ISET

ISET Economist Blog

A blog about economics in the South Caucasus.

Career Guidance for Unemployed Georgians

One of the most puzzling aspects of the Georgian labor market is what is known as the “qualification mismatch”. While unemployment is high, many positions remain vacant due to a lack of qualified applicants.

There is plenty of casual evidence that there is such a mismatch. Recently, a World Bank delegation we hosted at ISET reported about a meeting they had with Georgian entrepreneurs. One of those businessmen, active in the construction sector, was bringing welders from Turkey to Tbilisi, paying them extraordinarily high salaries (Turkish wage level plus compensation for working abroad). There were simply not enough local welders to do the job.

The career choices of young Georgians are also difficult to understand. Many are going for subjects like law, international relations, and management – all of which are not selling well in the labor market. Mathematics, on the other hand, is demanded by employers (at least in its applied branches), and it is arguably the only subject where Georgian universities can compete on an international level. Nevertheless, math is not much valued by young Georgians (see also the article “Math Education – an Engine of Economic Growth in the 21st Century” by Givi Melkadze, to be found on the ISET Economist Blog). Likewise, a representative of the German business association told me about companies that would like to expand their operations in Georgia yet cannot do it due to a lack of engineers.

The qualification mismatch was also shown to exist in serious studies on the Georgian labor market, for example “Georgia: Skills Mismatch and Unemployment Labor Market Challenges” (World Bank Report No. 72824-GE, 2013) and in several other analyses, some of them produced by the ISET Policy Institute.


PRIDE AND INFORMATION

There are a couple of potential explanations for this mismatch, for example an intrinsic aversion of Georgians to do jobs they consider “below their standards”. Many young Georgians see themselves as managers and lawyers, less so as welders. This preference for being an unemployed manager rather than a well-paid welder is something hardly observed in other countries, though in general qualification mismatches can be found all over the world (cf. Ghignoni and Verashchagina (2014): “Educational qualifications mismatch in Europe. Is it demand or supply driven?”, Journal of Comparative Economics, in press, or McGuinness and Sloane (2011): “Labour market mismatch among UK graduates: An analysis using REFLEX data”, Economics of Education Review 30, pp. 139-145). This attitude is remarkable for a developing country, and it might be related to the particular history of Georgian people. Perhaps, doing only “respectable” jobs was the Georgian peasant’s way to fend off economic impertinences feudal rulers tried to impose on their subjects. 

The most important reason for the mismatch, however, arguably is a lack of information among job-seekers about what are the qualifications that are high in demand. This problem is aggravated by the young age at which many Georgians make their educational choices, often leading to immature decisions and herding behavior (“doing what the classmates do”). Moreover, Georgians often plan their career in a warped process, involving the whole family, including grandparents, parents, and uncles. Many of these advisors derive their wisdom from their own experiences in Soviet times and post-Soviet times, hardly relevant for the current situation. At ISET, we thought a lot about these problems, and the peculiar qualification choices of Georgians were discussed in many of our articles, for example “Education that Matters”, by Nino Abashidze, and “A personal view on why people ‘choose’ to get higher education in Georgia”, by Giorgi Mekerishvili, and “The Educational Choices We Make…” by Eric Livny (all to be found on the ISET Economist Blog).


AN INNOVATIVE RESPONSE

If people do not know what they should learn to be economically successful, the most straightforward approach would be to just tell them. Those who are already on the job market but do not find employment may be an obvious group to start with, in particular as the Social Service Agency (SSA) of Georgia operates an infrastructure to collect information about job-seekers (through their webpage worknet.gov.ge) and assign them to vocational training institutions. As an amendment to these training activities, the SSA, World Bank, and ISET are considering to design a “recommendation system” to inform unemployed people in what field they should back up their skills to maximize their job market chances.

Compared to similar approaches in other countries, the system we envision is innovative in at least two respects.

Firstly, it does not only take into account employers’ wishes when making recommendations to job-seekers. If one does not consider the job seeker’s own preferences, it may happen that people may prefer to not participate in the vocational training system at all. And even if one can effectively incentivize job seekers to attend training programs, as it is for example the case in Germany, where the refusal to participate in training is sanctioned by a reduction of unemployment benefits, it is likely that involuntary training will be less effective. Therefore, it is problematic that studies analyzing the demand for qualifications in the job market tend to focus on employers’ demands while neglecting the preferences of the people who are to be trained (see, for example, Lettmayr and Nehls (2012): “Skills supply and demand in Europe: Methodological framework”, CEDEFOP Working Paper No. 25 or Shah (2010): “Demand for qualifications and the future labour market in Australia 2010 to 2025”, Center for the Economics of Education and Training Working Paper, Monash University).

Secondly, we plan to employ the machinery of modern econometrics to make recommendations that go beyond “informed guesses”. Given information about the job seeker and the economic environment in different sectors, we will answer the question: “How many months do we expect the job seeker to be unemployed in the year after the training if the training was in qualification X?” Here, X can be whatever is offered in the vocational training system at the location of the job seeker, for example welder, mechanic, accountant, or IT expert.

The pieces of information used for answering this question are the job-seeker’s personal characteristics (like age, gender, preferences, skills, and other information obtained through the website worknet.ge, operated by the SSA) and the current and future economic situation in different sectors. For evaluating the economic profitability of different skills, we would use value added tax data that can be decomposed into 45 sectors and updated on a monthly basis and we would draw on forecasts like the Business Confidence Index of ISET, which allows decomposition into 5 sectors.

The recommendation made to the job seeker will be: “Choose the training in field X if somebody with your personal characteristics, given the economic situation and outlook, has the lowest expected number of unemployed months (or the highest salary) in X in the year after training in X was received.” This recommendation is likely to be accepted by job seekers who want to maximize their employment chances (or maximize salary) if the system is credible and as transparent as possible.

If implemented, Georgia is once again going for innovative policy solutions, in this case making use of advanced economic methods. This is very much in line with the country’s reputation as one of the top reformers in the world. Whether the qualification mismatch can be fought effectively in this way has to be seen, but, given the severity of the problem, it is necessary to think outside the box and go for courageous reforms.

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Guest - mfmsm on Friday, 28 November 2014 22:45

There should be vocational options available especially for boys from age fourteen or so, and the ability to migrate into vocational training should be factored into the State School. But the State Schools are frequently staffed by all-female contingents who would have no idea even what welding was. A boy who was thoroughly bored when I was teaching him, and who, along with others, would just opt out and twiddle his thumbs, has since leaving school found a lot of fulfillment in building and car mechanics operations with his family male kin group, and astonishingly has built some very nice Georgian churches out of discarded polystyrene and the kind of white foam which computers come in. These churches are about a metre or more wide and high, incorporate a lighting system, and even have little icons cut from magazines on the walls. They take up much of his family's flat! There is present in the Georgian mind a really fantastic artistic, graphic and spatial imagination, and Georgians are natural architects and makers. A year or two back, I wanted funds from the Eurasia Foundation to propose both a school restaurant staffed by the pupils and teaching cooking skills and a workshop (to make school furniture) for the boys; but this (obviously too ambitious) did not stand a chance in the conservative mindset of a Kvemo Kartli provincial town; it was my proposal to combat the triad of hunger, truancy and disruptive behaviour which was endemic in the school. But school Heads are light years away from understanding a non-Soviet or non-academic learning universe, and these people set the tone in the community among the 'intelligent populace'. I know there are other, very different schools in Tbilisi, and I had the privilege of visiting one. But between the ideas and studies at that one, at Mtatsminda, and the provinces, is a gulf as wide as that between Dives and Lazarus.There are not too many vocational training schools in Geogia per capita; and not all regions are served: the UK has plenty; and I have studied at several, perhaps unusually for a University arts graduate. What would maybe be needed would be short-term residencies by training experts from oversees, with full linguistic support and the loan of tools etc; and a lot of press and TV coverage, too. There are charities collecting tools for developing countries in the UK; but how to get those tools to Georgian small enterprises? That could be done, maybe, in the building, electrical, food, hotel and car trades; but as you have pointed out elsewhere, there are management imbalances too. There are lessons here for all of us. I too suffered from warped family advice and decision making due to stagnant ideas being put forward as being relevant: and here a very interesting field emerges: how up-to-date and technologically informed is grass-roots thinking in any social group? - and how deisiable IS it that it should be cutting-edge? The caveat is that if it becomes too goal-oriented a country can lose its traditional identity. I would say that this has already happened to England, France and probably other European countries too, maybe Benelux and Scandinavia, in the interests of a homogenized 'social market' ideal of what work, labour and the societal economics should be about, efficiency emerges but a country's soul is put in jeopardy in the interests of a purely materialistic and secular vision, which has some damaging long-term effects. Really acute local research into the Kartvelian character and its aspirations may in the end better draw out the characteristic Georgian gifts and mix them, non-invasively I hope, with the 'demands of the market'. Malmo University has a new online course in Kartvelian Regional Studies and it is apparently attracting huge interest from would be Georgia-philes with good technical thinking skills, like those of the talented, multicultural people at your own institute.Yet Georgia's incipient shrewd friendship to all regional partners looks in the end like becoming an exemplar of its own; so the very rich and perverse mix of hopelessness and bright ideas cheek by jowl should nonetheless in time reap a good harvest. May you continue to surprise us, Georgia, I say!

There should be vocational options available especially for boys from age fourteen or so, and the ability to migrate into vocational training should be factored into the State School. But the State Schools are frequently staffed by all-female contingents who would have no idea even what welding was. A boy who was thoroughly bored when I was teaching him, and who, along with others, would just opt out and twiddle his thumbs, has since leaving school found a lot of fulfillment in building and car mechanics operations with his family male kin group, and astonishingly has built some very nice Georgian churches out of discarded polystyrene and the kind of white foam which computers come in. These churches are about a metre or more wide and high, incorporate a lighting system, and even have little icons cut from magazines on the walls. They take up much of his family's flat! There is present in the Georgian mind a really fantastic artistic, graphic and spatial imagination, and Georgians are natural architects and makers. A year or two back, I wanted funds from the Eurasia Foundation to propose both a school restaurant staffed by the pupils and teaching cooking skills and a workshop (to make school furniture) for the boys; but this (obviously too ambitious) did not stand a chance in the conservative mindset of a Kvemo Kartli provincial town; it was my proposal to combat the triad of hunger, truancy and disruptive behaviour which was endemic in the school. But school Heads are light years away from understanding a non-Soviet or non-academic learning universe, and these people set the tone in the community among the 'intelligent populace'. I know there are other, very different schools in Tbilisi, and I had the privilege of visiting one. But between the ideas and studies at that one, at Mtatsminda, and the provinces, is a gulf as wide as that between Dives and Lazarus.There are not too many vocational training schools in Geogia per capita; and not all regions are served: the UK has plenty; and I have studied at several, perhaps unusually for a University arts graduate. What would maybe be needed would be short-term residencies by training experts from oversees, with full linguistic support and the loan of tools etc; and a lot of press and TV coverage, too. There are charities collecting tools for developing countries in the UK; but how to get those tools to Georgian small enterprises? That could be done, maybe, in the building, electrical, food, hotel and car trades; but as you have pointed out elsewhere, there are management imbalances too. There are lessons here for all of us. I too suffered from warped family advice and decision making due to stagnant ideas being put forward as being relevant: and here a very interesting field emerges: how up-to-date and technologically informed is grass-roots thinking in any social group? - and how deisiable IS it that it should be cutting-edge? The caveat is that if it becomes too goal-oriented a country can lose its traditional identity. I would say that this has already happened to England, France and probably other European countries too, maybe Benelux and Scandinavia, in the interests of a homogenized 'social market' ideal of what work, labour and the societal economics should be about, efficiency emerges but a country's soul is put in jeopardy in the interests of a purely materialistic and secular vision, which has some damaging long-term effects. Really acute local research into the Kartvelian character and its aspirations may in the end better draw out the characteristic Georgian gifts and mix them, non-invasively I hope, with the 'demands of the market'. Malmo University has a new online course in Kartvelian Regional Studies and it is apparently attracting huge interest from would be Georgia-philes with good technical thinking skills, like those of the talented, multicultural people at your own institute.Yet Georgia's incipient shrewd friendship to all regional partners looks in the end like becoming an exemplar of its own; so the very rich and perverse mix of hopelessness and bright ideas cheek by jowl should nonetheless in time reap a good harvest. May you continue to surprise us, Georgia, I say!
Guest - Hans Gutbrod on Friday, 28 November 2014 22:47

ok, I like the general idea, and I agree that carpenters, welders, and plumbers plus a number of other skilled workers could do well. (Around 2007/2008, a notable presence at the restaurant Il Garage for lunch and dinner where about a dozen Italian workmen who had been brought in to work on the Presidential Palace. They were around for months, and were from north of Venice, i.e. a high-salaried area.)

But with this analysis, you go on to say that it's a merely economical argument, and that informed people would sensibly choose to take such skilled work. Where did you leave all the fascinating behavioural economics? Would it not be worthwhile to test various approaches more empirically?

ok, I like the general idea, and I agree that carpenters, welders, and plumbers plus a number of other skilled workers could do well. (Around 2007/2008, a notable presence at the restaurant Il Garage for lunch and dinner where about a dozen Italian workmen who had been brought in to work on the Presidential Palace. They were around for months, and were from north of Venice, i.e. a high-salaried area.) But with this analysis, you go on to say that it's a merely economical argument, and that informed people would sensibly choose to take such skilled work. Where did you leave all the fascinating behavioural economics? Would it not be worthwhile to test various approaches more empirically?
Guest - Oliver Reisner on Saturday, 29 November 2014 18:25
The right link is http://www.worknet.gov.ge/
Guest - Elene Grdzelidze on Monday, 01 December 2014 17:33

@Oliver Reisner: Thank you for the notice, we have made the change.

@Oliver Reisner: Thank you for the notice, we have made the change.
Guest - Giorgi Kelbakiani on Tuesday, 02 December 2014 14:29

Nice one Florian!
I think there are other problems there as well but the lack of information about the labor market is certainly one of the crucial ones

However, You will need a Sopha-level PR campaign to make such project work

Nice one Florian! I think there are other problems there as well but the lack of information about the labor market is certainly one of the crucial ones However, You will need a Sopha-level PR campaign to make such project work
Guest - Nikita on Wednesday, 03 December 2014 21:26

Providing training recommendations based on expected benefits in different professions is a good idea. A complementary idea is to reduce qualified job-seekers’ costs in finding a job.

Imagine that a job in Georgia can only be found via one’s social network. If the career recommendation does not account for the job-seekers social contacts, it may recommend a qualification in a field that the job-seeker has no (social) access to.

In contrast, imagine that all job offers in Georgia are collected in one database that every job-seeker can access. After finishing her training in field X, the job-seeker can apply to all suitable positions that are posted in the database. The VET training attests that the job-seeker is qualified for the jobs in X that she applies to. Receiving more applications from qualified workers increases the pressure on the employers to hire qualified anonymous workers instead of socially connected coffee makers. (If an employer prefers to hire a coffee maker, her competitors can profit from hiring the qualified worker.)

Taken together, the incentive-compatible career guidance and the reduced job search costs may not only reduce the qualification mismatch, but can potentially lead to more merit-based hiring in Georgia, too.

Providing training recommendations based on expected benefits in different professions is a good idea. A complementary idea is to reduce qualified job-seekers’ costs in finding a job. Imagine that a job in Georgia can only be found via one’s social network. If the career recommendation does not account for the job-seekers social contacts, it may recommend a qualification in a field that the job-seeker has no (social) access to. In contrast, imagine that all job offers in Georgia are collected in one database that every job-seeker can access. After finishing her training in field X, the job-seeker can apply to all suitable positions that are posted in the database. The VET training attests that the job-seeker is qualified for the jobs in X that she applies to. Receiving more applications from qualified workers increases the pressure on the employers to hire qualified anonymous workers instead of socially connected coffee makers. (If an employer prefers to hire a coffee maker, her competitors can profit from hiring the qualified worker.) Taken together, the incentive-compatible career guidance and the reduced job search costs may not only reduce the qualification mismatch, but can potentially lead to more merit-based hiring in Georgia, too.
Guest - Maya G. on Tuesday, 09 December 2014 21:44

Today I've visited one of the expensive private school in Tbilisi and the best I've heard there was that they work hard to informs their pupils about labor market and consequently their graduates are choosing diverse professions and are not concentrated on Business Administration and among them are students who chose vocational education as well. This is the best approach, to inform entrant students about opportunities in different specialties and this should be done on a central bases.

Today I've visited one of the expensive private school in Tbilisi and the best I've heard there was that they work hard to informs their pupils about labor market and consequently their graduates are choosing diverse professions and are not concentrated on Business Administration and among them are students who chose vocational education as well. This is the best approach, to inform entrant students about opportunities in different specialties and this should be done on a central bases.
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