On December 27th, the Armenian government approved a strategic employment program for 2025-2031, aiming to improve labor resource utilization and reduce poverty. This program outlines a vision and effective solutions for developing the employment sector, addressing deep-rooted labor market challenges. Minister of Labor and Social Affairs, Narek Mkrtchyan, presented the program, highlighting that unemployment in Armenia stems from both cyclical and structural issues. A mismatch between labor supply and demand has resulted in significant underemployment, affecting 15% of the workforce (339,000 people) in 2022. This untapped potential, if channeled into competitive employment opportunities, could significantly contribute to the country’s economic development. However, previous state employment policies have primarily focused on mitigating the consequences of unemployment rather than addressing its root causes.
Armenia’s 2025-2031 employment strategy, while possessing several positive aspects, faces potential risks and pitfalls during implementation that could hinder its effectiveness. The strategy aims to improve labor resource utilization and reduce poverty by addressing deep-rooted labor market problems. However, several key challenges must be addressed to ensure its success.
One critical risk is a potential mismatch between training programs and the actual needs of the labor market. The strategy’s success hinges on accurately assessing labor supply and demand. If incentives or training programs do not align with economic requirements, resources may be misallocated, preventing target groups from integrating into the workforce. For instance, if training programs fail to address the demands of modern professions, beneficiaries may remain uncompetitive. Furthermore, job creation in certain economic sectors can be time-consuming, while target groups often require immediate results. This temporal mismatch could lead to disillusionment and a loss of momentum.
Institutional and organizational weaknesses also pose a significant challenge. Systemic reform of employment policy requires strong institutional capacity and effective cooperation between the public and private sectors. If relevant bodies lack sufficient capacity or incentives, program implementation may falter. For example, the underutilization of local self-government bodies in regional communities could slow down program launch. Similarly, a lack of collaboration with the private sector could limit the creation of high-productivity employment opportunities. This lack of synergy can create bottlenecks in the implementation process.
Financial sustainability is another critical concern. Stable and adequate funding is essential for the program’s implementation. If funding from the government or donors is unstable, the program may fail to achieve its intended outcomes. For example, training and entrepreneurship promotion initiatives included in the program could be discontinued due to financial constraints, disrupting planned activities and eroding public trust.
The long-term impact of structural labor market problems must also be considered. While support for target groups can address short-term issues, failing to eliminate underlying structural weaknesses (e.g., the dominance of low-productivity sectors) will lead to recurring problems. If job creation focuses solely on low-productivity sectors, it will not solve long-term employment challenges. This can perpetuate a cycle of underemployment and low wages.
The program’s focus on specific target groups presents a potential risk of social injustice. This targeting, while intended to maximize impact, could leave certain segments of the population without support, potentially exacerbating social inequalities. For instance, if rural communities or other age groups are excluded from the program, their access to employment opportunities will become even more limited.
Finally, political and economic instability can significantly impact the program’s implementation. Any crisis or instability can disrupt the program’s progress, diverting resources and shifting priorities.
To mitigate these risks, several recommendations are offered: thorough research of actual labor market needs and program alignment, ensuring private sector involvement in creating employment opportunities, long-term planning of financial resources and attracting donor programs, developing additional programs for rural communities and socially vulnerable groups, and establishing clear monitoring and evaluation mechanisms to assess program effectiveness. Addressing these potential pitfalls is crucial for the successful implementation of the program and ensuring its long-term positive impact on Armenia’s economy and society.
