According to the EU Business Climate Survey, the absence of qualified workforce is not only a leading problem for businesses in Georgia, but often it has been the main and only limitation to expansion during the past few years.
The 2024 EU Business Climate Survey sought to quantify the impact of the skills shortage. Companies were asked to estimate their performance shortfalls attributable to this issue. While about 25% of respondents found this question too hypothetical to answer, others provided estimates. Among those who did respond, approximately 48% reported producing or selling between 5% and 40% less due to the skills gap.
According to the document, the weighted average impact across all ranges is calculated at -27.2%. If this rate applies to the total business sector turnover in 2023, which amounted to 204.6 billion GEL with a value added of 77.9 billion GEL, the estimated economic impact would be substantial. Specifically, this issue results in an unrealized income of roughly about 55.6 billion GEL and a shortfall of approximately 21.2 billion GEL in value added annually in the country. This represents a 21 billion GEL problem (or about 26% of Georgia’s GDP) and addressing it would have a profound impact not only on individual businesses but also on the broader economy.
Several key factors cause a significant workforce deficit in Georgia. According to surveyed businesses, high emigration rates (cited by 66% of respondents) are the most frequently mentioned cause, drastically depleting the local labor pool. This issue is compounded by inadequate professional education, identified by 65% of respondents as a major contributor to skills shortages. Furthermore, weak collaboration between educational institutions and the private sector (noted by 33% of respondents) hampers efforts to align educational outcomes with market needs.
The emigration of skilled workers is a significant challenge for businesses, leading to a steady drain on the labor market. Many enterprises invest in training employees only to lose them to better opportunities elsewhere. However, an equally pressing issue is the misallocation of human resources from high-productivity sectors to low-productivity sectors and a substantial portion of the workforce remains underutilized, with resources often diverted from high-productivity sectors to lower-productivity roles.
To address this, short-term retraining programs can play a transformative role. For instance, employees in lower-skill positions, such as supermarket staff, could be upskilled to take on higherproductivity roles, such as high-temperature operators. This shift would not only increase their earning potential but also boost overall private sector output, creating a win-win scenario for both workers and businesses.
