Recently, Azerbaijan has witnessed solid economic growth over the last 5 years. This growth has been driven by domestic demand including non-oil private investments, public investments, government expenditures, consumption expenditures or households and oil exports. Real GDP has also witnessed tremendous growth owing to growth in the non-tradables sectors including transportation, construction, and public utilities. The capacity constraints however did not enable the supply to grow as rapidly as demand leading to inflationary pressures. The objective of this paper is to provide a discussion of the labour cost drivers, labour demand drivers, and labour supply drivers in Azerbaijan.
According to macroeconomic theory the wage rate usually depends on the price level. The higher the price level the higher will be the real wage rate demanded by workers. Azerbaijan is currently suffering from high rates of unemployment. As a result the wage rates are very low. According to the Human Development and Central Unit (HDCU) and European and Central Asia Region (ECAR) (2005) a vast majority of people in the city of Mingachevir an Industrial city have become redundant as a result of lack of demand for products, which has culminated in production stoppage, bankruptcy, liquidation and corporate restructurings. This has driven the wage rates to very low levels. ...Show more