Harnessing Mongolia's Human Capital: Addressing Youth and Women's Employment

Mongolia faces significant labor market challenges, particularly for youth and women, despite a young, educated workforce, with declining labor participation and high unemployment. Addressing gender disparities, improving education quality, and enhancing employment opportunities are crucial for economic growth and harnessing the demographic dividend.

Mongolia is grappling with significant labor market challenges, particularly in relation to the employment of youth and women. This issue is examined in a comprehensive study conducted by the World Bank, with contributions from researchers Alexandra Avdeenko, Anne-Lore Fraikin, Carola Gruen, and Natalia Millan. Despite having a relatively young, urban, and educated working-age population, Mongolia struggles to effectively utilize its human resources. Labor force participation and employment rates are both low and declining, while unemployment, including long-term unemployment, remains high. Many workers are engaged in excessively long working hours, and although the share of the working-age population with tertiary education is high, the returns on this education have decreased over recent years.

Women's Education Advantages Failing to Close Employment Gap

Women, despite being more educated than men, face substantial barriers in the labor market. Their participation rate is lower, and they are often underrepresented in higher-paying fields such as science and engineering. A significant number of women with tertiary degrees are not in employment, education, or training (NEET). This trend is also prevalent among young graduates, contributing to Mongolia’s challenges in school-to-work transitions. Real wages in Mongolia have increased considerably, but this growth lags behind labor productivity gains. Wage disparities by gender, age, education, and location persist, making women and youth particularly vulnerable. As the country approaches a period where its demographic window will close, it is crucial to better utilize the available labor resources to promote economic growth and harness the demographic dividend.

Urban-Rural Divide in Mongolia’s Labor Force

The high unemployment rate is particularly pronounced among urban residents, youth, and those with upper secondary education. Notably, women in rural areas with lower educational attainment have seen a significant decline in labor force participation, driven largely by caregiving responsibilities. This contributes to a growing gender gap in labor market participation. Mongolia’s labor market also shows a significant urban-rural divide in employment rates, with higher participation in rural areas due to the prevalence of self-employed agricultural work and animal husbandry. The employment rates for those with lower secondary education continue to fall, whereas those with college education have the highest employment rates.

Informal Employment and Seasonal Work Patterns

Despite a shift towards wage employment over the past decade, a substantial portion of the workforce remains in informal employment, particularly in agriculture and among self-employed workers. This informal sector contributes to labor market volatility, exacerbated by Mongolia's strong seasonal economic activities and internal migration patterns. Efforts to address these issues must focus on enhancing the quality of education, improving school-to-work transitions, promoting gender equality in labor force participation, and supporting vulnerable groups such as women and youth. Additionally, policies that encourage part-time work and flexible working arrangements, as well as efforts to bridge the urban-rural divide in employment opportunities, are essential for creating a more inclusive and effective labor market in Mongolia.

Harnessing Human Capital for Economic Growth

The research highlighted the importance of considering demographic trends. Mongolia’s working-age population is expected to continue growing until 2050, but the old-age dependency ratio will rise significantly. This demographic shift underscores the urgency of improving labor force participation and productivity now. The analysis also emphasized the critical role of education in shaping labor market outcomes. While Mongolia boasts a high level of educational attainment, the quality of education remains a concern. There are significant disparities in educational attainment by gender and location, with women and urban residents generally achieving higher levels of education. However, even with higher educational attainment, many women and young graduates struggle to transition into employment. Mongolia’s urbanization has contributed to a pool of well-educated young workers concentrated in cities, particularly Ulaanbaatar. However, the benefits of this urbanization have not been fully realized due to persistent labor market inefficiencies. The country’s labor market is characterized by a high incidence of informal employment, long working hours, and significant wage disparities.

Addressing these challenges requires a multifaceted approach that includes policy reforms, targeted interventions, and increased investment in education and training. Furthermore, the analysis suggested that improving labor market outcomes for women and youth could yield substantial economic benefits. Reducing the gender gap in labor force participation and wages, and enhancing opportunities for young people to gain meaningful employment, are critical steps towards achieving a more vibrant and inclusive labor market. The World Bank’s research underscores the need for Mongolia to better harness its human capital to foster economic growth and resilience. As the country navigates these labor market challenges, a focus on inclusivity and productivity will be key to ensuring that Mongolia can fully benefit from its demographic advantages and achieve sustainable development.