In recent years, structural changes implemented in Azerbaijan towards optimizing the public administration system have entered a new phase. Particularly in the last two years, the abolition of several state institutions in the Nakhchivan Autonomous Republic, the reorganization of the activities of some organizations, as well as the layoffs carried out in various regions of the country and in strategic state companies, Baku Metro, Azerbaijan Caspian Shipping Company, and executive authorities, indicate that this process has taken on a systematic character. In parallel, the practice of merging some state institutions operating in the capital and simplifying management mechanisms has begun.
Although these changes might initially appear to be solely about optimizing the administrative apparatus and reducing budget expenditures, their scope of impact is actually broader. The layoffs and structural changes implemented in the public sector directly affect the balance of the labor market, the level of unemployment, and the access of qualified personnel to new employment opportunities.
Vugar Bayramov, a member of the Economic Policy Committee, told Modern.az regarding the issue that the main goal of structural reforms is not to optimize costs, but to ensure management flexibility:
“As a result, establishing a more flexible system where decisions are implemented more quickly is both a challenge and a requirement of the modern era. On the one hand, flexibility will increase, and on the other hand, the creation of new jobs in the private sector is a priority.”
The MP stated that, according to official statistics, the number of jobs created in the private sector in recent times is higher compared to the public sector. In the last year, we observe a greater number of employment contracts registered in the private sector:
“In this context, increasing the share of the private sector in both the creation of new jobs and the employment of qualified personnel, while simultaneously ensuring flexibility in the state structure, are important aspects.
“We observe not only layoffs in the public sectors but also the creation of new institutions. This is because there is a need to establish new institutions in line with challenges and modern requirements, or to form new departments within existing institutions,” he noted during his statement.
Economist-lawyer Akram Hasanov, on the other hand, linked the merger of institutions to the existence of numerous institutions performing the same function in Azerbaijan:
“The number of employees in state apparatuses has been excessively inflated. Unnecessary positions and employees exist. This creates an additional burden on the state budget.”
He noted that layoffs in state institutions have both positive and negative aspects:
“On the one hand, the state budget is relieved of an extra burden, while on the other hand, people may become unemployed or their salaries may decrease. To prevent this problem, entrepreneurship and the private sector need to be developed.”
In his statement to our website, economist Khalid Karimli emphasized that there is no need for state structures to be so large:
“The wrong decision here was made by creating insignificant institutions or by allowing institutions to grow more than necessary. At least until a year ago, the state's share in the employment structure was 50 percent. After the layoffs, this figure has dropped to 48.6 percent. The state was the main employer, which is a wrong approach if we are talking about a market economy. If we look at neighboring countries, this figure is approximately 20 percent in the public sector, and at worst, 30 percent.”
According to the economist, if stricter measures are taken, hundreds of thousands of people will be laid off from the public sector:
“To prevent unemployment in the country, the state created more jobs. Now, efforts are being made to correct these errors. I believe that if stricter measures are taken, several hundred thousand people could be laid off from the public sector. However, considering its impact on unemployment and social problems, the process is being implemented gradually. Especially the development of artificial intelligence and the spread of technologies will lead to more work being done by fewer people. One of the main reasons for the layoffs is the decrease in oil revenues. Therefore, preparations are gradually being made for this process to reduce the burden on the budget,” the economist emphasized.
X. Karimli stated that the reason for the phased implementation of the process is that the private sector can also join this process:
“As an economic outcome, the share of those working in the public sector and those working in the private sector was almost equal until now, which is not the correct approach. The state even attracted employees by offering higher salaries than the private sector, which created an incorrect situation in the labor market.”
In the initial stages, those removed from the public sector may receive lower salaries in the private sector:
“As the public sector shrinks, the private sector will grow. It is possible that in the initial stage, the pace of salary increases may not be very rapid, and a certain level of unemployment may arise. The consequences of this need to be addressed through social policy, unemployment benefits, and other mechanisms. Overall, since the process is phased, it will not turn into a serious problem for the economy. However, this was a step we should have taken long ago. The current process is the initial stage, and I believe it will continue more rapidly thereafter.”
