandiskaya oblast (10% below the national average), concentrated in
manufacturing and processing southeast of Astana; East Kazakhstan (9% below); Almatinskaya oblast (6% below), the large region including the area north of Almaty;
Pavlodarskaya oblast (5% below), east of Astana; and North Kazakhstan oblast (5% below).

Persistence and subsistence

These long-run trends may be somewhat stable. In 2010, the five areas with the highest rates of unemployment relative to Kazakhstan included three with high long-run rates: Mangistauskaya oblast (10% percent above the national rate in 2010); the city of Almaty (9% above); and Kyzylordinskaya oblast (2%). The five areas with the lowest rates of relative unemployment in 2010 included two with low long-run rates: Karagandiskaya oblast (5% below the national rate in 2010) and Pavlodarskaya oblast (3% below).

Despite these persistent regional effects, the disparity across regional rates may be diminishing: Their standard deviation (a popular measure of dispersion) was .053 in 2010, lower than for the period from 2003 through 2010 on average (.075). Perhaps the national labor market is improving: Workers may be more likely now to migrate from areas of high unemployment to areas of low unemployment, thus decreasing the unemployment rate in the former areas and increasing it in the latter. But one would still like to know why unemployment rates are stubbornly high in Mangistauskaya and Kyzylordinskaya oblasts as well as in Almaty.

In principle, the unemployment rate in Kazakhstan may fall partly because people become so discouraged that they cease looking for work, thus dropping out of the labor force. In that case, a falling rate of unemployment would hardly be a sign of economic health. We can check statistically for such a possibility. The labor force is the sum of employed and unemployed workers. A worker may lose his unemployment status either because he gets a job (increasing the number of employed workers) or because he drops out of the labor force (reducing the number of unemployed workers but not increasing the number of employed workers). If an increase in the number of discouraged workers dominates the labor market, then the labor force must become smaller (see the Notes). But in Kazakhstan, the annual number of newly employed workers is seven times as large as the annual reduction in the number of unemployed workers. This suggests that the economy tends to create jobs rather than discourage workers.

But the rate of increase in jobs is not impressive -- an average of 2.2% from 2003 through 2010. This may provide enough jobs for youths entering the labor market; the rate of population growth in 2009 was 1.6%. But it is just a fraction of the growth rate of the national economy, and it occurs in spite of the fact that the burgeoning sector of services is labor-intensive. In Kazakhstan’s economy, all is not as well as it seems. -- Leon Taylor, tayloralmaty@yahoo.com


Notes

1. To determine the importance of “discouraged workers” (that is, people who no longer look for work) to Kazakhstan’s economy, let’s measure their impact on the labor force, which sums employed and unemployed workers.

Denote the labor force as LF; the number of employed workers, as E; and the number of unemployed workers, as UN. Then LF = E + UN. Using dX to denote a change in X, dLF = dE + dUN. Considering these changes, we may ignore movements from the unemployed ranks to the employed, or in the reverse direction, since they do not affect the overall size of the labor force.

The number of employed workers may change in either of two ways that affect the size of the labor force: An entrant gets a job; or a worker loses his job and decides not to look for another (i.e., he leaves the labor force). In the first case, dE > 0; in the second case, dE< 0. The number of unemployed workers may also change in either of two ways that affect the size of the labor force: An unemployed worker leaves the labor force (dUN < 0); or an entrant begins looking unsuccessfully for work (dUN > 0).

If the increase in the number of discouraged workers dominates other changes in the size of the labor force, then dLF < 0. From 2003 through 2010, the size of Kazakhstan’s labor force has never decreased. But its growth has been slow, at the average annual rate of 1.7% over this period. References

Statistical Agency of Kazakhstan. www.stat.kz The source of all raw data used in this article.