LABOR TRENDS IN GEORGIA

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

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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.

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FEATURES OF THE LABOR MARKET
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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.


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Major Recent Developments in Legislation
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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.


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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.

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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.

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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.

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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

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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.

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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.

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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
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.

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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.

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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

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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.

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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.

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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.

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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.

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Discrimination in Employment
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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.

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Occupational Safety and Health
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25. In accordance with the new Labor Code, the Ministry has

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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
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.

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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.
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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.

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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.

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Foreign investment potential, agreements
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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.

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Key Labor Contacts:
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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

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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