Ivane Machavariani: “Unemployment is at historic minimum”

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The FINANCIAL — Verdict: FactCheck concludes that Ivane Machavariani’s statement is a LIE.

Resume: In 2016-2017, the number of employed people in Georgia has decreased. In accordance with the data of the National Statistics Office of Georgia, there were 1,733.8 thousand employed in 2015. In 2016, that figure decreased to 1,717.3 thousand and in 2017 decreased further to 1,706.6 thousand.

In addition, the share of employed people in the workforce has decreased from 57.4% to 56.7%.
Of note is that the unemployment has also decreased (in percentage figures) in the aforementioned years. However, that does not mean there is a progress in terms of employment, because decreased unemployment rate is stipulated not by adding jobs, but by decreasing of workforce. Of note is that decreasing workforce, that is, economically active population, is a negative thing.

Even though in this specific case, the unemployment level (%) does not actually show a real situation (the number of employed persons is more precise indicator), Ivane Machavariani’s statement that “unemployment is at historic minimum” is still inaccurate, because unemployment level in 1998-2004 was less than today’s 13.9%.

Analysis

During the presentation of 2019 draft state budget of Georgia, the Minister of Finance, Ivane Machavariani stated that unemployment in the country is at the historic minimum.

The unemployment level refers to share of unemployed people in the workforce. The latter consists of employed people and unemployed persons, who are willing and able to work. A person is considered unemployed, if in the he/she was not employed even for one hour during a seven-day period prior to the National Statistics Office of Georgia’s survey, was looking for a job in the last four weeks and was ready to start working in the next two weeks.

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Therefore, those people who are able to work, but were not looking for a job in the four weeks, preceding the survey, are not included in the statistical figures (workforce). On the other hand, having people outside the workforce, might be stipulated by the rise of the so called “discouraged worker” numbers. This term refers to a situation, when a person who is able to work is looking for employment for a long time, but could not find it and ceases to try. Therefore, the situation in terms of employment/unemployment is better shown by the level of employment, which illustrates what part of workforce is employed.

As of 2017, of total workforce, 56.7% was employed. In 2016, that figure was 0.4 percentage points higher at 57.1%, whilst in 2015 it was 57.4%.

Therefore, there is a trend of decreasing share of employed people in the last years. In the same period, workforce among the people who are able to work has also decreased. In 2015, workforce was 66.8% of the people who are able to work, whilst in 2015 that figure dropped to 65.8%.

Graph 1: Population, Workforce and Employment Level (thousand people, %)

Even though the unemployment rate, that is, share of unemployed people, decreased in 2016-2017, that does not mean that number of employed people has increased. On the contrary, number of employed people has decreased, whilst reducing the unemployment rate is stipulated by decreasing workforce (economically active population), that is, people who are willing and able to work.

In 2016 (unemployment level 14%), the number of employed people was 1,717.3 thousand, whilst in 2017 (unemployment level 13.9%) the number of employed people decreased by 10,000 and dropped to 1,706.6 thousand.

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Graph 2: People Able to Work, Number of Employed and Unemployment Level

The graph 2 illustrates that in the period of 2008-2015, the number of employed people has increased, but dropped in 2016-2017. In 2016-2017, the unemployment rate decreased from 14.1% to 13.9% but this is not stipulated by the employment of more people. Decreased unemployment level is stipulated by reducing share of economically active persons in people who are able to work. In turn, reducing the number of economically active persons is stipulated by their decision to cease looking for job.

Even though in this specific case, unemployment level in percentage does not really show existing situation and does not imply increase in the number of employed people, the Minister’s statement that “unemployment is at historic minimum” is still inaccurate, because in the last 20 years, the lowest unemployment rate – 10.3% – was registered in 2000.

 

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