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Uzbekistan’s labor market in international assessments:
About positions in international ratings and indexes

The Ministry of poverty reduction and employment of the Republic of Uzbekistan.

International rankings and indexes assess the economic and political freedom, well-being of life, human rights, education, health care system, etc. of various countries. In accordance with the Decree of the President of the Republic of Uzbekistan dated 02.06.2020, key performance indicators (KPIs) were defined for priority international ratings and indices for the Republic of Uzbekistan, a number of which, as well as 16 sub-indicators, are directly related to the labor market. This article highlights sub-indicators related to the labor market that affect the position in international indices, as well as measures that need to be implemented in the labor market to improve the position of Uzbekistan in international comparisons.

Global Innovation Index

The Global Innovation Index (GII), evaluated by the World Intellectual Property Organization (WIPO) since 2007, covers the economies of 132 countries, which account for 94.3% of the world’s population. In this index, Uzbekistan ranked 93rd in 2020, 86th in 2021, and 82nd in 2022. The index consists of 7 directions and 81 sub-indicators. Each country is rated on a 100-point scale. In this index, 3 sub-indicators of the “Business Development” direction and 1 sub-indicator of the “Institutional system” direction relate to the labor market, which are evaluated as follows.

Employment in knowledge-intensive industries.

According to the methodology of the International Labor Organization, this sub-indicator is formed by calculating the share of the number of people employed in knowledge-intensive industries, which belong to three categories of professions: managers, specialists, technical and auxiliary specialists, as part of the economically active population. Therefore, the GII sub-indicator lacks data on employment in knowledge-intensive industries in Uzbekistan. This is due to the fact that the report was not conducted according to the ISCO-08 and ISCO-88 standards, which take into account the distribution of employment by position. In order to determine the indicators of this sub-indicator, it is necessary to determine the number of employees in knowledge-intensive industries based on the interdepartmental software and hardware complex “Unified National Labor System”, as well as make changes to the questionnaire for determining the balance of labor resources based on the recommendation of the International Labor Organization. As an experiment, it is advisable to conduct an appropriate survey to coordinate the quality of the collected data with the International Labor Organization.

Firms that offer formal training.

This sub-indicator is measured by determining the percentage of firms offering formal training and retraining courses for their permanent employees out of the total number of firms in the country. Based on the World Bank methodology, more than a thousand companies are selected in each country and surveys are conducted. The questionnaire consists of 13 components and includes 67 sub-indicators.

The 2022 report indicates that firms offering formal training in Uzbekistan account for 16.9% of the total number of firms, and the country ranks 88th in this sub-indicator. These figures are based on the results of a survey conducted by the World Bank in 2019 among 1,239 firms operating in various sectors of the Uzbek economy. Firms that participated in the survey were divided into 3 groups, depending on the number of employees. According to the survey results, 13% or 78 out of 603 small firms, 23.6% or 97 out of 415 medium-sized firms, 42.1% or 93 out of 221 large firms organized training, retraining courses, trainings and seminars for their employees.

Firms offering formal training in Uzbekistanin 2019

SubindicatorShare of the total number of firmsfrom THEM:Europe and Central­AsiaIn lower-middle-income countries­
Small firms (5-19­employees)Medium-sized companies (20-99 employees)Large companies (100 + employees)
Percentage of firms offering formal training16,9 %13%23,6%42,1%32,7%37,3%

Source: World Bank (enterprise survey)

https://www.enterprisesurveys.org/en/data/exploreeconomies/2019/uzbekistan

Based on this, it can be concluded that the organization of training, retraining courses, trainings and seminars for employees of small and medium-sized enterprises in Uzbekistan is not sufficiently satisfactory. To improve country’s position on this indicator, it is possible to introduce a system of allocating subsidies to employers from the state budget in order to encourage small and medium-sized firms to train employees.

Working women with higher education

This indicator is determined by calculating the proportion of women with higher education in the total employed population. In the GII 2022, working women with higher education account for 13.7% of the total number of employees, and Uzbekistan ranks 56th in this sub-indicator. The reason for the relatively low rate in country can be explained by the fact that the number of women with higher education among the population is small, and many of them, married according to traditional customs, mostly do not work and are engaged in household work.

Working women with higher education in 2022

CountriesPlace in the Global Innovation IndexPlace in the sub-indicator, employed women with higher educationProportion of employed women with higher education to the total employed population
Ukraine57230.5%
Belarus773220.5%
Uzbekistan825613.7%
Kazakhstan833120.7%
Kyrgyzstan946411.7%

Source: World Intellectual Property Organization (WIPO)

To improve this sub-indicator, it is necessary to dramatically increase the coverage of women and girls with higher education, and create equal opportunities for girls and boys in families to get an education. It is also necessary to introduce a methodology for determining the employment rate of women with higher education in the formal and informal sectors, and to conduct negotiations with the International Labour Organization to improve the methodology for determining the balance of labor resources.

Expenses related to dismissal

This sub-indicator takes into account the compensable period due to dismissal of an employee and the period of notification of dismissal of an employee due to staff reduction in the organization. The longer the employee’s notice period and compensation period, the lower the score. In 2022, Uzbekistan scored 17.3 points on this indicator and took 73rd place.

In accordance with article 102 of the current Labor Code, the employer is obliged to notify the employee (regardless of the length of service) at least 2 months (or 8.7 weeks) before the termination of the employment contract in connection with dismissal, and on the basis of mutual agreement, it is also possible to replace it with a 2-month compensation. In countries with high scores for this sub-indicator, the average notice period for an employee’s dismissal is 4 weeks, and it is not possible to replace this period with compensation.

In accordance with articles 506, 511, 518 of the New Edition of the Labor Code of the Republic of Uzbekistan (which will enter into force on April 30, 2023), the terms for notifying an employee of a micro-employer, an employee of an individual entrepreneur, a domestic worker about the termination of an employment contract, as well as cases and amounts of payments for termination of the employment contract, severance pay and other compensation payments are determined by the employment contract.

In this regard, during the forming  process of this indicator, international organizations are recommended to take into account the Labor Code of the Republic of Uzbekistan in the new edition.

Women, Business and the Law Index

The Women, Business, and the Law index is developed by the World Bank and covers 190 countries. The ­sub-indicators in the index consist of eight indicators and are formed based on answers to 35 questions aimed at determining the availability of regulatory legal acts that serve as the legal basis for comfortable and free living and work of women in the country being evaluated. The survey is conducted by World Bank experts in consultation with human rights defenders and independent experts in the country. Each sub-indicator is evaluated using a 100-point system, and the arithmetic mean of the sub-indicators is used to calculate the index.

Uzbekistan scored 70.6 points out of 100 under this scheme in 2022, receiving low indicators for sub-indicators related to the labor market — employment and remuneration. When studying the reasons for low results for these sub-indicators, it was found that, existing and newly adopted regulatory documents in the republic were not taken into account in the evaluation process, i.e. when answering the questions raised.

In particular, the provisions of the Law “On Protection of Women from harassment and violence”, adopted on 02.09.2019, articles 118-121 of the Criminal Code of the Republic of Uzbekistan, which define liability for any form of sexual violence; article 6 of the Labor Code, according to which any restrictions in the sphere of labor relations based on gender, age, race, nationality, language were not taken into account and other aspects that are not related to the results of their work are not allowed; as well as the Presidential Decree of 07.03.2019 “On measures to further strengthen guarantees of women’s labor rights and support for entrepreneurship”, which lifted bans on the use of women’s labor in certain fields or professions from May 1, 2019.

In this regard, it is necessary to organize webinars and meetings with representatives of the World Bank and inform them in more detail about the ongoing reforms and current laws.

Economic Freedom Index, 2022

CountriesIndex of Economic FreedomIndicator of labor market
freedom placeoverall scorescore
Denmark107864.4
Kazakhstan6464.462.7
Azerbaijan7561.655.9
Turkey10756.947.1
Uzbekistan11755.748
Belarus1355346.8

Source: https://www.heritage.org/index/

The Index of Economic Freedom is compiled by the Heritage Foundation (USA) and The Wall Street Journal. It assesses the level and­ effectiveness of government activities in 12 areas that can have a significant impact on economic growth and the well-being of the population, one of which is the freedom of the labor market.

This index is based on the fact that the availability of opportunities for citizens to find decent work is a key component of economic freedom, and the ability of economic entities to freely enter into contracts with employees and dismiss them increases productivity and ensures economic growth. Based on this, strong government intervention in this area slows down economic growth and reduces the level of labor market freedom.

In 2022, according to the Economic Freedom Index report, Uzbekistan ranked 117th among 177 countries with 55.7 points. According to the labor market freedom indicator, he scored 48 points

The labor market freedom indicator includes 9 sub-indicators and is calculated as the arithmetic mean of them. This indicator is determined ­based on the following sub-indicators.

Minimum wage. Based on the above methodology, the lower the minimum wage in a country, the more positive the impact it has on the freedom of the labor market, which will expand the opportunities for employers to choose the labor force. At the same time, if the minimum wage increases dramatically, employers will want to hire fewer workers.

The amount of labor required would decrease, and the supply of labor will increase. In this regard, the reduction or increase in the minimum wage should be based on the results of an analysis of labor market trends. The minimum wage in Uzbekistan in 2022 is 82.5 US dollars.

Associate’s law

In many countries, trade unions play an important role in monitoring the freedom of the labor market, and depending on the level and characteristics of their activities, they can serve as a powerful tool in ensuring free labor or as an obstacle to the effective functioning of the labor market.

The “Association Law” sub-indicator is based on the “Freedom in the World” rating, published annually by Freedom House, and is formed based on the rating given for 3 questions on a 0-4-point system. The respondent evaluates each question on a scale from 0 to 4.According to the results of the 2022 index, Uzbekistan received a rather low score from experts. To increase this sub-indicator, comprehensive measures should be taken to further develop the activities of non-governmental organizations.

Annual paid leave

Annual paid leave in 2022

CountriesAnnual paid leave period
Russia30 days
Belarus28 days
Azerbaijan30 days
Moldova35 days
Uzbekistan21 days
Lithuania27 days
European Union25 days

Source: Wikipedia

According to the International Labour Organization, annual leave is considered necessary to improve the employee’s performance, restore health and increase­ productivity, but the simultaneous departure of several employees of the organization for a long period of leave can cause problems associated with non-fulfillment of tasks. This sub-indicator is calculated using the appropriate formula and the shorter the period of annual paid leave, the higher the sub-indicator.

Article 229 of the new edition of the Labor Code stipulates that the period of annual paid leave in the Republic of Uzbekistan is 21 calendar days. Based on the results of the analysis of the experience of foreign countries on the duration of annual paid leave, there is no need to change the duration of annual paid leave in Uzbekistan due to the fact that national standards correspond to those of developed countries.

The “Notice period for redundancy” and “Pay for redundancy” sub-indicators are similar to the “Redundancy costs” sub-indicator of the Global Innovation Index, i.e. the longer the notice period and the compensated period, the lower the sub-indicators. Measures taken to improve the Global Innovation Index sub-indicator will automatically improve these sub-indicators.

Labor productivity. According to the International Labor Organization, labor productivity is the ratio of the product (GDP) produced over a certain period of time to the number of people employed in the production of this product (or to the working time spent by them). Labor productivity is the share of GDP per hour of working time.

Labor productivity increases if GDP growth is achieved without increasing the working hours of the labor force in a given period. This requires investment in human capital and manufacturing technologies. In order to increase labor productivity in Uzbekistan, it is recommended to develop human capital, train qualified specialists, introduce new technologies in production, and develop the creation of a value chain in all areas.

Labor force participation rate

Labor force participation rate in 2021

CountriesLabor force participation rate (%)Human resources (million people)
Russia61.3 %93.8
Kazakhstan69 %11.9
Belarus63.7 %6.2
Azerbaijan63.7 %7
Uzbekistan57.7 %23.1
Ukraine55.1 %29.2
South Korea63.1 %28.5

Source: World Bank and International Labour Organization

Labor force participation rate — the ratio of the labor force (employed and unemployed) of a certain age group to the total population of the corresponding age group (in percent).

The labor force participation rate is used to study the size and composition of human resources in a country, to predict the number of labor forces offered on the labor market in the future, to develop labor policies, and to determine the length of working age for men and women.

In order to increase the labor force participation rate, it is necessary to strengthen the work aimed at providing employment to the unemployed and jobseekers belonging to a certain age group.

Overtime restrictions. A country that does not have (or has) restrictions on overtime is awarded 100 (or 0) points. In Uzbekistan, there are no restrictions on overtime, meaning that if an employee has to work overtime to perform a certain job, the employer will have to pay twice the salary during this time, as defined in the Labor Code, so the sub-indicator was assigned 100 points.

Legality of layoffs due to downsizing

A country where there are (or are not) legal grounds for dismissing employees due to staff cuts is awarded 100 (or 0) points. In Uzbekistan, an employer has a legal basis for dismissing an employee due to a reduction in staff (Articles 102-103 of the Labor Code of the Republic of Uzbekistan). This sub-indicator was awarded 100 points.

Conclusion

The presented analytical data allow us to more specifically identify the measures needed to improve relations in the sphere of labor, contributing to the expansion of economic freedom, which will contribute to the growth of Uzbekistan’s position in international ratings and indices. At the same time, it should be borne in mind that international experts involved in rating evaluation are only concerned with identifying factors that cause low sub-indicators in the index, and developing recommendations aimed at eliminating them.

Therefore, the improvement of Uzbekistan’ position in international indexes and ratings is primarily due to the fact that legislative, executive, judicial bodies, representatives of local government bodies will act, as the head of our state said, in accordance with the principle of “the state for people”. If decisions aimed at developing entrepreneurship are effectively implemented, if people’s lives improve, this will lead to an increase in country’s position in international indices and ratings.

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