Ulaanbaatar /MONTSAME/. Mongolia’s labor market has expanded significantly during the last two decades, with employment rising by 50 percent. Its labor force has also become increasingly educated: the share of the population aged 25 and over with a college degree now resembles that of high-income countries. Fewer people now work in agriculture, and more and more people are working in the service sector, a sign of development. These changes would suggest that Mongolia has a vibrant and diverse labor market with an abundant supply of good jobs.

However, some indicators show otherwise. Most of the jobs created in recent years were in low-wage sectors. The economy, including exports, has increasingly become dependent on mining, a sector that is not very labor-intensive and employs very few people. Labor force participation has also been declining over the past decade, especially among women, and unemployment is high, particularly among young people. Added to this is the fact that by 2030, 14 percent of the population is expected to be over the age of 65, raising concerns about the sustainability of pension systems and healthcare expenditures.

How can Mongolia create a labor market that is more dynamic and inclusive and that better serves the needs of its economy and society? In the past week, I have had the privilege of visiting Mongolia and discussing such issues with key stakeholders in the country. These questions are also the focus of the recent World Bank Mongolia Jobs Diagnostic, which identifies two main challenges for the country: first, to create more and better jobs that are also more diversified across sectors than in the recent past; and, second, to develop a more inclusive labor market, where more women are encouraged to participate, and that brings more young people and urban residents into the workforce.  

To address these challenges, several key constraints will need to be tackled.

First, labor demand will need to be more dynamic. This will require strengthened macroeconomic and fiscal management to encourage the flow of sustained investments needed for job creation. The business environment will need to be made more conducive to a dynamic and innovative private sector that will demand high-quality labor. Among the ways to do this are ensuring greater stability in the policy and regulatory environment, establishing an effective public-private dialogue to identify critical regulatory constraints, and promoting a fair, competitive business environment that encourages the growth of innovative, productive firms. It will also be important to diversify exports beyond the resource sector and promote job creation in new economic sectors with lower volatility.

Second, the skills of the country’s workforce will also need to be upgraded. This will involve enhancing the quality and relevance of the current skills development system. Even though Mongolia is a highly educated country, recent graduates have difficulty finding jobs, in part because they don’t have the skills that are being demanded in the labor market. This includes soft skills, such as teamwork and communication skills, but there are also mismatches concerning the field of study. Another way to upgrade the workforce is to remove employment barriers faced by social assistance beneficiaries, as well as by women. This can be done via effective active labor market programs, but also by providing work incentives, as well as access to childcare and other social services.

Finally, improvements will be needed in the way the labor market functions using a comprehensive labor market information system. Such a system would allow employers, job seekers, students, and policymakers to access timely and accurate information on labor market conditions, the workforce, and the demand for labor and skills. Such information would allow for more informed choices by employers and job seekers alike, leading to a more efficient labor market in which people acquire the skills that are most in demand and where employers can tap into a workforce that is more suitable to their needs.

The recently launched eJOB platform, developed with support from the World Bank, allows employers to post job listings and jobseekers to search for and apply for jobs. This is one important step in the right direction, but making sure all private and public stakeholders are benefiting from the quality information provided by the system will require continuous effort in the long run.

Finally, labor market regulations should be more rigorously enforced; the duration and level of benefits of unemployment insurance should be reviewed to increase generosity, based on rigorous actuarial assessment.

In sum, making Mongolia’s labor market more vibrant and inclusive will require a “whole of government” approach, with several economic and social agencies playing an important role in tackling demand and supply-side constraints in close cooperation with the private sector. As more and better jobs are created and the labor market becomes more inclusive for certain groups such as women and youth, Mongolia can be expected to enjoy more favorable economic prospects while at the same time allowing more individuals and families to increase their well-being.

                Mara Warwick, World Bank Country Director for China and Mongolia, and Director for Korea.