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Medium to long-term labor supply-demand forecast

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  • 1. human resources development service of korea Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Billion tugrik 12000 10,414.1 10000 8000 5678 5,498.5 6000 1360 4000 2104 2000 3010 705 976 807 1272 0 2012 2022 Agriculture 2012 2022 Mining and Quarrying 2012 2022 Manufacturing 2012 2022 Service 2012 2022 GDP 2013
  • 2. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Foreword We have developed a medium to long-term labor market forecasting (pilot) model for Mongolia for the first time. The timing of this model development coincides with the structural changes in population and the rapid economic growth expected in the country which require changes in labor policies on the labor force participation rate and labor productivity. We have forecasted major changes in the labor market until 2022 in terms of 19 industries and 10 major occupational groups using the model. One of the major objectives of labor policies is to promote inclusive growth by developing the national labor force. It implies to improve the higher and vocational education system, and labor productivity in industries. On the other hand, labor studies provide school leavers and the current labor force with information on the choices of occupation and directions to enhance their skills. We will be working to promote the forecast results for policy making and information purposes. In 2014, we have two objectives to improve the forecast. First, the forecast will be based on the sub-classifications of industries and sub-groups of occupations. As a result, there will be more detailed information for a policy making purpose. Second, we will consider various policy scenarios so that we will be able to forecast the effects of proposed policy changes on the labor market outcomes. During the period in which we publicized the results of the pilot model, the President of Mongolia initiated the manifesto on the principles of a smart government and the government reported that it would keep a policy not to increase the number of government employees. When we introduce these policy changes in the model, the forecast results would be quite different as the additional employees in the government sector forecasted by the pilot model would have to be allocated across the other industries. It is important to maintain the capacity building taking place in the modelling and forecasting sector at the Institute of Labour Studies and develop its cooperation with other advisory organizations. I would like to thank the officials at the Ministry of Labour of Mongolia and Ministry of Employment and Labor of the Republic of Korea who supported our work. 1
  • 3. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST I would also like to congratulate to Human Resources Development Services of Korea and “Gerege Partners” LLC on their successful collaborations with us. I hope that you will find the forecast results useful for the purposes of policy making and information providing leading to the efficient allocation of national human recourses. CHIMEDDORJ MUNKHJARGAL Director of Institute for Labour Studies 2
  • 4. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Table of Contents Chapter 1. Medium to Long-term Labor Supply-Demand Forecast Introduction and Method 1. 2. 3. 4. Significance of labor supply-demand forecasting.............................................................. 5 Forecasting procedure and method.................................................................................... 5 Statistical data used for forecasting....................................................................................7 Work required to be undertaken further............................................................................7 Chapter 2. Major Results of the 2013-2022 Medium to Long-term Forecast 1. 2. 3. 4. Labor force forecast........................................................................................................... 9 Employment forecast by industries................................................................................... 16 Employment forecast by occupation................................................................................. 21 Unemployment rate forecast.............................................................................................25 3
  • 5. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Chapter 1 Medium to Long-term Labor Supply-Demand Forecast Introduction and Method 4
  • 6. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST 1 Significance of labor supply-demand forecasting Labor supply-demand forecasting acts as a signal that prevents and alleviates likely imbalances in the labor market. One type of an imbalance in the labor market is labor force with a university degree is unable to find suitable employment opportunities for an extended period of time. The main reason for such a situation is asymmetric employment information between labor providers and employers. In this case, the supply-demand forecast acts as a signal that contributes to the efficient development and allocation of national human resources. In general, the forecast performs both a policy function and an information function. The policy function: the forecast acts as the main data for the government policies on employment, industry and education (human resources development). The information function: the data provided by the forecast is used for decision making 2 on career or occupation selection. Through its information function, the forecast assists the labor market entrants to reach rational decisions which improve the efficiency of the labor market. In this respect, a need to develop a labor market projection system for Mongolia has arisen. The development of this system has been initiated by the Institute of Labor Studies of the Ministry of Labor and the first pilot model of the labor market and its results are presented in this report. On the pilot model, two consultancy teams have participated as well. The national consultant is a team of economists from Gerege Partners LLC the main role of which was to carry out the model simulations. The international consultant is a team of labor market experts of HRD Korea advised on the model development. Forecasting procedure and method The medium to long-term forecast consists of the following two parts: § labor supply forecasting (labor force forecasting) § labor demand forecasting (employment forecasting). Figure 1-1 shows the sequence of steps to carry out the medium to long-term forecast. This is the simplified version of the Korean labor supply-demand forecasting system. 1 The Korean model is the adaptation of the US Bureau of Labor Statistics model. 5
  • 7. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Figure 1-1. Medium to long-term labor market forecasting system Working age population forecasting GDP by industries Labor force participation rate forecasting Employment coefficient forecasting (by industries) Economically active population forecasting (Labor supply) Employment forecasting by industries and in aggregate (Labor demand) Labor supply-demand forecasting “Industry-occupation” matrix forecasting Based on the population forecast, the labor supply forecasting initially projects 1) the working age population (15 and older), 2) the labor force participation rate, and 3) the economically active population. In particular, the working age population and the economically active population are determined by age (age strata in five-year increments) and gender (male, female). The forecast period is 10 years. The employment forecasting calculates 1) the employment size in aggregate and by industries by using projected industry growth rates and the employment coefficients (the inverse of 6 labor productivity) by industries. Next, 2) the employment by industries is converted to employment by occupations using the forecast of the industry-occupation matrix. Finally, 3) the labor force forecast and employment forecast results are used to calculate the economy’s total unemployment rate and employment rate. The employment forecast is disaggregated by 19 industries as well as by 10 major occupational groups of National Statistical Office (NSO) of Mongolia. The forecast period for the employment is 10 years, the same as that for the labor force forecast.
  • 8. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST 3 Statistical data used for forecasting Basic statistical data used for the forecasting includes the International Monetary Fund (IMF)’s GDP projections for Mongolia, the NSO’s population growth projection, the NSO’s labor force survey and the NSO’s GDP by industries (for a detailed description, refer to Table 1-1). The NSO’s population growth projections, in particular, the Medium Fertility Scenario (2B) is used for the labor supply forecast. The working age population is the total number of people who are aged 15 years of age and over and is determined by using the NSO’s labor force survey (LFS). The economically active population is also derived from the LFS and is the sum of employed and unemployed population. The IMF’s GDP projections, the share of each industry’s GDP in the country’s aggregate GDP in the NSO’s statistical reports and the data on the number of employees in each industry in the LFS reports are used for the employment forecast. Table 1-1. Statistical data used for the forecasting Indicators Population projection Working age population Economically active population GDP by industries Employment by industries Employment by occupations by major groups 4 Source Renewed population growth projection /2010-2040/ Labor force survey Labor force survey National income GDP projections Labor force survey Labor force survey Prepared by Comment NSO by age and gender NSO NSO NSO IMF NSO NSO by age and gender by age and gender by main industries in total by main industries ҮАМАТ-08 /ISCO-08/ Work required to be undertaken further As mentioned above, the pilot model for the medium to long-term labor supply-demand forecast of Mongolia has been developed through this project. From the experience of the Korean labor market studies, the extension of this model is possible as well as required. For example, the employment forecast by sub-industries and sub- occupational groups will generate more detailed information. Also, by determining labor supply by each occupational group and forecasting the labor market for each occupational group, the entrants in the labor market and school leavers will have an opportunity to choose their occupations rationally. 7
  • 9. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Chapter 2 Major Results of the 2013-2022 Medium to Long-term Forecast 8
  • 10. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST 1 Labor force forecast The labor force (or labor supply) forecast has been carried out in accordance with the following three steps. Figure 2-1. Process for aggregate labor supply forecast Population Trend and Projection (by age, 15 and older) Participation Rate Projection We forecast the labor force (or the economically active population) of Mongolia until 2022 by using the historical data on the economically active population and the working age (15 and older) population and labor force participation rates. A. Working age population forecast The annual “labor force survey” (LFS) reports the actual working age population who are 15 years of age and older. However LFS does not forecast the working age population. To forecast the working age population, we use the NSO’s population growth projection 2010-2040. The projection is based on “Population and Housing Census - 2010” and has six scenarios for each age group because of different projections of Economically Active Population (Labor Force) Projection fertility rate, mortality rate and net migration. The projected 15 and older population until 2022 from the Medium Fertility Scenario or 2B – the most suitable scenario of the population growth projections - has been used in this study. The projected 15 and older population from the NSO’s projected population growth could not be taken and used straight away due to methodological difference of the LFS - the size of the working age population in the LFS tends to be smaller than the population of 15 and older reported in the statistical yearbooks. Therefore, it was required to adjust the forecast of the 15 and older population until 2022 by forecasting this difference. 9
  • 11. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Figure 2-2. Projected 15+ population (by gender, age groups, 1000 people, 2000-2022) Male Female Male Female 65+ 50-54 45-49 45-49 40-44 40-44 35-39 35-39 30-34 30-34 25-29 25-29 20-24 20-24 15-19 50 55-59 50-54 50 60-64 55-59 150 65+ 60-64 15-19 150 150 50 2000* Male 50 150 2012** Female Male Female 65+ 40-44 35-39 35-39 30-34 30-34 25-29 25-29 20-24 20-24 15-19 150 45-49 40-44 50 50-54 45-49 2017*** 55-59 50-54 50 60-64 55-59 150 65+ 60-64 15-19 150 50 50 150 2022*** * Source: “Annual Population Employment Reports” submitted by aimags and UB offices of NSO. ** Source: NSO’s labor force survey *** Projections 10
  • 12. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Table 2-1. Projected 15+ population (by age groups, 2002-2022) (unit: 1000 people, %) Population (1000) (%) Growth /Decline (1000) Annual average growth rate (%) 2007 2012 2017 2022 2007 2012 2017 2022 ‘07-’12 ‘12-’17 ‘17-’22 ‘07-’12 ‘12-’17 ‘17-’22 Total 15+ 15-64 1632 1529 1812 1700 1982 1872 2139 1993 100.0 93.7 100.0 93.8 100.0 94.5 100.0 93.2 180 171 169 173 157 121 2.1 2.1 1.8 2.0 1.5 1.3 The age group of 30-54 years, which has the highest employment rate, is forecasted to increase by 2.3 percent in the first half and by 2.2 in the second half of the projected period. This group will be expanded by 21,900 people annually in the period of 2012-2022. Table 2-1 shows that the 15-64 population will have a roughly constant share of 93-94 percent in the total population in 2007-2022. The share of young people of 15-29 years of age in the total population has been declining constantly in the last ten years and this trend is likely to continue until 2022. 15-29 664 670 693 642 40.7 36.9 35.0 30.0 6 23 -51 0.2 0.7 -1.5 30-54 758 881 989 1100 46.4 48.6 49.9 51.4 123 108 111 3.1 2.3 2.2 55+ 210 261 301 397 12.9 14.4 15.2 18.5 52 39 96 4.5 2.8 5.7 Table 2-2 shows the 15 and older population by gender. It is evident that the share of women is much higher compared to men and this trend is likely to continue in the next ten years. Approximately 48 percent of the population of this age group is men and 52 percent is women. In the first five years, it is estimated that the number of men will increase by 2.1 percent but decline to 1.4 percent annually in the last five years of the projected period. In contrast, the increase in numbers of women will be relatively steady around 1.6 percent. 11
  • 13. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Table 2-2. Projected 15+ population (by gender, 2002-2022) (unit: 1000 people, %) Total   Population (1000) (%) Growth/ Decline (1000) Annual average growth rate (%) 2007 2012 2017 2022 2007 2012 2017 2022 ‘07-’12 ‘12-’17 ‘17-’22 ‘07-’12 ‘12-’17 ‘17-’22 B. Labor force participation rate forecast The labor force participation rate is determined by the ratio of the economically active population to the working age (15 and older) population. Based on the data of labor force participation rate for 2006 to 2012, we forecast the labor force participation rate by gender and age groups until 2022 (Table 2-3). From Table 2-3, one can see that the general labor force participation rate which was 63.5 percent in 2012 will increase slightly to 63.7 percent in 2017 and will decline to 62.5 percent in 2022. With respect to age groups, the labor force participation rate has the biggest decline in the age group of 15-29 which may be linked to 12 Male 1632 1812 1983 2139 100.0 100.0 100.0 100.0 180 170 156 2.1 1.8 1.5 Female 786 870 965 1036 48.2 48.0 48.7 48.4 84 95 71 2.1 2.1 1.4 846 942 1018 1103 51.8 52.0 51.3 51.6 96 75 86 2.2 1.6 1.6 the desire to attain education. The participation rate is the highest in the age group of 30-49 – over 80 percent. However, disaggregation by gender shows that men’s participation rate is the highest between 25-49 years of age while for women it occurs later between 3049 years of age. Men’s labor force participation rate will increase by 1.4 percent until 2017 and thereafter it will decline. Meanwhile women’s labor participation rate will decline between 1544 years of age. However, with the family life becoming relatively stable between the ages of 45-54, women’s labor force participation rate will increase.
  • 14. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Table 2-3. Labor force participation rate forecast (by gender, age groups, 2000-2022)       Participation rate (%)   2000* 2012 2017p Change 2022p 20122017p 2017p2022p 20122022p Total 62.9 15~19 44.9 27.9 21.2 22.2 -6.7 1.0 -5.7 20~24 58.4 53.7 50.9 49.9 -2.9 -1.0 -3.9 25~29 65.6 77.3 75.8 75.2 -1.5 -0.6 -2.1 30~34 70.4 81.4 80.7 80.2 -0.7 -0.6 -1.3 63.5 63.7 62.5 0.1 -1.1 -1.0 35~39 67.7 85.4 85.4 85.5 0.0 0.1 0.2 40~44 68.8 86.0 86.0 85.8 0.0 -0.2 -0.2 45~49 64.6 82.1 83.1 83.4 1.0 0.2 1.3 50~54 59.0 71.4 73.4 74.3 2.0 0.9 2.9 55~59 Total 76.9 49.2 49.4 49.2 0.1 -0.2 0.0 60~64   25.7 25.8 24.7 0.1 -1.1 -1.0 65+   15.1 12.5 12.1 -2.6 -0.4 -3.0 69.0 70.5 69.6 1.4 -0.9 0.5 Total 15~19 47.6 30.7 25.0 26.6 -5.7 1.5 -4.2 20~24 61.6 60.4 58.9 58.2 -1.5 -0.7 -2.2 25~29 67.3 86.3 84.9 84.6 -1.4 -0.2 -1.7 30~34 Male 64.8 73.1 88.4 88.3 88.1 -0.1 -0.1 -0.2 35~39 69.7 89.9 90.0 90.1 0.0 0.1 0.1 40~44 69.3 87.6 88.5 88.1 0.9 -0.4 0.5 45~49 62.5 83.7 85.8 86.1 2.1 0.2 2.4 50~54 61.7 77.3 78.9 79.2 1.5 0.3 1.9 55~59 62.3 62.7 63.0 62.3 0.3 -0.7 -0.4 60~64   33.7 33.0 32.0 -0.7 -1.0 -1.7 65+   18.9 17.7 17.4 -1.1 -0.3 -1.5 13
  • 15. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Total 58.4 57.2 55.9 -1.2 -1.3 -2.5 15~19 42.3 25.0 17.3 17.8 -7.8 0.5 -7.3 20~24 55.4 46.7 42.7 41.3 -4.0 -1.4 -5.4 25~29 63.9 68.8 66.7 65.7 -2.1 -1.0 -3.1 30~34 67.8 74.9 73.2 72.2 -1.6 -1.0 -2.7 35~39 65.8 81.4 80.9 81.1 -0.5 0.2 -0.3 40~44 68.2 84.5 83.6 83.6 -0.9 -0.1 -1.0 45~49 66.7 80.6 80.6 80.8 0.0 0.2 0.2 50~54 Female 61.0 56.6 66.5 68.5 69.9 2.0 1.4 3.5 -0.9 0.2 -0.6 55~59   38.5 37.6 37.9 60~64   18.8 20.0 18.9 1.2 -1.1 0.1 65+   12.2 9.0 8.7 -3.2 -0.3 -3.5 * Source: Annual population employment report (NSO) C. Economically active population forecast The forecasts of the 15 and older population and labor force participation rate are used for the estimation of the economically active population forecast by age group and gender (Table 2-4), which determines the total labor supply. Table 2-4 shows that while the economically active population was 1,151 thousand in 2012 it will increase by 186 thousand people reaching 1,337 thousand in 2022. By gender, the number of men is higher than women and this trend is likely to continue in the next 10 years. In the last five years the annual average growth rate 14 of the male labor force was 3.2 percent, this number is forecasted to decline to 2.5 percent in the first half of the projected period and drop further to 1.2 percent in the second half of the projected period. This latter reduction is associated with both the reduction of men’s labor force participation rate in the final five years of the projected period (2018-2022) and the steep decline in the number of men of 15 years of age and over in the same period. Women’s annual average growth rate is relatively stable around 1.1-1.2 percent over the projected period.
  • 16. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Table 2-4. Economically active population forecast (by gender, 1000 people, 2002-2022) Total   Economically active population (1000) (%) Growth/ Decline (1000) Annual average growth rate 2002* 2007 2012 2017 2022 2002 2007 2012 2017 2022 ‘03-’07 ‘08-’12 ‘13-’17 ‘18-’22 ‘03-’07 ‘08-’12 ‘13-’17 ‘18-’22 Male 901 991 1151 1262 1337 100.0 100.0 100.0 100.0 100.0 89 161 111 75 1.9 3.0 1.9 1.2 Female 454 514 601 680 720 50.4 51.9 52.2 53.9 53.9 59 87 80 40 2.5 3.2 2.5 1.2 447 477 551 582 617 49.6 48.1 47.8 46.1 46.1 30 74 31 35 1.3 2.9 1.1 1.2 * Annual Population Employment Report (NSO) Table 2-5. Economically active population (by age, 1000 people, 2007-2022)     Economically active population (1000) (%) Growth/ Decline (1000) Annual average growth rate 2007 2012 2017 2022 2007 2012 2017 2022 ‘07-’12 ‘12-’17 ‘17-’22 ‘07-’12 ‘12-’17 ‘17-’22 Total (15 and older) 15+ 15-64 990 974 1151 1134 1262 1248 1337 1320 100.0 98.3 100.0 98.5 100.0 98.9 100.0 98.7 161 160 111 114 75 71 3.0 3.1 1.9 1.9 1.2 1.1 15-29 317 354 359 318 32.0 30.7 28.4 23.8 37 5 -41 2.2 0.3 -2.4 30-54 614 721 813 905 62.0 62.6 64.4 67.7 107 92 92 3.3 2.4 2.2 55 and over 59 76 90 114 6.0 6.6 7.2 8.5 17 14 24 5.2 3.5 4.7 15
  • 17. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST The economically active population forecast by age groups is shown in the Table 2-5. The population aged 15-29 was 354 thousand in 2012 and is forecasted to increase to 359 thousand in 2017 but decline to 318 thousand in 2022. While in the first half of the projected period the annual average growth rate of this age group is 0.3 percent, in the second half it will 2 Employment forecast by industries In order to forecast the labor demand, we project the value added of each of 19 industries of the Mongolian economy as well as the employment coefficient (the inverse of labor productivity) of each industry. A. Industry value added forecast In Mongolia, there is no medium to long-term forecast for GDP by industries. The reason could be that it depends on many factors and putting them together requires complicated techniques. In this study, we simply extrapolate the observed share of each industry’s value added in the aggregate GDP by using data for 2000 to 2012. Next, we adjust IMF’s projection for Mongolian GDP*2. 2 According to the IMF, the unemployment rate in Mongolia would decrease continuously and reach 3 percent by 2018 (source: World Economic Outlook (October 2013)). We think that it is debatable to consider it as the long-term (natural) rate of unemployment. Instead, we assume that the natural rate of unemployment is about 6 percent. 16 have a sharp decline and drop to -2.4 percent. However, the population aged 30-54, which forms the significant portion of the economically active population, is forecasted to grow but with a diminishing rate. The annual average growth rate of the population aged 55 and over, that has the smallest share in the economically active population, is likely to increase. * To forecast GDP by industries, we first used IMF’s projections of Mongolian GDP until 2018 carried out in October 2012. However, we found that with these projections, the unemployment rate is likely to be lower than its assumed long-term (natural) rate of 6 percent. Other things being equal (such as the trend of foreign labor import), it means overheating in the labor market hence could have an adverse impact on the growth rate by increasing the wage rate to adjust to the long-term equilibrium. For this reason, we revise down the IMF’s GDP projections in our forecasting.
  • 18. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST We forecast that real GDP growth 7.1 percent until 2017 and 6.6 percent for 2018 to 20223. In the next five years, industries will experience the highest growth rates are mining and quarrying (I2), transportation and storage (I8), information and communication (I10). In the final five years, however, the growth rate of these industries tend to decline (see Table 2-6). Table 2-6. Real GDP by industries (million MNT, at 2005 constant prices) Growth (%) Industries* 2007 2012 2017p 2022p I1 732,275 807,208 947,449 1,170,091 2.0 3.3 4.3 3.8 I2 691,862 976,400 1,579,082 2,127,438 7.1 10.1 6.1 8.1 I3 328,067 383,449 637,422 846,806 3.2 10.7 5.8 8.2 I4 84,994 104,469 141,928 172,519 4.2 6.3 4.0 5.1 I5 18,459 22,676 32,969 42,854 4.2 7.8 5.4 6.6 I6 118,078 194,570 226,370 312,802 0.5 3.1 6.7 4.9 I7 534,378 1,199,157 1,504,011 2,109,736 17.5 4.6 7.0 5.8 I8 361,745 576,071 941,601 1,333,769 9.8 10.3 7.2 8.8 I9 28,998 64,930 69,752 96,008 17.5 1.4 6.6 4.0 I10 149,735 240,099 394,010 556,910 9.9 10.4 7.2 8.8 I11 128,635 280,834 347,503 491,645 16.9 4.4 7.2 5.8 I12 167,681 222,886 331,329 423,442 5.9 8.3 5.0 6.6 I13 18,470 63,400 76,357 110,696 28.0 3.8 7.7 5.7 I14 43,622 100,195 145,685 209,313 18.1 7.8 7.5 7.6 20072012 2012- 2017p2017p 2022p 20122022p I15 69,847 75,198 107,878 127,897 1.5 7.5 3.5 5.5 I16 89,203 101,097 111,978 106,312 2.5 2.1 -1.0 0.5 I17 45,480 45,265 74,587 92,952 -0.1 10.5 4.5 7.5 I18 9,896 13,447 20,910 28,495 6.3 9.2 6.4 7.8 18,561 27,130 40,121 54,397 7.9 8.1 6.3 7.2 7,730,943 10,414,084 8.6 7.1 6.1 6.6 I19 Total 3,639,988 5,498,482 * see Annex for the meaning of the abbreviations. 3 According to the IMF’s projections, the average GDP growth is 8.5 percent until 2017 and 7.7 percent for 2018 to 2022. 17
  • 19. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST B. Employment coefficient forecast The employment coefficient is an indicator measuring the required employment or the number of workers to produce value added worth 1 million MNT. In other words, this is the inverse of labor productivity. Data on the value added and employment of all 19 industries of the economy for 2000 to 2012 are used to forecast this coefficient at an industry level. C. Employment forecast by industries The total number of employees was 1.05 million in 2012 and it is forecasted to increase to 1.18 million in 2017 and further by 205,446 to 1.26 million in 2022. The annual average growth rate of employment is forecasted to be 2.3 percent in 2012-2017 but decline to 1.3 percent in 20172022. In the entire projected period (20122022), the total employment tends to increase on average by 1.8 percent or 20,545 employees annually. The forecast indicates that employment in the Agriculture, Forestry and Fishing Sector (I1) 18 will decline by 51,706 employees by 2022. The employment in the Construction Sector (I6) is likely to increase with a relatively constant annual average growth rate of 6 percent. The Arts, Entertainment and Recreation Sector (I18) has the highest annual growth rate of 12.3 percent in the first five years. Compared to this, the employment in the Other Services Activities Sector (I19) will have a slight annual growth in the next 2 years but decline on average by 3.1 percent annually until 2022. The employment in sectors such as Mining and Quarrying (I2), Water Supply, Sewerage, Waste Management and Remediation Activities (I5), Professional, Scientific and Technical Activities (I13), Public Administration and Defence, Compulsory Social Security (I15), Human Health and Social Work Activities (I17) are projected to have a relatively high annual average growth rate of 5-8 percent by 2022. Figure 2-3 compared the weight of each sector’s employment in total employment in 2012 and 2022.
  • 20. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Table 2-7. Employment forecast by industries (persons, 2012-2022, %) Change Sectors 2012 2017p 2022p Growth (%) 20122017p 2017p2022p 20122022p 20122017p 2017p2022p 20122022p I1 369,960 330,890 318,254 -39,070 -12,636 -51,706 -2.2 -0.8 -1.5 I2 46,696 71,848 91,480 25,152 19,632 44,784 9.0 4.9 7.0 I3 64,897 81,600 88,754 16,703 7,154 23,857 4.7 1.7 3.2 I4 14,497 15,546 16,265 1,050 719 1,768 1.4 0.9 1.2 I5 6,681 9,891 12,856 3,210 2,965 6,175 8.2 5.4 6.8 I6 59,204 79,230 109,481 20,025 30,251 50,276 6.0 6.7 6.3 I7 131,340 147,710 128,148 16,370 -19,562 -3,192 2.4 -2.8 -0.2 I8 56,091 65,704 65,585 9,613 -119 9,494 3.2 0.0 1.6 I9 30,235 31,986 38,341 1,751 6,355 8,106 1.1 3.7 2.4 I10 14,740 19,262 23,433 4,522 4,171 8,693 5.5 4.0 4.7 I11 17,376 21,832 22,882 4,456 1,050 5,506 4.7 0.9 2.8 I12 1,208 1,301 1,659 93 358 451 1.5 5.0 3.2 I13 11,341 17,036 24,734 5,695 7,698 13,393 8.5 7.7 8.1 I14 13,334 14,483 11,772 1,150 -2,711 -1,562 1.7 -4.1 -1.2 I15* 62,919 89,184 108,962 26,265 19,779 46,043 7.2 4.1 5.6 I16 86,269 95,865 94,793 9,596 -1,072 8,524 2.1 -0.2 0.9 I17 37,529 59,184 73,829 21,655 14,645 36,300 9.5 4.5 7.0 I18 7,357 13,123 16,181 5,766 3,058 8,824 12.3 4.3 8.2 I19 Total 19,783 18,507 14,477 -1,276 -4,030 -5,306 -1.3 -4.8 -3.1 1,051,4571 1,184,181 1,261,886 127,740 77,705 205,446 2.3 1.3 1.8 * I15 represents “Public administration and defence; compulsory social security”. The increase projected in the number of employees in this industry reflects the historical pattern only in a sense that it does not reflect policies that the government intends to implement such as the “From the bureaucratic government to a smart government” manifesto. 19
  • 21. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Figure 2-3. Observed and forecasted employment by industries (%) Other service activities 2022p Arts, entertainment and rec 2012* Human health and social work activities Education Public administration and defence;.. Administrative and support service activitie Professional, scientific and technical activities Real estate activities Financial and insurance Information, communication Accommodation and food service activitie Transportation and storage Wholesale and retail trade, repair of motor.. Construction Water supply, sewerage, waste.. Electricity, gas, steam and air conditioning.. Manufacturing Mining and quarring Agriculture, Forestry, Fishing and Hunting 0 It can be seen that 35 percent of employees of 15 and older were employed by the Agriculture, Forestry and Fisheries (I1) in 2012 tends to decline to 25.2 percent by 2022. Also the employment share in the sectors such as Wholesale and Retail Trade, Repair Motor Vehicle and Motor- 20 10 20 30 40 cycles (I7), Administrative and Support Service Activities (I14), Education (I16) and Other Service Activities (I19) is likely to lower in 2022 compared to 2012. In contrast, the shares of other sectors are likely to increase.
  • 22. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST 3 Employment forecast by occupation In Mongolia, ISCO-08 occupational classification groups are used and we carry out the employment forecast for 2013 to 2022 for each of the ten major groups (1-digit). In doing so, we use the “industry-occupation” matrices for 2007 to 2012. This matrix divides the total employment size in a given year into industries and occupational groups. For each industry, by extrapolating the observed share of the employment in each occupational group in the total industry employment, we forecast the “industry-occupation” matrix for 2013 to 2022 (see Tables 2-9, 2-10). Summing up across the industries, we derive the total (economy-wide) employment size in each occupational group (Table 2-8). Table 2-8. Employment forecast by 10 major occupational groups (number, %) Major occupational groups M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 Total Growth (%) 2007-08* 41,646 114,433 44,044 16,840 110,567 363,511 90,479 70,029 48,254   899,802 2012* 2017p 2022p 58,429 161,560 37,069 27,064 162,105 362,750 93,241 78,240 70,734 5,250 1,056,441 76,423 196,699 52,135 30,022 177,769 319,927 127,043 101,578 96,987 5,600 1,184,181 87,788 227,045 57,916 34,177 173,289 306,790 145,660 110,298 112,027 6,897 1,261,886 20122017p 5.5 4.0 7.1 2.1 1.9 -2.5 6.4 5.4 6.5 1.3 2.3 2017p2022p 2.8 2.9 2.1 2.6 -0.5 -0.8 2.8 1.7 2.9 4.3 1.3 20122022p 4.2 3.5 4.6 2.4 0.7 -1.7 4.6 3.5 4.7 2.8 1.8 * NSO’s labor force survey /only domestic workers/ p Projected results /the sum of domestic and foreign workers/ For the period of 2012-2022, the fastest growing occupations are М1 (manager), М3 (technicians and associated professionals), М7 (craft and related trades workers) and М9 (elementary occupation)4. The average growth of the employment in these occupations is over 4 percent. On the other hand, the demand for M6 (skilled agriculture, forestry, and fishery workers) 4 М2 is for professionals, М4 is for clerical support workers, М5 is for service and sales workers, М8 is for plant and machine operators and assemblers. 21
  • 23. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST tends to decrease. The decrease in M6 tends to contribute to the increase in employment in the most occupational groups. The following figure compares the observed share of the employment in each occupational group in the total employment in 2012 with its projected in 2022. In 2012, М6 (skilled agriculture, forestry, and fishery workers) accounted for 34.3 percent of the total employment while in 2022, it tends to account for 24.3 percent. The share of М10 (armed force occupation) tends to remain roughly the same around 0.5 percent. Figure 2-4. Observed and projected employment by 10 major occupational groups (%) M10 M9 M8 M7 M6 M5 M4 M3 M2 M1 0.0 5.0 10.0 15.0 20.0 2022p 25.0 30.0 35.0 40.0 2012* Below we show the projected “industry-occupation” matrices as of 2017 and 2022. 22
  • 24.   Industries 2668 865 820 405 6400 9478 1743 I4 I5 I6 I7 I8 3783 1140 1580 1386 I16 I17 I18 I19 76423 15690 I15 9875 1102 2906 I13 532 I12 I14 443 3151 I11 196699 1797 5093 31404 58176 24102 2156 7731 8756 6907 3887 I9 I10 7280 12032 762 4467 8159 9553 5737 7985 I3 1382 M2 I2 1791 M1 I1 Total   52135 1450 712 10228 3337 11701 610 3848 326 2328 2282 450 1372 3433 2615 618 1248 1728 2870 980 M3 30022 409 313 910 2735 4980 739 231 - 5238 1501 1036 3307 2535 1617 554 501 1436 1733 247 M4 177769 7630 1477 5945 9230 10073 3875 460 - 1208 930 17587 3137 102563 2135 756 254 4821 3963 1726 M5 319927 88 121 146 208 386 159 168 - 0 0 87 107 435 216 0 0 568 118 317120 M6 Occupational groups Table 2-9. “Industry-occupation” matrix (number, 2017) 127043 3795 764 1497 1568 1478 995 211 - 205 904 305 1988 10191 41884 2021 4385 44155 8519 2177 M7 101578 174 232 2290 1430 6949 880 334 - 1008 314 591 47387 3127 4169 1337 1813 5906 21333 2303 M8 96987 1778 2831 5624 15309 8313 2164 807 - 964 688 4158 3995 8667 8162 3437 2058 6844 18022   5600   88 5511 M10 3165   M9 18507 13123 59184 95865 89184 14483 17036 1301 21832 19262 31986 65704 147710 79230 9891 15546 81600 71848 330890 Total Medium to Long-term LABOR SUPPLY-DEMAND FORECAST 23
  • 25. 24   Industries 508 9209 7739 I5 I6 I7 1788 875 545 14486 668 I12 1389 6113 30494 87788 227045 1045 I19 39784 1201 2033 I17 3728 I16 I18 57459 19636 I15 1603 1393 2422 I13 I14 7567 11294 5112 3351 998 I11 I9 2678 6596 17428 963 I10 8959 I8 9425 8740 I3 I4 5059 11659 7450 I2 1504 M2 1932 M1 I1 Total   57916 1191 861 12041 2156 12886 489 5810 447 2271 2621 598 1340 2885 3637 875 1228 1926 3603 1052 M3 34177 337 190 1055 2699 6165 682 239 - 6047 1626 1294 3569 2243 2494 808 454 1692 2324 258 M4 173289 6276 1921 7465 9638 11414 3023 688 - 1235 1151 20293 3030 90519 2996 1032 211 5647 4940 1808 M5 306790 59 145 183 209 477 128 249 - 0 0 104 110 379 281 0 0 494 102 303869 M6 Occupational groups Table 2-10. “Industry-occupation” matrix (number, 2022) 145660 2889 901 2015 1583 1670 860 150 - 217 847 182 1913 8203 57622 2784 4352 47044 10148 2279 M7 110298 40 163 2557 1003 8507 748 445 - 1172 89 742 47236 2714 5030 1694 1570 6251 27953 2382 M8 M10 112027 1250 3853 7528 16231 10903 1816 1273 - 1022 693 5170 3920 6868 10783 4192 2517 7534 23301   6897   87 6809 3170   M9 14477 16181 73829 94793 108962 11772 24734 1659 22882 23433 38341 65585 128148 109481 12856 16265 88754 91480 318254 Total Medium to Long-term LABOR SUPPLY-DEMAND FORECAST
  • 26. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST 4 Unemployment rate forecast We derive the unemployment rate forecast by using the labor force (labor supply) forecast and the employment (labor demand) forecast. In 2012, the unemployment rate was 8.2 percent and we assume that the long-term unemployment rate is around 6 percent (± 0.5 percentage points) to derive the results in the forecasting model. In other words, we assume that the natural (or structural, NAIRU) rate of unemployment is about 6 percent. We revise down the growth of GDP projected by IMF and derive the labor demand such that the economy will experience the natural rate of unemployment in the long-term. Table 2-11. Unemployment rate forecast (number, %, 2012-2022) Labor demand   Labor supply Unemployment rate (%) 2012* 1,056,441 1,151,146 8.2 2013 1,110,160 1,180,712 6.0 2014 1,137,663 1,203,672 5.5 2015 1,150,724 1,224,913 6.1 2016 1,168,275 1,244,381 6.1 2017 1,184,181 1,262,139 6.2 2018 1,198,089 1,278,435 6.3 2019 1,211,819 1,293,652 6.3 2020 1,229,756 1,308,260 6.0 2021 1,244,758 1,322,684 5.9 2022 1,261,886 1,337,189 5.6 * Source: NSO’s labor force survey 25
  • 27. Medium to Long-term LABOR SUPPLY-DEMAND FORECAST Annex: Abbreviated words I1 Agriculture, Forestry, Fishing and Hunting I2 Mining and quarrying I3 Manufacturing I4 Electricity, gas, steam and air conditioning supply I5 Water supply, sewerage, waste management and remediation activities I6 Construction I7 Wholesale and retail trade, repair of motor vehicles and motorcycles I8 Transportation and storage I9 Accommodation and food service activitie I10 Information, communication I11 Financial and insurance activities I12 Real estate activities I13 Professional, scientific and technical activities I14 Administrative and support service activities I15 Public administration and defence; compulsory social security I16 Education I17 Human health and social work activities I18 Arts, entertainment and recreation I19 Other service activities М1 Manager М2 Professionals М3 Technicians and associate professionals М4 Clerical support workers М5 Service and sales workers М6 Skilled agriculture, forestry and fishery workers М7 Craft and related trades workers М8 Plant and machine operators and assemblers М9 Elementary occupation М10 Armed forces occupation 26

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