The Economic Effects of Labor Market Regulations: Research Results Presentation
The Economic Effects of Labor Market Regulations: Research Results Presentation


On Thursday, 6 June, PMC Research Center, as part of the study funded by the Policy, Advocacy, and Civil Society Development in Georgia (G-PAC) program of the United States Agency for International Development (USAID), held public discussions on the topic: "Economic Effects of Labor Market Regulations".

During the meeting the results of this study were presented and reflected upon. The research report covers the analyses of the relationship between labor market rigidity and a country's economic performance based on the experiences of other developed and less developed countries as well as quantitative research into the business leaders' attitudes toward the proposed amendments to the labor code of Georgia.

The results of the empirical studies clearly revealed the negative impact of the tightening of labor market regulations from which the following outcomes are anticipated: higher unemployment rate, reduction of the number of new jobs created, increase in the share of shadow economy, increase in the negative effects of economic crisis.

The business leaders' attitude survey assessed the total effect of proposed changes to the labor code of Georgia on the business environment and on the creation of new jobs. It was found that 46% of interviewed business leaders considered the amendments to have no positive influence on the improvement of the business environment and 51% of those interviewed felt that the amendments will not promote the creation of new jobs.

On the basis of the research results, the following recommendations are proposed:

  • To reduce as much as possible or abolish restrictions on fixed-term contracts
  • To ensure equality between employee and employer in cases of termination of employment
  • To increase the degree of freedom in collective agreements, meaning that trade unions should not have a monopoly status granted by law, to conduct collective negotiations on behalf of employees
  • To exclude the possibility of the Minister of Labor, Health and Social Affairs taking part in any way in the collective dispute resolution process