Balancing Policy Reforms for Sustainable Job Creation

Mongolia faces significant challenges in its labor market, including an aging population, low workforce participation, high unemployment rates, and low labor productivity. Recently, the Prime Minister met with private employers to discuss labor force issues and wage policies. As Mongolia seeks solutions, striking a balance between policy reforms and sustainable job creation becomes crucial.

Mongolia's heavy reliance on the public sector, where 22% of the employed population works, is unsustainable.

To address this, the government aims to outsource work to the private sector, reducing the burden on the government while creating job growth opportunities. However, concerns raised by private sector representatives regarding social insurance payment burdens and skill shortages must be considered.

Private sector representatives highlight the tax burden on employers and the scarcity of job-ready skilled workers. They fear that wage increases for public sector employees may disrupt the private sector's competitiveness.

The finance minister proposes performance-based salaries to increase productivity and incentivize employers following recent pockets of strikes by teachers and healthcare workers. Addressing these concerns is crucial for a balanced labor market.

Small businesses in the commerce sector offer promising job prospects, particularly in Ulaanbaatar. While the public sector's influence has diminished, it remains essential in areas with limited alternative job options. However, Mongolia's long, cold winters restrict outdoor operations, leading to a reliance on temporary contract labor. Policies should ensure year-round job opportunities across sectors.

Mongolia has made progress in promoting gender equality, with 53.4% of women participating in the labor force, but there is room for improvement.

Addressing gender inequality in the workplace and at home could boost annual per capita growth by 0.5 percentage points, according to the Asian Development Bank.

Concerns also exist regarding education quality and equity, especially for individuals with lower education levels. Disparities in educational outcomes for males, rural herders, and economically disadvantaged backgrounds need attention.

Outsourcing to the private sector holds potential for job creation, but caution is necessary. Quality jobs, worker protections, and the impact on displaced public sector employees must be considered. Rushing into outsourcing without safeguards may lead to a race to the bottom in terms of wages and working conditions, exacerbating inequalities.

Mongolia's labor landscape presents challenges and opportunities. Addressing low labor force participation, aging demographics, and low labor productivity is crucial for sustainable job creation. Policymakers must carefully navigate reforms to ensure worker protections and equitable outcomes. By balancing policy reforms and sustainable job creation, Mongolia can foster a thriving labor market that benefits all stakeholders while avoiding exacerbation of inequalities.

Amar Adiya is Editor-in-Chief of Mongolia Weekly newsletter.