Kazakhstan’s foreign workers figures show true state of economy

Kazakhstan’s foreign workers figures show true state of economy
Unlike personal incomes and wages, the economic slowdown did not immediately affect the official joblessness figures.
By Naubet Bisenov in Almaty August 23, 2016

Kazakhstan’s job market is starting to feel the effect of the country’s economic slowdown, brought on by low oil prices, which began in the second half of 2015. While the joblessness rate has been stable throughout the crisis, figures for foreign workers show that all is not well in the job market.

According to the Kazakh State Statistics Committee, after contracting by 0.2% in the first quarter of this year, the economy managed to edge up by 0.1% year on year in January-June 2016. The overall economic growth stood at 1.2% in the whole of 2015, with the economy probably in recession in the second half (though this is unclear, because the country’s statistics agency does not publish quarterly economic indicators). Industrial output was up just 0.1% year-on-year in July 2016 after falling for 11 months with the exception of February 2015.

Unlike personal incomes and wages, the slowdown in the economy did not immediately affect the official joblessness figures as the rate of unemployment has been virtually unchanged at below 5% of the labour force since the economy started contracting in the third quarter of 2015.

According to official statistics, the number of unemployed people stood at 452,300 in July, or 5.1% of labour force. The figure increased from 446,000 people in July 2015, or 4.9% of labour force. By contrast, in the year to June, the real income of the population contracted by 10.7% on the year and the average monthly wage fell by 1.1% year on year in the second quarter of 2016.

The job market has until now been buoyed by a massive economic stimulus programme worth KZT1tn ($6.7bn) in 2014-2015 and KZT1.45tn ($4bn) in 2016; this programme aims to create 29,200 new jobs in the processing sector in 2015-2019. According to official statistics, the number of employed in the processing sector increased from 552,600 people in 2015 to 558,700 in January-June 2016, while the labour force fell from 8.96mn in the fourth quarter of 2015 to 8.93mn in the second quarter of 2015.

But the underlying impact of the economic crisis can be seen in the import of foreign labour by the country’s mining companies. According to the Health and Social Development Ministry’s figures, the number of work permits issued to foreigners in Kazakhstan reached 29,458 as of June 1. The figure is well below the government’s annual foreign labour quota of 0.7% of the country’s workforce or about 63,000 work permits. The number of permits to import foreign labour was 32,363 as at January 1, 2016, showing a clear decline.

The fact that companies eligible to import foreign labour have failed to fill jobs with foreign workers to the extent the government allows, indirectly shows that employers are trying to cope with the consequences of the slowdown by hiring fewer people.

Astana strictly controls imports of foreign labour by companies operating in the country, especially in the extractive sectors. In order to boost the ailing economy, the Kazakh government has offered a number of perks, including unlimited import of labour for companies investing at least $20mn in the real sector of the economy.

By limiting foreign labour the government is trying to force employers to invest in training local personnel. Kazakh citizens are allowed to import up to five domestic workers such as maids and gardeners as long as these domestic workers pay taxes to the tune of around KZT4,300 (€11) a month. However, many migrant workers, especially from neighbouring countries, use such permits to illegally work in the construction and other sectors.

The ministry said 1,716 permits had been issued for top managers and their deputies and 5,550 permits for heads of departments but the bulk of permits had been issued for specialists (13,382) and skilled workers (6,934). The government also issued 1,876 work permits for seasonal workers.

At the moment, 3,672 employers use foreign labour and they employ about 465,000 Kazakh citizens, or 93.7% of their total workforce, according to official figures. The main sources of migrant workers for large employers are China (11,713 people), Turkey (3,302), Uzbekistan (3,012), the UK (1,490) and India (1,274 people).