ISET Economist Blog

Education sector vis-à-vis labor market demands
Monday, 08 April, 2024

“The success of the nation and its future generations relies on education being handled correctly”

 – Ilia Chavchavadze

Employment and prospective occupations were the subjects of lively debate at the recent economic forum that took place in Davos in January 2024. Globally, the transition of economies to green standards will generate an additional 69 million jobs. In the meanwhile, technological advancements and economic recessions pose a threat to the other 83 million available jobs. This means that, on the one hand, the present workforce must be retrained, and on the other, the education sector, both professional and higher education, must be adapted to meet the anticipated needs. The questions arise, what skills are required to compete in the labor market in each field, to meet employer standards and expectations, and to create innovation? There is, nevertheless, no standard list and such proficiencies include understanding digital technology and data analysis, as well as knowledge of green technologies and practices in a variety of disciplines. Critical thinking, analytical abilities, a problem-solving mindset, and others are all examples of needed qualities.

Today, as leaders and experts address future needs on a global scale, we have to handle the particular realities of Georgia. Numerous scholarly investigations conducted by reputable organizations in recent years have concluded that Georgia is presently dealing with a critical mismatch between the skills available and market demand. Entrepreneurs and businesses identify skill gaps, skill shortages, and skill obsolescence as significant obstacles to more rapid and efficient business and institutional development. This, naturally, leads to the education sector. If the country’s higher and professional education sector fails to train professional workers with the knowledge and skills required by the labor market, there will undoubtedly be a mismatch between labor market demand and educational supply. As a result, we face the reality in which innovations are being introduced slowly in certain industries or into the economy in general. Science also lags behind worldwide triumphs, and it fails to provide the essential insights, analyses, and breakthroughs that are required to support the country’s socioeconomic progress.

The world’s leading universities are located in highly developed countries with strong economies and good levels of well-being. This clearly illustrates that the economy, people’s well-being, and education are inextricably linked. Academic institutions in these nations are primarily devoted to raising professionals who are sought after by both the scientific community and on the labor market. Highly ranked universities are those that raise the most competitive labor market workers, alongside the most famous scholars, whose names are associated with new achievements and discoveries in specialized fields or on a broader scale.

Given the critical importance of the education sector to the growth of human capital, it is crucial to acknowledge that Georgia falls behind other countries in the region and in Eastern Europe. The World Bank reports that the average human capital of Georgians is merely 57% of what they might have accomplished had they been granted access to a completely developed healthcare and education system. According to International Standardized Tests, Georgia’s 12-year school education is, on average, equivalent to only 8.3 years of international education, placing it among the lowest in the European neighbourhood region. It suggests that the complete potential of human capital is not yet being fully realized. Moreover, vocational and higher education institutions fail to equip students with the knowledge and abilities demanded by the private sector, even upon completion of secondary education.

According to a 2021 European Bank for Reconstruction and Development (EBRD) Report and the 2019 Global Competitiveness Index, Georgia was ranked 125th out of 141 countries during the assessment of labor force skills and 120th in the ease of finding workers with the necessary skills. Essentially, many people are unemployed, and an even greater number are employed in low-wage positions in fields unrelated to their graduate degree; while firms are unable to hire employees with the necessary skills and expertise.

The World Bank highlights that the quality of higher education is much lower in Georgia than the average of many European and Central Asian countries. Significant adaptations are thus necessary within the higher education sector to align with international benchmarks and to equip the labor force with essential digital, cognitive, and analytical skills and knowledge. Crucially, individuals who possess inadequate knowledge or skillsets face significant challenges in the job market and are either unemployed or receive meager compensation. Consequently, their progress from low-productivity to high-productivity sectors is impeded, thus impacting their ability to improve their own economic circumstances or that of their families. This situation also negatively impacts the private sector as it hinders its ability to find the necessary personnel to operate, expand, and develop its activities. As a result, opportunities for growth, innovation, job creation, and enhanced economic contribution are diminished. This creates a closed circle that neither the employer nor the employee can escape. 

Despite significant efforts to improve the Georgian vocational education sector during the past decade, the outcomes remain unsatisfactory, where vocational study is chosen by a mere 6% of school graduates. This results in a scarcity of people on the market with highly sought-after professions or craftsmanship, whereas the supply of people with higher education diplomas exceeds the demand (one example being the widespread sad story about Georgian taxi drivers with two diplomas).

An expansion of employment opportunities and a high employment rate among the populace serve as reliable indicators of economic advancement, alongside the increasing number of adequately compensated positions on the labor market. Nonetheless, if the education sector is unable to supply the labor market with individuals possessing the requisite skills and abilities, or if current employees do not undergo retraining, it impedes the growth of production and business, while also depriving the economy of highly compensated employment opportunities. The World Bank 2023 Georgia: Systematic Country Diagnostic Update identifies enhancing education quality and providing Georgians with the necessary skills to overcome poverty and improve overall well-being as one of its top ten priorities.

In summary, there are three critical priorities that must be addressed to rectify the discrepancy that exists between education and market demand:

Greater emphasis should be placed on improving the quality of education to equip individuals with advanced knowledge and abilities that are demanded on the labor market. It is imperative that our universities, vocational education colleges, and individual academic programs all endeavor to attain parity with the average standards observed in Europe. This is an essential task that does necessitate modifications, yet it is achievable.

Second, society must be informed, and the cultural phenomenon must be altered so that more people attend vocational schools.

Furthermore, it is crucial for the education sector to predict future demands for particular occupations and skills so as to prevent an increase in the existing skills mismatch. The dynamic nature of the market, evolving workplace models, rapid technological advancements, and the widespread nature of globalization each necessitate the acquisition of new skills, knowledge, and abilities. At this time, countries and companies alike are focusing on the information, occupations, and competencies that will be essential, sought after, and highly paid in the coming years.

The views and analysis in this article belong solely to the author(s) and do not necessarily reflect the views of the international School of Economics at TSU (ISET) or ISET Policty Institute.