Mongolia’s Labor Market: Unlocking the Potential of Youth and Women in the Face of Rapid Demographic Change

Mongolia’s young population and rapid urbanization present a significant opportunity for economic growth, but underutilized labor resources, particularly among youth and women, pose challenges. High youth unemployment, low female labor force participation, and widening gender disparities in pay highlight the need for targeted policies. The World Bank’s report emphasizes that improving labor productivity, reducing gender gaps, and aligning education with labor market needs are essential for Mongolia to capitalize on its current demographic dividend.

Mongolia’s Demographic Window: A Double-Edged Sword

Mongolia, with its relatively young population and rapid urbanization, stands at a critical juncture in its labor market development. As the country enjoys favorable demographic conditions, a significant portion of its workforce is young and educated. However, looming demographic shifts and underutilized human resources pose a challenge that could hinder Mongolia’s economic growth in the coming decades. This article delves into the key findings of the World Bank report “Navigating Labor Market Challenges with a Focus on Youth and Women’s Employment: Labor Supply Analysis for Mongolia”, highlighting labor market issues that impact both youth and women and offers insights into how Mongolia can navigate its labor challenges.

In 2022, Mongolia’s age dependency ratio—the number of dependents per 100 working-age individuals—stood at 58.9%, comparable to OECD countries. However, this favorable demographic condition will not last indefinitely. By the 2040s, Mongolia will face rapid population aging, increasing the pressure on its pension and health systems. To harness its current demographic dividend, Mongolia must act now to boost labor productivity, improve employment rates, and reduce disparities, particularly for youth and women.

Urbanization and the Struggle for Employment

Urbanization in Mongolia has surged, with nearly three-quarters of the working-age population now living in urban areas, especially in Ulaanbaatar and other aimag centers. This urban migration has created a highly educated workforce, particularly among women. Yet, despite their educational achievements, many Mongolians struggle to find suitable employment.

Unemployment remains high, especially among young people and women. The transition from school to work is slow, with youth unemployment rates significantly outpacing national averages. College-educated youth face unemployment rates of over 20%, highlighting the mismatch between education and the job market. Despite higher education levels, many young graduates are not finding jobs that match their skills, leading to a growing number of people who are "Not in Employment, Education, or Training" (NEET). This issue is particularly prevalent among women, who often face additional barriers to employment due to caregiving responsibilities.

Women with tertiary education far outnumber their male counterparts, yet their labor force participation lags. The gender gap is especially pronounced in fields like science and engineering, where women are still underrepresented. Additionally, women are often concentrated in lower-paying fields, such as education and health care, which limits their earning potential. This further contributes to the widening gender pay gap, with women earning significantly less than men on average.

The Gender Gap in Labor Market Participation

Mongolia’s labor force participation is lower than that of comparable countries, particularly for women. In 2021, the labor force participation rate for women was 49.9%, significantly lower than that of men. Even more concerning is the fact that this gender gap is widening, particularly in rural areas where the participation of less-educated women has declined over the past decade.

Caregiving responsibilities and traditional gender roles contribute to this gap. Women are often forced to leave the labor market during their childbearing and childrearing years, making it difficult for them to return to work later in life. Older women also tend to retire earlier than men, further reducing their participation in the workforce.

The gender pay gap also highlights the disparities in Mongolia’s labor market. Women earn, on average, 20% less than men. Even when controlling for factors like education and hours worked, more than half of this gap remains unexplained. This suggests that unobserved factors, such as societal norms and discrimination, may be contributing to the persistent wage disparity between men and women.

The Path Forward: Better Utilizing Mongolia’s Labor Resources

As Mongolia approaches a period of demographic transition, it is crucial that the country better utilizes its available labor resources. Increasing women’s labor force participation, reducing youth unemployment, and closing the gender wage gap are essential for boosting productivity and fostering inclusive economic growth.

To address these challenges, Mongolia must invest in policies that promote gender equality in the workforce. Expanding access to affordable childcare, offering more flexible work arrangements, and encouraging women to pursue careers in high-paying fields like science and engineering are essential steps toward reducing the gender gap. Additionally, improving the quality of education to better align with labor market demands will help young people transition more smoothly into employment.

In the face of rapid population aging, Mongolia has a limited window of opportunity to capitalize on its young and educated workforce. By addressing these labor market challenges and implementing inclusive policies, Mongolia can secure sustainable economic growth for future generations.