Unemployment, inflation and low wages take their toll on hard-pressed Azeris

Unemployment, inflation and low wages take their toll on hard-pressed Azeris
Not so happy Novruz in Azerbaijan.
By bne IntelliNews March 3, 2016

The economic crisis afflicting Azerbaijan is taking its toll on the population judging by the spate of suicides caused by mounting debt and unemployment in recent months. Not that you’d know it if you listened to the authorities.

The most famous case out of a dozen such incidents that have taken place since December is that of Alik Novruzov, a 63-year-old school janitor who set himself on fire at work on January 7 because he could no longer pay a €4,000 bank loan.

Novruzov’s suicide is an extreme manifestation of the decline in living conditions in Azerbaijan, where the national currency has lost half of its value in the last year, GDP per capita almost halved in dollar terms and prices increased by double digits.

Baku’s answer has been to try to sweep the matter under the carpet by not publishing reliable official data on unemployment, inflation and economic growth, while the majority of news outlets refrain from writing about the topic for fear of repercussions in this notoriously repressive country. However, there’s ample evidence that living standards have sharply deteriorated.

The “Baku Lifestyle” opinion poll conducted by consultancy Business Insight in February, for example, revealed that 68% of the 640 respondents found their living conditions to have worsened in the last year, with only 7.5% saying that they had improved. Most worryingly, some 75% of the respondents who were employed said that their living conditions had worsened, as did 72% of retirees.  

Outside the capital city, life is even harder. While the average household income in the country was a meagre AZN220 (€130) per month in 2014, over 50% of households in the provinces got by on less than AZN180 (€106) per month, according to the Azerbaijani statistics service Azstat. Despite having spent some $30bn on rural development since he came to power, President Ilham Aliyev’s promise to create jobs in the regions has largely come to nought. And this failure prompted protests in some 12 regions during the month of January, some of which were violently crushed by the authorities.

The rises in unemployment and food prices – double for certain products – since the December devaluation has pushed the normally cowed Azerbaijanis onto the streets. However, official data does not reflect the true extent of the increases.

Baku’s figures indicate a manageable inflation rate of 4% in 2015. But anecdotal evidence points to much higher figures; a shopping trip to supermarket chain Bizim, for example, is estimated to cost some 30% more than in December. Fitch Ratings concurs, predicting inflation will reach at least 14% by end-2016, according to its latest country analysis, which cites, “reports of prices adjusting by 50% [to the devaluation of the currency], indicating that the consumer price index may understate actual inflation”.

Azstat has consistently put unemployment at about 5% for years now, but its statistics also reveal that a mere 1.5mn out of an active workforce of 5.8mn is gainfully employed, which begs the question of how the remaining 4.3mn Azerbaijanis get by. Azstat figures have also failed to account for a wave of layoffs since December, which have included some of the largest companies in the country like telecommunications incumbent Azercell, which announced it would fire some 60 employees in January, gas utility Azerigaz, and power utility Azerenergji. The latter two did not reveal the number of people they would lay off – a level of transparency not unusual for state-owned enterprises in Azerbaijan. In addition, Azerbaijan’s central bank closed six banks since the beginning of the year, leaving employees out of jobs and hundreds of thousands of uninsured depositors without their savings.

The Azerbaijani government accounts for some 53% of the legal jobs in the country, but even it has begun to streamline its bureaucracy as it finds itself increasingly strapped for cash. Having abolished an entire ministry in December, the Ministry of National Security (MNS), and laid off hundreds of employees – some of whom were hired by MNS’ counterparts the State Security Service and Foreign Intelligence Service – Baku announced it would close down museums and cultural organisations that are not economically viable. Seeing how reports of stores closing abound in Azerbaijan, expecting museums to make a profit is an incredible feat in the current economic climate. 

Besides, some of the workers on the government’s payroll receive such low wages that resorting to graft is their only way to get by. Sources in Baku have told bne IntelliNews that university professors earn wages as low as AZN150 (€86.7) to AZN200, and that asking students for bribes to pass exams has become widespread.

Race to the bottom

In a separate case that emerged in February, some 540 former employees of the construction company Azimport – a company that has won an astounding 700 government tenders in the last 10 years – complained that it owed them AZN750,000 in unpaid wages for work they had performed before the European Games sporting competition that took place in June 2015.

The workers were reportedly hired by a subcontractor of Azimport’s to build infrastructure for an event that cost Baku billions of dollars, but had not signed employment contracts with either Azimport or the subcontractor. The latter – an individual called Rauf Ismayilov – had also not signed any contracts with Azimport, raising a red flag about government tenders and nepotism, labour rights, and how much of Azerbaijan’s economy resides in the shadows. Official statistics claim that the grey economy accounts for some 7-8% of GDP, but some believe the figure to be several times higher.

Meanwhile, a sugar factory in the south of the country that belongs to Azersun Holding, a company linked to the ruling elite, laid off almost a fourth of its 850 employees in December. Most of the workers have been unsuccessful at finding other jobs. “Wherever I go for a job, I am told to wait... Unemployment has always been a problem here, but now it’s even worse,” one worker told Eurasianet. Unsurprisingly, the layoffs are not reflected in official statistics, which place unemployment in the Imishli region, where the factory is located, at only 47 individuals.

Azerbaijanis are growing impatient with unfulfilled promises of economic growth and job creation, which might explain why participants at a job fair in the northern city of Ganja staged a protest on February 5 over fears that they would not receive any of the 750 jobs they had been promised. Law enforcement duly cracked down on the demonstration and closed down the fair.

The authorities are becoming increasingly aware of the toll that inflation, low wages and unemployment are taking on Azerbaijanis, but the populist measures it has taken so far are too little, too late. Labour Minister Salim Muslumov’s recent promises to provide vocational training for the unemployed fell flat; people want jobs, not promises. Having relied on the oil and gas sector for so long – a sector that employs only 80,000 workers, some of them foreigners – Baku needs to find ways to create jobs for the 4.3mn that are ostensibly out of work, and to do so fast.

In the meantime, state institutions are using sleight of hand to limit financial stresses on citizens and avoid the terrible headlines of suicides. According to Meydan TV, the central bank has advised banks to refrain from harassing bad debtors by telephone, and to take the issue directly to court, which of course takes much more time.