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Policies for human capital development in Armenia

An ETF Torino Process assessment

Release Date
19 Μάιος 2020
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3. ASSESSMENT OF KEY ISSUES AND POLICY RESPONSES

The assessment finds that the upcoming revision of policies for employment and vocational education offers an opportunity for Armenia to create new synergies between employment and VET programmes and between the public and private sectors to strengthen the link between skills formation and quality employment.

The VET and employment systems could be better integrated from both programme and policy perspectives. A stronger focus on partnerships would act as a bridge to connect diverse types of skills development.

There are two main challenges: (1) lifelong learning and (2) a stronger role for VET in polices related to small businesses and employment.

Both include multiple sub-issues and challenges with ripple effects through the educational system and the labour market. The broad range of challenges includes some that will require significant time and money to address. When it comes to human capital, education and employment, the default mode puts responsibility in the hands of the public sector – just as tradition would have it. Yet, public resources are limited. Additional help must come from outside, including from the private sector.

Local circumstances may often determine what will work in certain places. The government can develop strategies and allocate resources, but support from NGOs and the private sector will be vital. That also means that some things will fall beyond the scope of government control. The government might become more of a facilitator.

3.1 Area of challenges: training opportunities in support of lifelong learning

3.1.1 Key issue (i) implementation of vocational education policies

Armenia has developed a progressive and comprehensive set of VET policies. They focus on relevance, school improvement, career guidance, quality assurance, and engagement with the business community. The policies have had time to mature. In some key areas, such as career guidance and entrepreneurial learning, they are being successfully launched.

For the labour market, the main public policy framework is the National Employment Strategy 2013-2018. It lays the groundwork for targeted programmes that aim to match the supply of labour with the needs of the economy and encourage the balanced treatment of different demographic groups and regions.

Both the employment and the VET strategies have received backing from the international donor community, particularly from the EU through its budget support programme.

The EU budget support programme focuses on human capital development in agriculture, a key sector of the Armenian economy. It accounts for 31.3% of employment, but just 13.7% of GDP[51] ETF KIESE Indicators, 2019
. It links education and employment through initiatives to encourage the modernisation of VET agricultural institutions in parallel with labour market programmes. The overall aim is to facilitate the transition from education to the workforce. It provides the government with significant funding, contingent on the attainment of performance-based indicators agreed upon between the EU and Armenia.

Revised policies for employment and VET are expected to be completed in the first half of 2020. The overall direction is not expected to change. Instead policies are likely to be strengthened and implementation encouraged.

Priorities and effectiveness

VET usually takes place at schools. The VET system is evolving into a core network of 12 regional colleges that operate in partnership with local schools to provide a range of services to students, communities, employment service offices, and businesses and employers.

These services include vocational training programmes that are offered in many ways: as part of preliminary and middle-level curricula, as part of specific programmes, or as employment-related training for adults. In the future, services may expand to include support for work-based learning, career guidance, continuing vocational training, and the validation of prior learning.

In addition, a new quality assurance system will be adopted. The concept of Centres of Excellence will be explored. The aim is to make VET more attractive to students and to employers by improving its reputation. The Centres of Excellence idea reflects the Ministry of Education's concern with what it calls 'optimisation', essentially making better use of resources and building on efficiency.

Related recommendations

For an outline of the recommendations in this area, see Recommendation 2 in Annex 1 of this report.

Work-based learning

The government is also keen to establish a system of work-based learning. It launched a new working group in 2017 to frame an initial policy and adapt the concept to Armenian conditions. An official concept note presents three types of work-based learning: internships, company-based schools, and an apprenticeship/dual system. Interns would maintain their student status. Apprentices would be employees. The status of those enrolled at in-house schools has yet to be defined.

The government drew up a road map for execution. It envisions short-term progress on internships, with in-house classrooms coming next and apprenticeships at a later stage.

The EU budget support programme, which includes a grant scheme, will also support this endeavour. It will fund projects designed to identify new approaches to encourage wider access to training, better student performance, and improved transitions to the next step, whether via further study, training, or employment.

The scheme will include:

pilot programmes for VET innovation and labour market reform (e.g. work-based learning, apprenticeships, skills and jobs matching mechanisms)

efforts to help VET graduates become more employable and productive, especially for entry-level jobs.

The broad-ranging scheme will involve companies, VET providers and other stakeholders in pilot projects designed to help lead to more systematic and sustainable programmes. Strategies include knowledge transfer and learning from best practices.

Specific target sectors may include agriculture and food processing, tourism and hospitality, creative industries, art, construction, healthcare, and transport.

The growth in work-based training may reflect a trend among companies to adopt internal labour market strategies that favour the training of current employees over outside recruitment. This may be in reaction to the inability of external institutional providers to meet the demands for skilled workers both quantitatively and qualitatively. Perhaps the skill shortages highlighted by business leaders can be overcome by more in-house training rather than through more public expenditure.

The policy agenda is as broad as it is full. It emphasizes partnerships and collaboration. Steady progress has been made for several years based on consistent actions that have effectively deployed limited resources.

The Ministries of Labour and Education coordinate their efforts at the national level, but the most effective collaboration is at the local level. At the national level, policymaking tends to take place in silos. This does not seem to have delayed any current policies, but it may have diminished their potential; more regular consultations would help both sides share experiences, discuss problems, and review possible solutions.

Notwithstanding, the ministries have recorded significant achievements. The entrepreneurial learning curriculum has advanced to the point where it can now make available instruments and materials. This progress reflects two main assets: their ability to identify new program areas and to coordinate implementation and to work effectively with the international community and donors, such as Germany`s GIZ.

Career guidance offers another positive example. It is one of the most effective areas of cooperation between the ministries. The agency is formally part of the Ministry of Labour and Social Affairs, but the programme is run through VET schools, part of the Ministry of Education.

The government could examine these two experiences to figure out why they work. There are few evaluations of policies at the crossroads of education and employment. The government could mandate the ministries to work together, perhaps with the support of experienced international donors such as GIZ, on this front. This would add to the expertise of the ministries while providing evidenced-based information to help future policymaking.

Related recommendations

For an outline of the recommendations in this area, see Recommendation 3 in Annex 1 of this report.

Shortcomings and policy gaps

The ministries face constraints mainly because the scope of some problems outstrips their ability to address them with the instruments and resources they have on hand.

Development of partnerships for the implementation of VET

Better collaboration between the ministries and the private sector is a top objective. Structures and partnerships have been established, but there is room for small businesses to play a greater role in the consultation process. Furthermore, it is unclear if the present structure of the National Council for VET Development, described in the national report, will remain relevant in the long term. A review of existing arrangements would appear to be in order. Such a review would examine whether: more regular meetings are needed, council operations should be updated, or if a different model would be more appropriate.

For example, in recent years, business associations have grown substantially in sectors that are not represented in the existing consultative structures and main business confederations. These include wine, tourism and information technology. It is important to note the reference in the national report to the failures of the wine and tourism sectoral committees to facilitate cooperation for business education. Lessons learned from this experience need to be incorporated in future efforts.

Agreements forged with schools will ensure that they have governing boards that involve partners. Thus the present emphasis is on national and institutional initiatives.

In the future there may also be potential for arrangements at the community or local level. They could help communities make employment programs and training more relevant to local needs.

Qualification frameworks

Armenia has also worked to develop a national qualification framework. This was not included in the 2011-2025 development strategy, and its progress has moved more slowly than parallel initiatives in other countries. The national report provides a basic outline of the framework. The updated VET strategy is expected to provide a clearer picture of the framework.

Initiatives could include credit transfer arrangements and the establishment of a higher vocational qualification for use outside of the school system. With a framework that can be referenced against the European Qualification Framework (EQF), Armenia would be in a better position to develop its systems internationally, particularly with regard to VET. This may improve the relative attractiveness of the VET system, which currently has few international connections compared to a higher education system that is linked internationally through the Bologna Process to the European Higher Education Area. For students, international connections to vocational qualifications could be valuable.

In the national report, the framework is presented mainly as a series of qualification levels, arranged in a hierarchy and described in terms of knowledge, skills and competencies.

The national report also appears to establish existing credentials as benchmarks for the framework levels. This approach risks reinforcing existing arrangements by favouring current qualifications and, consequently, the institutions and procedures of their management and coordination. This makes change difficult. Reference levels and frameworks need to be managed independently of ministries, preferably by the private sector.

In general, decisions about the levels and descriptions should be made independent of established qualifications. The process should draw on the standards in the labour market.

In taking the framework ahead, the ministries could work with sectors to develop, test and implement ways forward. Based on the results, they could finalise a more general framework.

Sector representatives should develop communications and marketing plans to inform potential employees of available career paths and employment prospects. The active leadership of industry is essential to the success of the qualifications framework. This is not made clear in the national report, which may indicate less than optimal levels of cooperation between business and education.

The framework should be clear about the use of short programmes, which are most popular with companies and NGOs. The framework's management structure must be defined. This would include the establishment of rules and regulations for issuing credentials. More decentralised decision-making will be needed as more people enter the system.

Continuing vocational education and training

Other issues besides qualification could be solved more quickly with greater cooperation among businesses and other stakeholders. For instance, the Ministry of Education has been working on initiatives on the validation of prior learning (VPL) and continuing education, but they have not yet been put into practice. There is considerable potential on both fronts, especially for people in the informal sector.

The present approach to VET policy places the public sector at the heart of the coordination and delivery of education and training. But the public system is just one model. Another relies on NGOs and the private sector. The second alternative needs to grow if Armenia wants to meet the demand for skilled workers.

Basic and higher education are meeting the needs of huge numbers of Armenians. As the population ages, so will the demand for continuing education. People already in the workforce will need new skills. Sometimes called upskilling, this on-going training will be increasingly important to help employees tackle new and more complex tasks and take on a broader range of functions.

The government could assist continuing vocational training simply by providing basic infrastructure. This could include training rooms in local communities, guidance materials, and a training support service network. The government could also promote the development of assessment and learning centres organized around communities, companies and industries. These could be sponsored by public-private partnerships uniting, for example, municipalities and employer associations. This would involve cooperation rather than regulation, which would probably be a better fit with industry groups. As part of the process, stakeholders might want to consider models of industry-based self-regulation that might encourage more business people to get on board.

Related recommendations

For an outline of the recommendations in this area, see Recommendation 2 in Annex 1 of this report.

3.1.2 Key issue (ii): teacher training and professional development for school quality

Priorities and effectiveness

The skills of education professionals play a critical role in the development of human capital because they directly influence the quality of student learning. In the future, a stronger emphasis is expected on the capability of learning to learn. Armenia's commitment to the development of entrepreneurial competencies means that this will be a focus of teaching also.

In addition, the government is developing a national digital transformation agenda that is expected to encourage an increase in the digital capacities throughout the population, with a consequent increase in the abilities of trainers. The move towards more workplace training will also influence the demand for more competent trainers.

These changes will require teachers to acquire new skills. In some cases, they will add to their current duties and tasks.

For teaching staff, the National Centre for Professional Education Quality Assurance (Ncpeqa) and the National Centre for VET Development (Ncvetd) lead and coordinate the process. Training requires teachers to be able to generate active participation among students with a strong emphasis on navigating through complex information, acquiring practical and cognitive skills, and adapting to different contexts.

The process covers both management and teaching staff. As noted in the national report, between 2014-2017, approximately 4 147 VET teachers were trained by Ncvetd (1 122 in 2014; 1 016 in 2015; 934 in 2016, 975 in 2017, and 477 in 2018)[52] Information on the training topics and the number of trained specialists is available on the NCVETD official webpage: http://www.mkuzak.am/?page_id=166&lang=en.
. In addition, during the same period, 150 college directors and deputies, 207 management board members, seven standards development experts, and other staff in the VET system received training on different topics.

The process is linked to schools through quality management. The Ncpeqa has trained 80 staff members from educational institutions on a new model of quality assurance for schools. The curriculum covers planning, coordination, reporting, and feedback and consultation mechanisms.

A network of 12 regional state colleges has made self-assessments based on the process and has incorporated links to curriculum implementation. There is no formal specific pedagogical specialisation for VET teachers, who tend to receive the same training as general education teachers. Similarly, there is no national recruitment programme for teachers. Most are hired directly by schools.

The process could be made more systematic through the development of a sector qualification framework for teachers that identified core teaching skills and specific elective competencies for specialties, such as vocational teaching. The national report states that the student teacher ratios for preliminary and middle-level VET are 7.2 and 5.6 respectively[53] Armenia, National Reference Report, table 22
. As the student population declines, that will grow. One possible response may be to retrain and redeploy teachers from the existing VET workforce in general education.

A qualification framework for the sector that mapped out the different possible jobs and related qualifications would help teachers to transfer to new positions and bolster their mobility. It could also act as a bridge from the public to the private sector.

Shortcomings and policy gaps

For practitioners, the public sector dominates the human capital development space. There are opportunities to work with NGOs and the private sector. However, civil servants and teachers have few ways to learn about them. Ncpeqa and Ncvetd focus mainly on the public sector with respect to teacher training and the public curriculum.

In addition to the gap in the institutional infrastructure, there is also a shortage of training for occupations that will be important to the expansion of learning and training services. These include workplace trainers – who will become increasingly important as workplace learning grows and becomes more popular. Benchmarks need to be set for businesses and other organisations that want to move in this direction.

A set of recognised core competencies for workplace training would identify the necessary skills that all professionals should have – although it would not necessarily be exhaustive. This list could form the basis of a nationally recognised certificate in Armenia. The Ministries of Education and Labour could lead the process with assistance from well-known national and international training organisations working in the country, such as World Skills Armenia, the German development agency GIZ, and the International Labour Organisation (ILO).

As a corollary to increased training, there will be more demand for skills assessments. A national programme for standards-based assessors could provide useful benchmarks. It could work along the lines of that for workplace training certificates. Professionals will need to be skilled in the vocations they oversee, a fact that could encourage more cooperation between industry and educators.

These certificates could provide a set of professional qualifications for people involved in human capital development. They could also be attractive to private providers, thereby increasing the supply of quality-assured professionals.

Other occupations that need to be encouraged include coaches and mentors. These are important for many adult learners who want to refresh their study skills. They provide guidance and can help balance practical and theoretical skills. These specialties could be developed and incorporated into a framework as electives.

The national report highlights the adoption of a European Quality Assurance in Vocational Education and Training (EQAVET) framework. This will serve as a valuable mechanism to ensure quality control in the VET system. It will also facilitate interactions with the EU and EU-member state systems. There is also room for quality assurance systems for industry-based skills. These could be developed by organisations related to sectors that are demonstrating substantial growth, such as tourism, information technology, and wine production.

The report does not place much emphasis on digital learning. It has not yet made a visible impact on VET to date, it states. Nevertheless, the government has clear ambitions in this regard. For example, digital classrooms, formulated through partnerships with firms such as Google and Apple, can support institutional programmes by making it easier for learners and instructors to connect – inside and outside of schools. They can make it easier to create classes, distribute assignments, communicate and stay organised.

Related recommendations

For an outline of the recommendations in this area, see Recommendation 5 in Annex 1 of this report.

3.2 Area of challenges: SME employment opportunities and quality of skills

In Armenia, most firms are small-and-medium-sized enterprises. In 2017, they accounted for al 99% of all companies in the non-rural sector, accounting for 66% of business-related employment and 60% of value added in the business sector. In total, 66.3% of jobs are in small and medium sized enterprises.

Micro enterprises, those with 10 or fewer employees, provide 94% of all jobs. More than half employ no one. The service sector encompasses 87% of the country's companies. Yerevan is home to almost half of the nation's firms, including 70% of those outside of agriculture.

Armenians generally work in small businesses, frequently in the services sector, and their skill-sets reflect that.

People may use their skills in the small business sector, but the labour market is much larger. The quality of available jobs will shape the skills that people develop, their incomes, and the opportunities they will have. The more quality jobs, the more skill development. And greater the contribution to economic growth.

This section looks at the main initiatives to support small business and the quality of the labour market. With regard to the support of small businesses, it draws on the preliminary findings of Armenia's 2019 assessment within the European Small Business Act. In terms of the labour market, it highlights current policies that focus on entry-level jobs and applicants. It outlines policy initiatives that deserve further attention.

There has been progress on both fronts, but there is a growing need for continuing education and training for working people. As better firms emerge and better opportunities become available, people will be more likely to find better jobs and advance professionally. Notably, VET and employment policies will need to be more closely aligned to continuing and lifelong learning.

3.2.1 Key issue (i): skills for small businesses

Small business is a key target for skills development in Armenia. The country`s work in this area is evaluated every 2-3 years as part of its participation in the EU Small Business Act assessment. The assessment looks at three main dimensions of skill formation in relation to small business: entrepreneurial learning, enterprise skills, and women's entrepreneurship[54] EU4Business Country Report 2018, chapter 2 – Armenia
. The first examines whether graduates have the tools they need to become entrepreneurs. The second looks at abilities to forge careers in a small business. The third focuses on the preparation of women self-employment.

Priorities and effectiveness

The business sector deserves considerable attention, including through integrating entrepreneurship into the curricula from primary to upper-secondary general education; strengthening education-business cooperation to ensure skills matching and practical experience, even at an early stage; and extending career guidance, although mainly via VET.

Under the lead of the Ministry of Education, Armenia has shifted its initial focus on financial education towards VET in the development of an entrepreneurial mind-set at all levels from primary to upper secondary.

A related key achievement since 2016 has been the development of teaching and learning materials. Take, for example, the teacher manuals for a new entrepreneurship education module of the second-fourth grade technology curriculum. In second grade, it provides an overview of entrepreneurship and covers idea generation and activity planning. In the third grade, they move on to examine innovation, creativity, business ideas, product presentation, and advertising. By the fourth grade, they focus on market research and business plan development.

The country has also included entrepreneurship as a career option in career guidance for VET students. As they mull over the future of their working lives, students can receive advice on this path as an option.

As for entrepreneurial internships, they have depended mainly on initiatives by individual schools.

One way to boost cooperation between the educational and business communities would be to pull in the private sector to help provide mandatory practical entrepreneurial experience. This would be handled through the new entrepreneurship module in secondary schools and by providing more work-based learning through VET.

In higher education, business and economics departments teach subjects such as finance, economics and management. Universities and the business community also work together to encourage entrepreneurship outside of business and technical schools. For example, the National Polytechnic University of Armenia offers an entrepreneurship programme. Students receive internships and address real world problems. Based on their performance, many receive job offers after graduation.

Women's entrepreneurship is now on the agenda, and there is room for further advancement. A national strategy for women's entrepreneurship aims in part to create awareness and identify role models. Likewise, Armenia's Small and Medium Enterprise (SME) Development Strategy 2016-2018 made women's entrepreneurship a priority, but national efforts have mostly been limited to Yerevan. NGOs lead the way. They have had many success stories, including from border and rural regions. They should be better disseminated, including through social media.

The programme for the promotion of entrepreneurship for women includes several parts:

training, consulting services, and financing for women entrepreneurs with little or no experience

information sharing and capacity building for women entrepreneurs and business service provider organizations that work with them

encouraging women entrepreneurs to participate in the programme Support for Entrepreneurs with Little or No Experience

organisation of meetings to provide information, consulting and more - in collaboration with local and international organizations that support women entrepreneurship

The high-profile Prime Minister's Best Women Entrepreneur Award aims to encourage and recognise women's entrepreneurship in different sectors of the economy and share best practices during a national event.

Entrepreneurship is promoted through VET partnerships, such as: the National Council for Vocational Education and Training, which includes employers; related sectoral skills councils and sectoral commissions; and management bodies at VET educational institutions, which include representatives from student bodies, partner organisations, employment offices, companies and local institutions.

A 2017 memorandum of understanding between the Ministry of Education and Junior Achievement of Armenia (JAA) mandated the inclusion entrepreneurship studies in general educational institutions.

A 2011 partnership championed by the SME Development Council includes the Ministry of Economy, representatives of the business community, the European Bank of Reconstruction and Development (EBRD) and the Organisation of Security and Cooperation in Europe (OSCE). Similar efforts by the SME Development Council could help identify and make use of examples of best practices among small businesses.

The 2019 Small Business Act assessment found that the Armenian education system remains unable to meet the needs of SMEs[55] Cited by (Armenian Business Coalition, 2018). Armenia: Small Business Act Country profile SME policy index: eastern partner countries 2020 assessing the implementation of the small business act for Europe © OECD 2019
 - even though SMEs account for a majority of the country's businesses. It is important to learn about the current and future skills requirements of SMEs and to provide financial support for SME training.

Shortcomings and policy gaps

Small business-related training tends to focus on the start-up process, idea generation, business plans and regulatory issues. While critical, these topics cover only a fraction of what's needed to successfully run a small business. Improved management training, including the management of skills, can help boost productivity. This requires a stronger focus on aspects of management training such as communications, operational planning, and the use and development of skills

Vocational training programmes offer little on skills management. Owners and managers have limited time for training sessions and few resources to fund development programs. In addition, since many owners lack formal training, its value sometimes comes under question.

Future waves of technological innovation and new competitive challenges will likely require enterprises to continuously update themselves. They will need skilled managers who know how to learn and can help draw out the best of their teams.

Many Armenians are own account workers. Sometimes, rather than serving as examples of entrepreneurial zeal, they are self-employed partly because they cannot find anything better.

Own account workers often complain about isolation. Efforts to improve their productivity and circumstances should include strategies to strengthen cooperation among them. This would help them share ideas, best practices and resources. It would also help improve their access to and use of support programmes. One approach could the expansion of parts of the current women's entrepreneurship programme, such as the informational meetings cited above, to encompass a broader range of own account workers.

In addition, many owner-managers are unaware of development options or prefer to operate informally and maintain control of the decision-making process. This leads to a preference for information from informal (but often less knowledgeable) sources, such as friends, suppliers and family members.

Advisory programmes could be offered at dedicated enterprise resource centres to help people with micro-businesses learn about skills issues. These could be community-based or associated with colleges, schools, or local employer organisations. They could focus on promoting cooperation among small businesses in relation to skills and creating networks for cooperation to encourage the more efficient use of scarce resources.

Even though many programmes are available, most Armenian small business owners do not get any management training before they open shop. Nor were most of them exposed to it in secondary school.

This is partly because it is not recognised as a VET programme, but mostly due to limited public resources. But building better companies is not just a matter for business. The institutions and systems that train managers must be ready to help. Entrepreneurship studies in vocational and tertiary education in the VET system could be expanded to offer specialisation in small business management.

Courses could cover topics such as workplace relations, conflict resolution, team performance, negotiations, change management, the use of technology, and working in partnerships. Support could prove critical in recruitment, to ensure the hiring of the right people with the right skills, and skill matching, to ensure that the right employees are performing the right tasks.

The public sector generally lacks this type of expertise, which opens room for the private sector to take the lead. There is a gap on this front when it comes to both VET and private sector training. There is potential for the private sector to better serve the broader community.

3.2.2 Key issue (ii): updating employment policy

An efficient labour market plays a critical role in the broader economy. It helps provide a skilled workforce to businesses. It improves the distribution of income, and helps individuals shape their futures. The demand for skills is based on the demand for labour, so employment and human capital development are intricately connected: as more people find jobs, the demand for more and better skills goes up. This contributes to economic growth.

Priorities and effectiveness

Labour market trends

Armenian authorities have been focusing on the labour market for some time. It figured prominently in the 2014-2025 development strategy, which established a number of targets for that period.

Forecasts envisioned most of the progress during in the second half of the period, in 2020-2025. For example, the unemployment rate was expected to decline to 13.1% by 2021 and to 10% in 2025. The employment rate was forecast to reach 53.9% in 2021 and to 57.2% by 2025[56] Armenian Development Strategy 2014-2025, p59, Employment rate base on 16+ population.
.

The projected growth rates of 4-5% for the period 2019-2023, based on the estimated employment coefficient of 0.2% used in the 2014-2025 development strategy, could reduce unemployment by an additional 4-5% over the period, bringing it down to12%, which is within range of the original estimates[57] Armenian Development Strategy 2014-2025, p58, the estimate is based on non-agricultural employment growth only
.

The unemployment rate has remained relatively stable in recent years, at 17.8%, but a substantial difference exists between the urban and rural figures, 25.4% and 7.4%, respectively. The difference indicates the role of informal employment in the countryside[58] Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Labour Resources, Table 1.1
.

Unemployment is particularly worrisome in urban areas, but informal employment stands out in rural areas, where agriculture predominates. Farming accounted for 337 300 of the country's 465 900 informal jobs in 2017[59] Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Employment, Table 4.3.9
. Women hold 52% of informal jobs in the countryside, compared to 34% in towns and cities.

Employment and activity rates have been more or less stable in recent years[60] Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Labour Resources, table 1.1/
ETF KIESE indicators 2019
.

Table 3: Key labour market variables 2014-2017

Indicator (%)

2014

2015

2016

2017

Activity rate[61] Based on working age population aged 15-75

63.1

62.5

61

60.9

Employment rate

52

50.9

50

50.1

Unemployment rate

17.6

18.5

18

17.8

Source:Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Labour Resources, table 1.1/ETF KIESE indicators 2019

These figures may improve in the 2019 labour market report, as they do not incorporate the impact of the strong GDP growth in 2017-2018.

Anticipation and labour market relevance

The government makes significant efforts to promote employability by following trends in the labour market and adjusting its school-based programmes accordingly. As the national report outlines, the government consults systematically with regional authorities, employers, educational institutions, employment services and relevant donors on possible skill needs.

Improvements in skills planning, anticipation and forecasting can help improve outcomes for employment and employability. This is particularly important because 28.7% of young people aged 15-24 are not working, studying or in training - though the proportion has fallen substantially from an estimated 44.6% in 2010. A sizeable difference exists between men and women, 20.7% and 37.5%, respectively. [62] ETF KIESE Indicators, 2019
 There is a strong correlation between education levels and labour market transition for young people. Those with tertiary education can move from school to stable and satisfactory jobs in less than half the time of those with secondary degrees. The reality is worse for young women[63] Labour market transitions of young women and men in Armenia ILO School to Work Transition. https://www.ilo.org/wcmsp5/groups/public/---ed_emp/documents/publication/wcms_537747.pdf
.

As indicated in the national report, in terms of the use of skills, Armstat reveals that an overwhelming majority (80.1%) believe their education was relevant to their employment and that work-related variations between over education and under education were reasonably small[64] Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Employment, Table 4.1.26
. However, 45% of respondents did not provide an answer because they said that they had not received vocational or professional education. This compares to 43.6% who found their education useful or very useful[65] Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook Labour Resources, Table 1.13
.

The potential impact of sound labour market research on employability is highlighted in the national report in its discussion of a study on job placements for graduates from 41 selected institutions in 2016-2017. It also called attention to the benefits of quality VET in this regard[66] Tables14 and 15 National reference report for Armenia, 2019
.

Labour market programmes

The government supports employment directly through active labour market programmes within the existing employment strategy. As described in the national report, these are generally well targeted and in line with international practices. They include initiatives that support:

Immediate job placement or self-employment

Job placement or self-employment within three months of programme completion. Target groups include job seekers at risk of dismissal or who are unemployed and unemployed, or who needed to obtain experience in their areas of professional qualification.

People looking for work in their specific fields, notably with financial backing to visit a potential employer

Temporary employment, including seasonal work for farmhands and in public works projects for the unemployed

In the Ministry of Labour and Social Affairs, there is a strong move towards the integration of social support services into a network of service delivery centres. The initial focus has been outside of Yerevan. The centres are designed to link different social and community services provided by the ministry into a single package of assistance to individuals. This will ultimately lead to localised social programmes designed through community needs assessments. Eventually they may be run at the community level. Presently, the centres provide services for: veteran's affairs, occupational rehabilitation, community health and social assistance. They may later also take on career guidance and work information, and skill validation, particularly for migrants and in the informal labour market.

The ministry also coordinates the work of the State Employment Agency and its programmes related to career information, job counselling, job placement, and employment-related training. In recent years, the agency has been strengthening its job matching and labour market forecasting capacities, including the launch of an improved online system for job seekers in 2017.

According to the Asian Development Bank (ADB) in its recent report on Good Jobs in Central Asia and the Caucasus:

The Armenian policy in reflects 'a transition from passive to active labour market policies (ALMPs) in 2014. Before this, total expenditures for ALMPs were and most expenditures on labour market policies were directed toward an unemployment benefit program, which was discontinued at the end of December 2013, as it was found that it created disincentives for job search and acceptance of job offers by the unemployed'.

State employment services provided support to 113 435 people in 2017, accounting for approximately 50% of the unemployed[67] Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Labour Resources, Tables 1.1 and 10.8
. Armstat notes that most unemployed persons did not use the state employment service in their job searches. They tended to use general market information as well as their own networks.

Table 4: Method of job search

Means of job Search

% of the total

Applied to state employment service

6.1

Applied to private employment agency

2.5

Applied directly to employer

20.8

Followed announcements

23.6

Applied through acquaintances

39.8

Source: Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Unemployment, Table 9.8

According to 2016-2017 data from the State Employment Agency, young people are overrepresented in its programmes (30%-39% of beneficiaries) compared to their share among the registered unemployed (24%). During the three years 2015-2017, roughly 7 030 young people benefitted from agency programmes. This figure represents a small fraction of the young registered unemployed (12% in 2015 and 20% in 2016). In 2017, Armenia substantially downsized funding for its state employment programme. The number of participants dropped to about 2 500 (one-fifth of the figures for previous years)[68] ETF Youth in Armenia Report, 2018
.

Table 5: Fewer people assisted through state employment services 2010-2014.

Coverage indicators

2010

2011

2012

2013

2014

Number of beneficiaries of all programmes

36,076

28,396

15,131

15,234

10,509

Matching rate (jobs found/job seeker %)

12.1

13.2

15.9

19.4

15.8

Source: Asian Development Bank, Good Jobs for Inclusive Growth, page 84

The state employment programme could be evaluated to identify the agency's overall impact. Such a study could also examine possible differences between rural and urban areas and measures that could help improve its services. One idea would be to incorporate some services into the Ministry of Labour's integrated service centres. Another idea: possible outsourcing of some services to NGOs. Labour market programs alone will have limited effects on employment. Macroeconomic policies have much greater effects on the demand for labour. Efforts to ensure healthy labour markets will depend in large part on broader economic progress.

Shortcomings and policy gaps

Improvements in employability mainly affect the pipeline of newly qualified graduates into the labour force. This previews gradual improvement later on and bodes well for young new entrants. But it does nothing for the existing workforce, often employed informally. Nor does it address the creation of quality jobs, which is necessary both to maximise skills and reduce inequalities.

Productivity gains are most likely to come by working with the existing workforce.

Skill and occupational profiles of the labour force

The skill profile of Armenia's active population is rising. The proportion graduates of higher education grew from 22.9% of the active population in 2010 to 29.7% in 2107. The share of people with low attainment fell by half from 8.2% to 4.2% over the same period. The percentage of those with middle level skills was more or less constant at around 66%[69] ETF KIESE Indicators
.

The national report indicates that 66% of employed Armenians work in low-to-medium skilled occupations and that 72.6% of highly-qualified people work in high-skilled employment[70] Torino Process, National reference report, Armenia, 2019 Table 16
.

Three occupational areas account for 70% of jobs: professional (16.5% of employment), technical (8.8%), and skilled workers (44.9%). Of those with tertiary education, 57% hold professional or technical positions. Of VET graduates, 64.3% of are employed as technical-professional or skilled workers[71] Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Employment Table, 4.1.23
.

Relatively few persons with higher or vocational education work at lower rungs of the chain.

The nature of employment presents a major challenge.

Informal employment

Own account workers constitute 33.6% of total employment. Of this figure, 85.5% are skilled workers, mainly VET qualified. They represent 318 400 individuals and 31% of total employment. Only 2 700 are professionals, generally tertiary graduates[72] Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Labour Resources, 4.1.25 – the corresponding number for own account workers that are technical professionals is 3200
. This might be partly explained by tax rates, among the highest in region and characterised as regressive by the ADB[73] Asian Development Bank, Good Jobs for Inclusive Growth in Central Asia, and the South Caucasus REGIONAL REPORT, Edited by Giovanni Capannelli and Ravi Kanbur, February 2019
.

Many of these jobs are in the informal sector. The informal sector offers little room for advancement. Non-employees (frequently own account workers) in the informal sector earn on average 57%of what their counterparts get in the formal sector[74] Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Incomes, Table 5.2
. With so many informal workers, Armenia faces an important challenge.

Many informal workers are also at least in part subsistence labourers producing for their own personal consumption, according to findings in 2018 by Armstat. There were significant differences between men and women.

Table 6: Nature of activity in employment

Purpose of activity

Percentage share%

Total

Men

Women

Produced for own use

14.3

9.5

20.3

Produced partially for own use, partly for exchange

25.9

22.1

26.9

Mainly exchange

61.5

68.5

52.8

Source: Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Employment, Table 4.1.13

The high level of informality and the nature of employment correspond with high levels of self-employment (40.3% in 2017) and high levels of vulnerability (39.1% in 2017)[75] ETF KIESE Indicators
. The proportion of employees classified as contributing family workers has declined since 2010, but the percentage of own account workers has risen from 27.5% to 36.8% during the same period[76] ETF KIESE Indicators
.

The phenomenon extends to the youth population. Armstat found that informal workers accounted for 40.6% of youth employment in 2016. That translates to 77 600 people between the ages of 15-29, and 17% of all informal workers. The informal employment rate among young women is lower that for men, 37.8% vs. 42.3%. The most important difference is between urban and rural areas. In urban Armenia, the informal employment rate for young people is less than 20%. In rural Armenia, it exceeds 67%[77] ETF Armenia Youth Report, 2018
.

The informal labour market can provide experience, income, socialisation to the world of work, and the security of a community; however, it does not generally enhance long-term labour market prospects. If nothing changes, many people will find their aspirations frustrated and their financial independence uncertain.

At the same time, their chances of becoming unemployed and remaining so may grow. Informal employers have little or no incentive provide training. Nor do employees have much reason to improve their skills.

The high proportion of informal jobs is tantamount to a 'deskilling' of the workforce. In a worst case scenario, it will perpetuate inequality.

When people cannot upgrade their skills, it can send ripple effects throughout the broader system. The overabundance of low-to-moderately skilled people tends to depress earnings, thereby clamping down on incomes and demand. It also removes pressures on employers to introduce productivity-enhancing innovations, such as new forms of work organisation or technology.

The highlights the need for the integration of employment and VET policies to encourage advances on both fronts.

VET and employment policies must address the needs of two job markets – a primary one based on formal enterprises, which generally require accredited or recognised skills, and a secondary informal one made up of low wage non-career jobs.

Developing employment pathways

Skill formation remains crucial even for people who already have jobs or are of working age. Such people generally want skills to help them find a position or for career advancement. Skill-related pathways, supported by relevant training, could help enable them to progress to higher levels of employment in specific sectors. People generally need to upgrade their skills from a low base to a medium level or to go from medium to high. The occupational distribution shows that VET-qualified workers can often move up to become technical professionals, but it is harder for them to break into purely professional positions.

Table 7: Occupational distribution by educational attainment level

Level of education attainment

Occupational level of employment

Total

Tertiary

Vocational

General education

Skilled worker

44.9

11.2

41.2

66.9

Technical professional

16.5

9.3

23.1

2

Professional

8.8

48.2

2.8

3.6

Managerial

6.1

15.1

3.9

1.6

Source: Labour Market in the Republic of Armenia, 2013-2017 Statistical Handbook, Table 4.1.23

Armenia's profile of education and occupational employment suggests that pathways could be developed based on existing labour benchmark levels rising from skilled craftsperson to technical-professionals to professionals.

Such pathways would obviously be attractive to individuals, but they would also be interesting to industries. Skilled people would be keener to enter industries that offer opportunities for advancement. Pathways would help the broader the labour market by reducing the stagnation of people at lower levels and facilitating vertical mobility.

Pathways could act as stepping stones into the primary labour market and offer a way to improve informal secondary employment. Programmes could bolster the status of many jobs. The target groups must include both the employed and the unemployed because many jobs offer what amount to unstable employment with few training opportunities.

A well-designed pathways programme could be an important part of a new continuing vocational training sector. This could include adult apprenticeships and traineeships. Work and training could be developed within a skills framework, leading to the next benchmark level, advancing from skilled craftsperson to technical professional to professional. It matters how these pathways are developed. Among other things, substantial community and local input is essential.

Related recommendations

For an outline of the recommendations in this area, see Recommendation 8 on page nine of this report.