07TBILISI2398, LABOR TRENDS IN GEORGIA

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Reference ID Created Released Classification Origin
07TBILISI2398 2007-09-21 12:50 2011-08-30 01:44 UNCLASSIFIED Embassy Tbilisi

VZCZCXRO4418
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSI #2398/01 2641250
ZNR UUUUU ZZH
R 211250Z SEP 07
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC 7709
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION

UNCLAS SECTION 01 OF 06 TBILISI 002398 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/CARC AND DRL 
COMMERCE FOR 4132 DANICA STARKS 
 
E.O. 12958: N/A 
TAGS: ELAB BEXP SENV EAGR ENRG GG
SUBJECT: LABOR TRENDS IN GEORGIA 
 
REF: (A) SECSTATE 40337, (B) TBILISI 927 (C) TBILISI 1624 (D) 
 
TBILISI 1456 
 
TBILISI 00002398  001.2 OF 006 
 
 
1.  Summary:  Post submits the following voluntary report on labor 
trends in Georgia.  Most Georgians work in agriculture and 
unemployment and underemployment are high, while wages in hired 
employment are relatively low.    Creating new employment 
opportunities is a key challenge for the Georgian government.  Its 
approach is to remove obstacles to doing business and encourage 
investment and economic growth, rather than providing payments and 
programs for the unemployed who are not indigent.  Part of that 
strategy is a new, employer-friendly labor code.  Unions are free to 
organize, but they are not strong, and strikes are very infrequent. 
End Summary. 
 
---------------------------- 
FEATURES OF THE LABOR MARKET 
---------------------------- 
 
2.  Employment in Georgia was drastically affected by the collapse 
of the economy after the fall of the Soviet Union, which reduced GDP 
to one third of its former level by 1994.  In 1979, 53 percent of 
the labor force was employed in industry.  The massive 
de-industrialization of the economy caused many urban residents to 
return to their places of origin, at least for part of the year. 
The transfer of agricultural land into private ownership accelerated 
the process, so that now 55.6 percent of the population works in 
agriculture.  Productivity is not high.  Georgians employed in 
farming produce only 11.7 percent of GDP, while the 6.8 percent of 
the labor force employed in industry produces 12.6 percent. 
 
3.  Only 12 percent of the labor force works in hired employment in 
the private sector.  Twice as many people, 22 percent of the labor 
force, work in the public sector, including state-owned industries. 
Fifty-six percent of the labor force is self-employed, at least 
nominally, compared to 16 percent in the EU.  The share of hired 
employees in total employment has been increasing lately while the 
share of the self-employed is decreasing, indicating more employment 
opportunities.  However, the official unemployment rate (ILO strict 
methodology) increased in the first quarter of 2007 to 15.3 percent, 
high even if seasonally adjusted.  The increase is partly 
attributable to restructuring of the public sector.  Official 
unemployment figures mask considerable under-employment and 
over-staffing. 
 
4.  Women play an important role in the labor force in Georgia. 
Proportionately more work in the public sector (117 women per 100 
men) than in the private sector (57 women per 100 men).  Women 
predominate in highly skilled employment.  There are 161 highly 
qualified women professionals per 100 men, and only 5 women per 100 
men in the unqualified labor force.  Overall however, women earn 
only 48.6 percent of a man's average salary.  Inadequate pensions 
keep Georgian workers in the work force longer, and lack of 
opportunity keeps younger workers out.  Fifteen percent of the 
economically active population is over 65, while 9.6 percent is 
under 25. 
 
5.  Since the Rose Revolution, the government has focused on 
reducing taxes (including employment taxes) and other general 
economic changes to promote employment.  Growth and investment 
(foreign and domestic) has occurred mainly in fields that do not 
produce large number of jobs, such as financial and other services, 
transport and communications.  Social programs are focused on the 
indigent and there is no unemployment compensation for newly 
unemployed persons.  Providing training for the workforce to find 
employment in the areas of the economy that are growing, such as 
tourism, is a task the government is beginning to address. 
 
 
---------------------------------------- 
Major Recent Developments in Legislation 
---------------------------------------- 
 
6. On May 25, 2006, Parliament ratified a new Labor Code, which 
entered into force in June 2006.  The new Code considerably 
liberalized employer-employee relations.  Most observers consider it 
very favorable to employers.  The code sets a minimum working age of 
16, a 41 hour work week, 24 calendar days of annual leave, and 
leaves everything else to employer-employee negotiations.  The 
Georgian Government adopted these amendments in order to create a 
more flexible labor force that would help achieve fast economic 
growth, make the labor market more responsive to changes in the 
economy and not least, attract foreign investors.  Prior to 2006, 
labor relations in Georgia were governed by the 1973 Labor Code of 
the Soviet Republic of Georgia, as amended in 1997. 
 
 
TBILISI 00002398  002.2 OF 006 
 
 
----------------------------------- &
#x000A;Tripartite Institutions--Government 
----------------------------------- 
 
7. The Department of Labor under the Ministry of Labor, Health and 
Social Security was abolished in 2006.  There is now a Department 
for Social Protection with only two office employees and one labor 
inspector working on labor related issues.  This department has the 
primary responsibility within the Government of Georgia (GoG) for 
labor issues.  In addition, one deputy minister focuses on labor 
issues and the Minister has a special advisor on labor issues. 
Other departments within the ministry deal with non labor-related 
issues.  The Ministry monitors adherence to accepted labor standards 
and drafts proposals for changes it deems necessary.  The 
Parliamentary Committee of Health and Social Security has general 
oversight over labor policy and considers labor related proposals 
submitted by the Ministry. 
 
8. The new Labor Code required the Ministry to create and maintain 
authority over a State Agency for Social Aid and Employment to 
implement state supported employment programs and find jobs for the 
unemployed.  In 2006 the Ministry managed a USD 29 million 
presidential initiative to pay companies to hire interns.  The 
program was not considered terribly effective however, and this year 
the remaining USD 17 million from the program will go to the 
Ministry for Economic Development for vocational training 
initiatives. 
 
9. The Civil Service Bureau is the President's deliberative body 
which establishes employment regulations and standards for state 
employees.  The Bureau is accountable to a Civil Service Board 
chaired by the President.  It is mandated to perform the following 
functions, but it is unclear whether it is in fact performing all of 
them.  The Bureau studies the effectiveness of the civil service; 
makes recommendations for improvement and structural change in 
government agencies; sets rules and methods for selection, hiring, 
and attestation; and issues recommendations on staffing patterns and 
additional qualifications for particular jobs in the public sector. 
The Bureau also designs training and re-training programs and 
maintains a database of all civil service jobs. 
 
10. The Division of Social and Demographic Statistics in the State 
Department of Statistics has a subdivision for labor statistics 
which collects labor-related data, mainly based on household 
surveys. 
 
--------------------------------------------- - 
Tripartite Institutions-Employer Organizations 
--------------------------------------------- - 
 
11. The Employers' Association of Georgia (EAG) has about 150 
employers as members.  Its president, Elguja Meladze, represents the 
organization at the ILO.  The Federation of Georgian Businessmen, 
headed by Badri Patarkatsishvili, and the American Chamber of 
Commerce (AmCham) are the two other major business organizations. 
In addition, there is another association which focuses on small and 
medium enterprise owners. 
 
------------------------------------ 
Tripartite Institutions-Labor Unions 
------------------------------------ 
 
12. The principal labor organization is the Georgian Trades Union 
Confederation (GTUC) which consists of 25 industrial unions and 
represents approximately 252,000 workers (about 42 percent of hired 
employment, but only 15 percent of the total workforce, much of 
which is self-employed in agriculture).  The Teacher's Union has 
approximately 100,000 members and plans to join the GTUC in late 
2007.  Outside the GTUC there is only the Cultural Tradeworkers 
Union, which exists on paper only, and the Independent Trade Union 
of Metropolitan Employees, which is close to dissolution due to 
personnel changes. 
 
----------------------------- 
State of Industrial Relations 
and the Role of Government 
----------------------------- 
 
13. The GTUC, the most active voice in the country for unionized 
workers, would welcome other organizations unionizing the remaining 
workforce and is not against having competition and/or 
collaboration.  GTUC representatives attend annual ILO conventions 
and describe their relationship with the GoG and the Employers' 
Association of Georgia in positive terms.  It has stressed that it 
shares the government's desire for a more prosperous, democratic 
Georgia (ref B).  However, it would like to see a more active social 
 
TBILISI 00002398  003.2 OF 006 
 
 
policy.  The trade unions, AmCham, the Federation of Georgian 
Businessmen, and the EAG all work with the Georgian government to 
help develop legislation that will enhance business development. 
Nevertheless, the GTUC claims the GoG developed the new Labor Code 
and its collective bargaining provisions without consulting with 
labor unions. 
 
---------------- 
Major Labor Laws 
---------------- 
 
14. The Labor Code of 2006 governs labor relations in Georgia.  In 
addition, the Georgian government is party to a number of 
International Labor Organization (ILO) conventions including the 
Forced Labor Convention of 1930, the Paid Holiday Convention of 
1936, the Anti-Discrimination (Employment and Occupation) Convention 
of 1951, the Human Resources Development Convention of 1975, the 
Right to Organize and Collective Bargaining Convention of 1949, the 
Equal Remuneration Convention of 1951, the Abolition of Forced Labor 
Convention of 1957, the Employment Policy Convention of 1964, and 
the Minimum Age Convention of 1973. 
 
--------------------------------------- 
Core Labor Standards and Workers Rights 
--------------------------------------- 
 
15. The Ministry of Labor, Health and Social Security sets the rules 
for compensation, leave, and allowances for temporary disability, 
pregnancy, and child care.  It also approves rules on unemployment 
registration.  It defines an unemployed person as one who is capable 
or semi-capable and is seeking employment and ready to work.  The 
new Labor Code provides for a 41-hour workweek and a weekly 24-hour 
rest period, unless otherwise specified in a labor contract.  The 
Georgian Labor Code mandates 24 calendar days of paid annual leave, 
together with 17 official holidays.  The law requires at least one 
month's severance pay in case of an employer-initiated dismissal. 
The labor code does not require premium pay for overtime, leaving it 
as a subject of the agreement between the parties to a labor 
contract.  Unless otherwise specified in the contract, employees 
should give one month's notice prior to quitting but employers do 
not have to give notice before dismissal.  The law provides 
employer-paid maternity leave for up to 126 days (4 months), with 
the option of an additional 12 months of unpaid leave.  It allows an 
employer-employee contract to prohibit the use of knowledge and 
qualifications obtained during employment in favor of any rival &#x0
00A;employer.  This provision may remain in force even after the 
termination of labor relations. 
 
16. The national minimum wage for public employees is now 115 GEL 
(USD 65.71) a month.  However, the minimum wage still does not 
provide a decent standard of living for a worker and family.  The 
official minimum subsistence level for a single person is 158.1 GEL 
(USD 87.80) and 275 GEL (USD 152) for a family of four.  The 
mandated minimum wage for private sector workers is unchanged for 
many years at 20 GEL (USD 11.11). 
 
17.  The average wage in private enterprises is 255.6 GEL (USD 
153.5) monthly; in government employment it is 205.4 GEL (USD 130). 
Minimum monthly pensions are 38 GEL (USD 22.75).  Unreported trade 
activities, assistance from family and friends, and the sale of 
homegrown agricultural products often supplement salaries. 
 
---------------------- 
Freedom of Association 
---------------------- 
 
18. The constitution and statutes provide for freedom of 
association, and the government generally respects this right in 
practice.  Authorities grant permits for registration of 
associations without arbitrary restriction or discrimination.  The 
law allows all workers, including government employees, to form and 
to join unions of their choice, and they do so in practice. 
However, there are certain restrictions with regard to law 
enforcement agencies and employees of the general prosecutor's 
office. This right is guaranteed by the Constitution of Georgia and 
the law on trade unions and international conventions; however, the 
new labor code limits the mechanisms for trade unions to implement 
its rights. 
 
--------------------- 
Collective bargaining 
--------------------- 
 
19. The law allows unions to conduct their activities without 
interference but the new code repealed the former Law on Collective 
Agreements.  In the view of the GTUC leadership, the lack of a 
 
TBILISI 00002398  004.2 OF 006 
 
 
detailed law on collective bargaining -- which they say runs counter 
to ILO principles -- is the biggest problem with the new Labor Code. 
 The concept still exists, though, as Georgia is a signatory of the 
International Labor Organization (ILO) 98 convention which set forth 
standards on collective bargaining.  According to the Labor Code, a 
collective agreement can be concluded between an employer and two or 
more employees and is based on the same principles as an individual 
contract.  Employees negotiate through a representative, who 
according to the code can be a physical person.  However, the ILO 
convention requires collective bargaining between the employer and 
the workers union or trade union -- not the employees themselves. 
The law prohibits discrimination by employers against union members, 
and employers may be prosecuted for such discrimination and forced 
to reinstate employees and pay back wages. 
 
--------------- 
Right to Strike 
--------------- 
 
20. The law provides for the right to strike with some restrictions 
on employees in law enforcement and emergency services, and on 
strikes that could pose a threat to life.  The new code sets a 
maximum time limit of 90 days for strikes.  The GTUC believes this 
renders strikes ineffective because the employer has a guarantee a 
strike would end after a certain period of time.  Employees must 
give the employer three days notice of a strike and then perform a 
warning strike lasting one hour.  As a practical matter, strikes are 
rare in Georgia and nearly unknown in the private sector. 
 
------------ 
Forced Labor 
------------ 
 
21. The law prohibits forced and compulsory labor, including by 
children. However, the new labor code permits compulsory labor in 
cases of emergency and natural disaster.  The ILO convention also 
allows compulsory labor in such situations, but requires 
remuneration, which is not the case in Georgia's code. 
 
----------- 
Child Labor 
----------- 
22. There are laws and policies to protect children from 
exploitation in the workplace.  With high unemployment resulting in 
a large pool of adult workers willing to work for low wages, child 
labor is uncommon in the country.  The Ministry is responsible for 
enforcing laws regulating child labor.  Although official data is 
not available, child labor is not considered a serious problem. 
However, in tourist areas, children are commonly seen peddling 
goods, and children work with their parents on family farms. 
23. The minimum employment age is 16. In exceptional cases, children 
may work with parental consent at ages 14 and 15.  Children under 
age 18 may not engage in unhealthy or underground work, and children 
15 and over are subject to reduced working hours.  The Labor 
Inspection Department at the Ministry of Labor, Health and Social 
Security was the only mechanism for monitoring enforcement of the 
minimum age requirement; however, the department was dissolved in 
2006.  At the end of 2006 a small group of labor inspectors ensured 
compliance with the law by checking personnel records at 
organizations, because problems were not likely to be documented in 
official company records.  The only organizations believed to 
strictly follow minimum age rules are the railroad and aviation 
sectors. 
 
---------------------------- 
Discrimination in Employment 
---------------------------- 
 
24. The Constitution of Georgia prohibits discrimination of any 
kind, and the law specifically prohibits discrimination against 
persons with disabilities.  In practice, however, discrimination in 
employment against persons with disabilities and age discrimination 
still exists.  Older job seekers -- trained under the Soviet system 
-- have a more difficult time obtaining employment than younger 
workers.  Even so, the new Labor Code leaves some room for 
discrimination.  As provided by Article 38, employers now can 
dismiss employees without explanation other than the employer's 
desire to do so.  Despite this provision the GTUC and its national 
unions reported frequent cases of management warning staff not to 
organize trade unions. 
 
------------------------------ 
Occupational Safety and Health 
------------------------------ 
 
25. In accordance with the new Labor Code, the Ministry has 
 
TBILISI 00002398  005.2 OF 006 
 
 
determined what constitutes hard, hazardous, and dangerous labor and 
developed a list of related jobs.  It has not, however, identified 
what benefits employees should receive from employers for working in 
these types of jobs.  The law requires the employer to pay for 
periodic medical checkups of employees working in hazardous 
conditions.  The Ministry is responsible for monitoring the 
implementation of health and safety standards.  In the event of a &#x00
0A;claim, Article 42 of the Administrative Code gives the courts 
authority to impose sanctions on an employer.  However, enforcement 
is a problem since there is only one inspector and the special 
advisor to the Minister on labor issues.  The law permits higher 
wages for hazardous work and gives workers the right to remove 
themselves from situations dangerous to their health or safety 
without jeopardizing their employment status.  In practice these 
protections are rarely, if ever, enforced.  The law allows trade 
unions to assist workers in compensation cases.  Within the past 
year, three such cases have come before the courts with the 
assistance of trade unions.  In two cases the victims' families 
received compensation for work-related deaths.  The third case is 
still pending. 
 
---------------------- 
Trafficking in Persons 
---------------------- 
26. Georgia is a source and transit country for women and girls 
trafficked primarily to Turkey and the U.A.E. for the purpose of 
commercial sexual exploitation.  Women and girls from Ukraine, 
Moldova, Russia, and other former Soviet states are trafficked 
through Georgia to Turkey, Greece, the U.A.E., and Western Europe. 
Men are trafficked for the purpose of forced labor; victims are 
trafficked for the purpose of forced labor in the breakaway regions 
of Abkhazia and South Ossetia. 
27. The Government of Georgia fully complies with the minimum 
standards for the elimination of trafficking.  Over the past year, 
the government made considerable progress in the prosecution and 
punishment of traffickers, protection and assistance for victims, 
and prevention of trafficking. Georgia developed and implemented a 
victim-centered national referral mechanism, provided a building for 
the country's first trafficking victims' shelter, dedicated on-going 
funding for victim assistance, passed comprehensive trafficking 
legislation, aggressively prosecuted and toughened penalties for 
traffickers, and initiated multiple proactive prevention programs. 
Georgia was moved from Tier 2 to Tier 1 on the State Department's 
Trafficking in Persons report in 2007. 
--------------------- 
Migrant/Expat Workers 
--------------------- 
 
28. Georgia allows foreigners to work freely on the local market, 
but generally does not have a sizable immigrant worker population. 
Although Chinese migrants are arriving in increasing numbers, most 
are self-employed (ref C).  Economic hardship has encouraged a 
significant out-migration of Georgians in recent years.  Emigration 
of qualified workers contributes to low labor productivity. 
 
--------------- 
Social Security 
--------------- 
 
29. Employers are legally required to make social security 
contributions for employees at a rate of 20 percent of the gross 
salary.  The employee portion of social taxes was abolished in 2004. 
 The social tax does not directly fund pensions but provides general 
revenue to the government, which pays pension benefits to retirees. 
In 2007 the Government eliminated the 20 percent social tax on 
employers effective January 1, 2008.  However, to make up for some 
of the lost revenue, the GoG increased the personal income tax to 25 
percent from 12 percent effective January 1, 2008 (ref D).  The 
state social security system provides very modest pension and 
maternity benefits.  Moving from a state-financed, defined benefits 
system to a privatized, defined contributions pension system is a 
priority of the GoG.  There is one pensioner for every 0.7 hired 
employees in Georgia (optimal would be 3-4), illustrating the 
difficulties the government faces in its task. 
 
---------------------------------------- 
Foreign investment potential, agreements 
---------------------------------------- 
 
30. Georgia's liberal labor code is intended to make Georgia more 
attractive to investors.  On June 21, 2007, Georgia signed a Trade 
and Investment Framework Agreement with the U.S.  In addition, 
Georgia has a Bilateral Investment Treaty with the U.S., signed on 
March 7, 1994, and entered into force on August 17, 1997. 
 
------------------- 
 
TBILISI 00002398  006.2 OF 006 
 
 
Key Labor Contacts: 
------------------- 
 
31. Key labor contacts include: 
 
A. Minister of Labor, Health, and Social Affairs David 
Tkeshelashvili.  http://www.molhsa.ge/eng/index.php; 
 
B. Department of Social Protection at the Ministry of Labor, Health 
and Social Affairs.  Tel: +995 32 381139, Fax: +995 32 387863; 
 
C. David Tsiklauri, Head of the Civil Service Bureau, Tel: 399302; 
 
D. Paata Shavishvili, - Statistics Department, subdivision of labor 
statistics under the Social and Demographic Statistics Division; 
Tel: +995 32 367210, ext 600; 
 
E. Irakli Petriashvili, President of the Georgian Trade Unions 
Confederation; Tel: +995 32 323 545, email: gtuc@geo.net.ge; 
 
F. Gocha Aleksandria, Vice-President of the Georgian Trade Unions 
Confederation; Tel: +995 32 323 545, email: gtuc@geo.net.ge; 
 
G. Elguja Meladze, President of the Employers' Association of 
Georgia; Tel: +995 32 222467, email: employer@employer.ge 
 
--------------------------------- 
Key Sources Used in Drafting this 
Foreign Labor Trends report: 
--------------------------------- 
 
32. Most of the information contained in this report was obtained 
through face-to-face and email communication.  In addition, Post 
used information from three reports for the relevant sections: 
 
A. 2007 Trafficking in Persons report 
http://www.state.gov/g/tip/ 
rls/tiprpt/2007/82805.html 
 
B. 2006 Human Rights Report 
http://www.state.gov/g/drl/ 
rls/hrrpt/2006/78813.htm 
 
C. 2006 Worst Forms of Child Labor Report 
 
 
PERRY

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