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Despite economic growth, negative trends on labour market would persist until late 2017

May 29, 2017 9:54
Image: "Brestskaja gazeta"

In January – April 2017, despite some economic recovery, 17900 people were laid off in Belarus. Recent layoffs in Belarus have been associated with economic stagnation and demographic situation. Economic recovery per se is not enough to restore the demand for labour force, further layoffs would continue by reducing retirement age workers.

According to Belstat, in January – April 2017, 173,700 people were hired and 191,600 laid off. Net layoffs totalled 17,900 people, including 7,600 in April. The largest number of layoffs were reported in retail trade, housing and communal services, and construction. Layoffs have been exceeding hires for six consecutive months. Layoffs were reported amid resumed economic growth: in January-April, GDP grew by 0.5%, with manufacturing industry being the major contributor.

In recent years, layoffs occur in the Belarusian economy for two main reasons. Firstly, the demographic situation suggests the retirement of labour resources due to the ageing of the population. Those who retire outnumber those who reach the working age. Secondly, due to the stagnation of the Belarusian economy, the demand from employers for new employees has decreased. There are insignificantly few new enterprises emerging in Belarus, primarily due to the poor protection of the private property rights, which scares away investors. Due to budget restrictions and limited capacity of the state aid, state enterprises also could not offer new jobs.

Nevertheless, the labour market situation in 2017 is favourable as compared with previous years. The growth in people’s incomes has slowed the pace of layoffs in retail trade. The state stepped up the allocation of funds for the construction within the state investment programme. In April 2017, for the first time in the last two years, the construction industry hired more people than laid off. The IT sector has remained a stable generator of new jobs.

However, the economy retains an excessive number of labour force, which is estimated at some 10% or about 300,000 people. The pace of economic recovery is slow; in order to fulfil the wage growth requirement, layoffs are likely to persist, mainly thanks to the reduced difference between those who reach the working age (90,000 people) and those who reach the retirement age (140,000 people). Contracts with persons of retirement age are unlikely to be prolonged in order to vacate jobs for young workers. In addition, such an approach would not increase the unemployment rate, since pensioners rarely registered as unemployed.

Overall, for six consecutive months, there were more layoffs than hires in the Belarusian economy. Belarus’ GDP growth rate is insufficient to boost demand for workers from enterprises. Layoffs would continue with dismissal of retirement age workers.

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