Almost 80 Percent of Private Jobs Are in Yerevan

The picture of Armenia’s economic development is often presented only in general numbers, but the reality is more complex. This article analyzes the latest trends in the Armenian labor market. This material shows how private sector growth is concentrated in the capital. We don’t just present the problems; we offer concrete solutions that can help balance the country’s economic development. If you are interested in Armenia’s economic future and how we can create a fairer and more sustainable labor market, this analysis is for you.

It should be noted that since 2002, the proportion of jobs in the public sector has continuously decreased from when approximately 70 percent of registered jobs were in the public sector. As of June 2024, public jobs accounted for 28.1 percent of the total. The reduction is not due to a decrease in the number of public sector jobs, but to an increase in registered non-public jobs. The number of public sector workers has increased by 4.1 percent since the late 2020s, while non-public sector jobs have increased by 26.2 percent.

Chart 1.

As of June 2024, there were 759 thousand registered workers, which is 4.6 percent more compared to the same period last year. These trends are clearly visible in the second chart, which shows the dynamics of the number of workers and the average wage in Armenia. Chart 2.

The number of workers in Armenia has a steady growth. Slowdown trends are observed in the average wage. As can be seen from the chart, the main growth in the average wage was observed from 2022 to the first half of 2023. As of June 2024, the adjusted average wage is 250 thousand AMD, which is 3.8 percent more than the previous year’s figure. However, these figures do not show the significant differences between Yerevan and the regions. The second chart shows the distribution of private jobs in Armenia. Chart 3.

As of the first half of 2024, 77.7 percent of private jobs in Armenia are located in Yerevan, which is a noticeable increase compared to 2019, when 73.5 percent of jobs were in Yerevan. Private sector jobs have mainly grown in Yerevan. According to our calculations, 79 percent of private sector jobs will be registered in Yerevan in December 2024. This is a concerning trend; the regions are developing disproportionately from Yerevan. In the regions, incomes are primarily provided by public sector jobs.

This disproportion becomes more obvious when we look at the ratio of public to private jobs by region, as shown in Chart 3. Taking into account the administrative status of Yerevan, 51.9 percent of non-public sector jobs were in Yerevan in the first half of 2024. 79.3 percent of the total wage fund is concentrated in Yerevan; in 2018, this figure was 73.5 percent. If we look at the wage fund, almost 80 percent of the formally registered economy is concentrated in Yerevan. As of the first half of 2024, the total wage fund is 208 billion AMD, which is 10.4 percent more compared to the same period last year. These data show that Armenia’s economic development is highly uneven. The regions are falling further behind Yerevan, creating serious challenges for the balanced development of the country. Wages and jobs have grown primarily in Yerevan in the private sector. The most significant wage growth is observed in the IT and financial sectors. It is inaccurate to rely solely on the increase in the arithmetic average wage. The wage growth of relatively high-income earners has a significant impact on this indicator. In recent years, there has been an increase in average wages mainly due to the influence of high earners. It is also important to consider the median wage, as it reflects the income of the statistically average person. Our 👨‍👩‍👧‍👦✨ Strong Family: Rich Family study showed that the middle class has the most children, highlighting the importance of a strong family as the foundation of a strong state.

A problem also arises from the significant labor imbalance between Yerevan and other regions. The promotion of IT organizations and the income tax refund law mainly contribute to the creation and increase of private wages in IT, construction and, consequently, services and financial sectors, which are mostly concentrated in Yerevan. This trend deepens the development gap between Yerevan and the regions, as new jobs are mainly created in the capital. It is necessary to provide certain privileges to organizations that wish to operate in regions where the number of public employees exceeds the number of private jobs. Chart 4.

The state has the ability to manage the state’s cash flows through fiscal and monetary policies. For example, the 2015 income tax return law established that the loan interest rate in construction effectively became 0 percent, which stimulated capital flows entering the economy mainly towards construction and primarily in Yerevan. Tax privileges are also important for international investors; this is a good stimulus from the point of view of managing capital flows entering the country. Thus, tax privileges can be introduced that will stimulate the development of regions, the creation of industrial activity, and an increase in jobs in the regions. For these privileges, the following format can be adopted as a basis: in those regions where private jobs are up to 2 times less than public jobs, provide a preferential income tax of 0-10 percent (depending on the type of production), and a profit tax privilege for industrial organizations. This privilege will apply until private jobs in that region are 2 times more than public jobs. Chart 5 shows the ratio of private and public jobs as of July 2024. Chart 5.

This privilege will not apply in Yerevan and the Kotayk region, where this ratio is already 3.77 and 2.52 respectively. This privilege will apply in Syunik for no more than 1-2 years, as well as in Ararat, where this ratio as of the first half of 2024 is already 1.62 and 1.48 respectively. This privilege will apply for a long time especially in underdeveloped regions: Tavush, Shirak, Aragatsotn, and Gegharkunik regions, where the number of public jobs exceeds private ones. For example, in the Gegharkunik region, registered public jobs are almost 2 times more than private jobs. This initiative will not reduce tax revenues, as almost 80 percent of the wage fund is already formed in Yerevan. It will be a stimulus for enterprises operating in the shadow economy in the regions to come out of the shadow and pay taxes, to create private jobs in the regions, to ensure the balanced development of the regions, as well as to create a stable industrial base for Armenia. This measure will ensure the creation of long-term added value, which will become the basis for the desired 7 percent annual economic growth. This policy can also contribute to the management of internal migration, reducing the number of people moving from the regions to Yerevan and encouraging specialists to work in their native regions. By contributing to the development of the regions, this project can help preserve the cultural and social capital of the regions. In summary, we can note that the current state of Armenia’s labor market shows a significant imbalance between Yerevan and the regions. This situation requires coordinated and long-term solutions aimed not only at general economic growth but also at the fair distribution of that growth across all areas of the country. The approach regarding the proposed tax privileges can be one of the first steps in this direction, but it must be accompanied by educational, infrastructural, and other social initiatives to ensure the comprehensive development of the regions.

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