Labor market dynamics in developing countries: analysis of employment transformation at the macro-level

Abstract

Understanding labor market dynamics remains a pivotal aspect within contemporary economic discourse, as necessitates the pursuit of effective employment models to ensure steady progress in the conditions of changes in the economic structure. The aim of the research is to examine the dynamics of the labor market in developing countries, with particular emphasis on China and Kazakhstan, taking into account economic, social, and technological trends. The methodology includes the analytic and comparison of trends in the labor market in developing countries, such as China and Kazakhstan over the past 20 years, and also monitoring the socio-economic nature of the labor process. The study identified changes in the labor market and provided empirical evidence for new forms of employment, utilizing comparative analysis and data visualization of the sectoral structure of the economy and global labor market trends up to 2027. The obtained results provide three main conclusions: a decrease in demand for low-skilled workers and an increase in demand for highly qualified individuals; the emergence of jobs with low levels of social protection; new forms of employment-oriented towards workers outside the social security system, domestic workers, and self-employed individuals. These types of employment can fill jobs in platform and piecework economies, cooperativism, and the sharing economy, which allows employers in developing markets to optimize employment. The findings of the study can contribute to understanding the functioning of the labor market in developing countries including the development of small and medium-sized businesses, startups, and innovative projects, and may be applicable in the development of economic and social policies for sustainable economic growth and social stability.

Introduction

The labor market is a fundamental system in the economy of any country and largely determines its development (Textor, 2024). In recent years, the growth of labor incomes has reduced global poverty by 40 percent (Schwab & Zahidi, 2020). Developing Asian countries, such as China and India, have achieved significant progress, but challenges persist in Kazakhstan, characterized by above-average income levels in the economy. Additionally, inequality remains a serious issue in the United States and Europe (Statista, 2024; The World Bank, 2022). Meanwhile, the global risks report for 2024 warns of the risk of economic opportunity shortages due to climate exacerbation and geopolitical tensions (Chhabria, 2024). At the same time, the year 2023 marks the onset of a wave of digital innovation related to generative artificial intelligence (AI), which has a significant impact on the labor market through accelerating technological progress (ILO, 2024). Developed countries are likely to be more affected by AI than developing countries due to their employment structures that focus on cognitively demanding roles (Cazzaniga et al., 2024). International Monetary Fund experts forecast that up to 60% of jobs in developed countries will be affected by AI (Cazzaniga et al., 2024; Chhabria, 2024). This will induce changes in employment (Schwab & Zahidi, 2020) and intensify geographical inequality (Schwab & Zahidi, 2020). The adaptation of the labor market in developing countries will occur slowly due to skills shortages and entry barriers for technology adoption, especially in low-productivity sectors (Alfes et al., 2022; Schwab & Zahidi, 2020). In the current economic climate, governments need to strengthen their domestic economies through initiatives that aim to improve productivity and living standards (The World Bank, 2020). Countries such as Germany, China, and New Zealand have started to evaluate success not only based on economic indicators, but also based on measures of social mobility and the happiness and well-being of their citizens (Chhabria, 2024; Feigenbaum, 2024), it becomes evident that changes in the labor market require continuous updating of knowledge and skills among workers (Shen & Zhang, 2024). China is expanding its influence in Central Asia through local partners and institutions. The country is adjusting local norms and regulations related to employee qualifications (Feigenbaum, 2024). These changes underscore the necessity of resilience for governments and the private sector, seeking to find new paths of growth and financial strategies in unstable times (Shen & Zhang, 2024), as well as to improve the well-being of the population through new earning opportunities (Matzhanova et al., 2021; Ryder, 2021). The expansion of employment opportunities as a result of globalization and technological advancement can have both positive and negative implications (Ryder, 2021). It is essential to understand this dynamic in order to devise effective developmental policies and strategies (Matzhanova et al., 2021; Textor, 2024).

Finding new forms of employment is a crucial task in adapting to changing economic circumstances and ensuring long-term equitable growth. This is particularly true for developing countries such as China, which has prioritized high-quality growth, and Kazakhstan, which focuses on traditional entrepreneurship. Despite the significance of this issue, research on new employment models in developing countries remains limited. There is a need for a more in-depth analysis and comprehension of these models' dynamics and impact on economic growth, social cohesion, and environmental sustainability, particularly in light of technological advancements.

The issue of finding new forms of employment is central to the development of economies and labor markets, which underpins the significance of this research. The study aims to explore the dynamics of labor markets in developing countries, with a particular focus on China and Kazakhstan, considering economic, social, and technological trends. This research contributes to the body of knowledge by examining the economic transformation and labor market in these countries through the lens of evolving employment skills. The study’s practical relevance lies in its potential to inform government, international organization, and business communities in formulating policies and strategies that promote economic growth and social mobility. These efforts are crucial for enhancing the quality of life of citizens in light of the evolving nature of the labor market.

Literature review

Over centuries, technological, social, and political changes have shaped the economy and influenced ways of earning a living in the labor market (Gurieva et al., 2020). The industrialization of the nineteenth century, with its new sectors and automation, altered professions and working conditions. Social and political transformations, such as labor movements and strikes, improved the conditions and protection of workers (QERY, 2024). Thus, these transformations significantly impacted the economy and people's ability to earn a living, shaping the structure and functioning of the labor market throughout history. In this context, the labor market (Leaker, 2020) includes various aspects of employment and jobs and provides insight into the development and functioning of the national economy. The labor market framework rests on the concept of demand (provided by employers) and supply (provided by workers) of human resources (Trading Economics, 2021). There are two major categories of employment in the labor market: wage earners and self-employed people (The World Bank, 2024). Wage earners are employed workers who receive a wage from an employer for the work they do. The self-employed are those people who work independently regardless of whether they have employees. In turn, employment is defined as a measure of people who have more than one job (The World Bank, 2024). Thus, the structure of the labor market is determined by the interaction of labor supply and demand, as well as the diversity of employment forms. The studies by Bue et al., (2022), Eichhorst et al., (2017), and Pavcnik (2017) present different approaches to the study of the labor market in developing countries. These approaches rely on labor segmentation, public employment, and trade policies. McKenzie (2017) focused on public employment policies in developing countries, and Lazarova et al., (2023) studied the labor market through trade. In turn, experts (The World Bank, 2022) urge governments of developing countries to implement reforms in tax and social policies to combat tax evasion and unsafe working conditions, which many enterprises utilize to increase their profits, aligning with the work of Yang et al., (2021). Experts also note that technological progress creates new opportunities and forms of employment, requiring workers to acquire new skills and critical thinking. These requirements reflect the needs of the modern labor market for professionals (Wratny, 2020), who possess not only technical knowledge (Markefke & Müller-Rehm, 2024), but also advanced interpersonal communication and adaptability skills (Ma, 2024). Experts (McKinsey, 2021) assert that in the near future, workers will not be able to stay in one job; this trend is becoming obsolete, consistent with the previously published work of Schmidt (2017).

Since the early 1980s, the global community has deliberately focused on economic growth and transformation of the economies of developing countries, particularly in China (Jian & Yu, 2019). The country’s economy followed trends toward domestic market liberalization in the context of industrialization, infrastructure modernization, and replication of advanced economies' economic institutions (Cavusgil, 2021), that affected neighboring countries, such as Kazakhstan (Farndale et al., 2022). Cultural and demographic characteristics, such as cultural cohesion and family conglomerates, also played a significant role in internal stability and development (Adilova et al., 2021; Aimaganbetova et al., 2020). These countries also addressed the issue of the informal economy and sought to reduce its influence by creating favorable conditions for the development of the formal sector (An et al., 2017). Therefore, the rationale involves identifying the importance of studying this issue to achieve sustainable and equitable development in developing countries.

The novelty of the study lies in its integrative approach to analysis, which includes quantitative measurements to gain insights into the dynamics of the labor market, employment vulnerabilities, and structural changes at the macro-level. These results are relevant for formulating economic and social policies focusing on developing countries and global trends.

Research objectives:

• To examine the dynamics of the labor market in developing countries, with a particular focus on China and Kazakhstan, considering economic, social, and technological trends.

• Research hypotheses:

• Key trends and features of labor market transformation in developing countries with different economic models, such as China and Kazakhstan, have influenced employment patterns amidst technological development and innovation.

• Monitoring the socio-economic nature of the labor process in China and Kazakhstan reveals changes in employment structure and social protection of workers, indicating shifts in existing forms of employment.

• Changes in the economic structure across major sectors in China and Kazakhstan over time, considering the global evolution of skills, will highlight new forms of employment that will be in demand in the labor market by 2027.

Materials and methods

The research is oriented to collect empirical data on the labor market of developing countries and analyze them to identify trends, challenges, and opportunities in the field of employment. The use of statistical data will provide specific information on the state of the labor market and its dynamics, which will justify conclusions and recommendations for policy and practice.

The methodological approach of the study is based on two approaches: decomposition to explain structural changes in the labor market and statistical analysis to assess the relationship between economic transformation and the level of real changes in employment in developing countries.

Decomposition is employed to unpack the constituent parts of structural changes in the labor market, that is, to understand which specific factors or determinants influence changes in employment. This approach involves analyzing aspects such as changes in the sectoral structure of the economy, growth or decline in demand for certain types of work, as well as the impact of technological changes and globalization on the labor market.

Statistical analysis, on the other hand, is based on the use of qualitative and quantitative methods of data collection and analysis. This approach entails gathering statistical data from various sources, such as international organizations and global databases, as well as applying various methods of statistical analysis to identify relationships and trends in labor market changes.

In this context, the utilization of methodological concepts proposed by authors, such as Dartanto et al., (2017), Feigenbaum (2024), Gurría (2019), and Resources of World Databases: Trading Economics (2021); The World Bank (2023a, 2023b, 2023c, 2023d, 2024), facilitates a comprehensive and impartial analysis of the impact of economic transformations on the labor market in developing countries.

The criterion for analysis is the labor market of China and Kazakhstan, which is of significant relevance and motivation for several reasons. Firstly, these two countries represent different models of developing economies with a strong influence on global trends. Secondly, both countries are undergoing a transition to economies oriented towards innovation and high-tech industries, which affects the structure and nature of employment. Common characteristics of the analyzed countries include a high level of economic development (above-average income); orientation towards resource-based exports; status as developing countries; and the historical influence of their communist past on authoritarian governance styles. Methodological tools for analysis include analytics, qualitative and comparative analysis, data monitoring and approximation, as well as visualization of data in a graphical and tabular representation of the results.

Initially, the authors analyzed and compared trends in the labor markets of developing countries, in particular China and Kazakhstan, in dynamics from 2000 to the present. For this purpose, researchers reviewed case studies: Dartanto et al., (2017), Feigenbaum (2024), Gurría (2019), as well as labor market statistics based on the The World Bank (2023a): population aged 15–64; employment rate at the age of 15 years and older; unemployment rate; GDP growth rate.

Subsequently, the labor market was studied through changes in the socio-economic nature of the labor process using data from the The World Bank (2024), by indicator Vulnerable employment, total (% of total employment) for the analyzed countries China and Kazakhstan compared to global data spanning from 2000 to 2022, where 2022 represents the latest available year in the database statistics, identified changes in the socio-economic nature of the labor process provided insights into the effectiveness of employment policies and social protection, as well as their impact on the vulnerability of employment levels.

In the final stage of the study, empirical justification was provided for new forms of employment through a detailed examination of the economic structure across key sectors (agriculture, industry, manufacturing, services) dynamically from 2000 to 2022 for each analyzed country (The World Bank, 2023a, 2023b, 2023c, 2023d) alongside global labor market trends to identify emerging skills in demand (World Economic Forum, 2023). Data visualization was conducted using histograms to present sector-specific economic data and pie charts to overlay forecasts based on global labor market trends. The assessment of the impact of changes in economic structure and projected skills on the labor market in China and Kazakhstan was carried out through approximation: logarithmic for China (equation: y = 15.772ln(x) + 11.593) and polynomial for Kazakhstan (equation: y = 0.4232x^2 + 1.3589x + 10.105). The study's outcome was the identification of new forms of employment characteristic of the labor market trends expected up to 2027, including those in developing countries.

Results

The literature review revealed that the national economies of the studied countries have transitioned from a centrally planned form to a market-oriented one, ensuring a certain stability in the global market. This is corroborated by the analysis conducted in Table 1 using analytical and comparative methods for the period 2000 to 2022 (the latest available data as of 2024). It was found that a transformation has occurred in the labor market: the economy has shifted from low-productivity, labor-intensive activities, and standard employment to the technologization of economic sectors, high-skilled activities, and unskilled jobs in standard employment. The driving force behind these changes is the active adoption and development of technologies and innovations. Against this backdrop, there is a disparity in professional qualifications and skills. This has led to a decrease in demand for low-skilled workers and an increase in demand for highly skilled specialists due to the technologization of economic sectors and innovations. In particular, the technologicalization of production has intensified wage inequality among high-skilled and low-skilled workers. Additionally, the analysis of analytics and comparison relies on descriptive statistics data of the labor markets of China and Kazakhstan, as major institutions in the national economy, which has allowed the identification of macroeconomic trends in development within the context of global influences.

Table 1 Labor market transformation in developing countries, period: 2000–2022 (case studies of China and Kazakhstan)

The obtained results of descriptive statistics (Table 1) revealed the following trends in the overall economic situation. Firstly, in China, the proportion of the employed population decreased (by 7.7%), indicating potential changes in the economy, such as automation and reduced demand for labor due to the rapid development of technology and innovation in economic sectors. This is also accompanied by an increase in the unemployment rate (by 1.7%), indicating labor market difficulties, possibly associated with the economy transitioning towards qualitative rather than quantitative indicators. Conversely, in Kazakhstan, the proportion of the employed population increased (by 2.3%), which may indicate positive trends in the economy, such as production growth, the development of new sectors, or the creation of new jobs. This is also accompanied by a decrease in the unemployment rate (by 7.9%), indicating an improvement in the labor market situation, possibly associated with an increase in job opportunities or a decrease in labor demand. Secondly, in China, the employment rate decreased (by 0.3%), while in Kazakhstan, it decreased even further (by 3.6%), indicating differences in approaches to development and economic policy. Thirdly, in the context of global trends, a decline in GDP growth is observed both in China (by 5.5%) and in Kazakhstan (by 6.6%), indicating a decrease in the pace of economic development in both countries. This may be associated with changes in the global economic climate and internal economic reforms. Thus, both countries are facing challenges in the economic sphere, and the decline in GDP growth may serve as evidence of the need for measures to stimulate growth and improve the economic situation.

Transformations in the labor market have entailed changes in the socio-economic nature of the labor process. Monitoring of the analyzed countries based on data on employment vulnerability (Fig. 1) compared with global trends provides a precise understanding of the behavior and working conditions of employees. Additionally, it helps determine the socio-economic security of workers in various economic sectors and assess the effectiveness of current employment and social protection policies.

Fig. 1

Source: developed by the authors based on data from The World Bank (2024)

Vulnerable employment, total—World, China, Kazakhstan.

The monitoring results (Fig. 1) indicate that initial socio-economic conditions in China and Kazakhstan differ: in China, employment vulnerability was significantly higher than in Kazakhstan (58% versus 41%). This discrepancy may reflect differences in levels of economic development and social protection. Additionally, from 2009 to 2017, employment vulnerability in China and globally followed similar dynamics, decreasing from 48–49% to 44%, highlighting the influence of global economic conditions on employment vulnerability in developing countries, particularly in China. In 2022, employment vulnerability in China remains higher than in Kazakhstan (42% versus 24%), underscoring the need for continued efforts to improve employment conditions. Overall, positive changes in the labor market can be noted: both China and Kazakhstan have shown comparable rates of improvement, with significant reductions in employment vulnerability by 16% and 17%, respectively, over the past two decades. This suggests that both countries have implemented substantial structural reforms aimed at enhancing labor conditions and reducing informal employment. However, the significant proportion of employment vulnerability in the economic structure of both China and Kazakhstan indicates a substantial presence of jobs outside the formal sector, leading to the emergence of new forms of employment. This underscores the necessity of adapting state employment policies and social protection to the new conditions of the labor market.

To identify emerging new forms of employment, it is important to examine the economic structure of the main sectors in each country and the projected socio-emotional skills within the context of global labor market trends. This empirical approach will substantiate the anticipated forms of employment in the future and support the development of strategies for effective economic development (Fig. 2).

Fig. 2

Source: developed by the authors based on data from The World Bank (2023a, b, c, d) and World Economic Forum (2023)

Overview of the Dynamics of Economic Structure in China and Kazakhstan in the Context of Required Skills in the Global Labor Market Until 2027

The empirical basis (Fig. 2) demonstrates that over the analyzed period, the economic context of China and Kazakhstan is characterized by a slowdown in the growth of traditional sectors and a shift towards a service-based economy. Moreover, the convergence of approximation trends in the service sector may indicate that both countries are moving towards similar economic models where the service sector is becoming increasingly significant. This trend aligns with global trends such as digitization, automation, and the growing importance of high-skilled services, particularly in information technology, finance, and education. It can be argued that both states may be undertaking economic reforms and attracting investments into the service sector to create new jobs and improve living standards. The growth of the service sector can result from targeted policies supporting self-employment, family businesses, startups, and innovative projects. The convergence of approximation trends for China (logarithmic) and Kazakhstan (polynomial) also suggests integration into the global economy, where services play a key role in international trade. Both countries can enhance their positions in the global services market by providing competitive and sought-after services internationally, utilizing the skills of emerging forms of employment. Thus, the identified economic context of the analyzed countries and the anticipated skills on the rise from 2023 to 2027 indicate that new forms of employment will correlate with supporting infrastructure projects, technological development, and the management of large-scale projects.

Discussion

This study examines the transformation of the labor market in China and Kazakhstan over the past two decades to identify new forms of employment. The analysis is framed within three hypotheses that have guided the formulation of the following research questions: (1) focusing on key aspects related to labor market trends in developing countries with different economic models, such as China and Kazakhstan; (2) monitoring employment vulnerability over the past two decades; (3) providing empirical justification for new forms of employment.

Initially, an analysis and comparison of the labor market for the years 2000 and 2022 were conducted, identifying changes in employment driven by technological innovations, thereby confirming hypothesis 1. The technologicalization of labor enhances productivity and optimizes work processes. The intellectualization of work, associated with the introduction of various technologies including artificial intelligence and process automation, is transforming the ways tasks are performed. This process is creating new job roles and specialties that require high qualifications and adaptation to evolving technologies. Technological innovations may increase demand for highly skilled workers while simultaneously reducing demand for low-skilled labor. The findings of the present study align with research by Alfes et al., (2022) and Wang et al., (2021), but contrast with those of Beane & Leonardi (2022) and Bue et al., (2022). Overall, researchers emphasize that future employment will depend on technological development and will encompass non-standard forms of work. These trends are interdependent: automation eliminates jobs that can be replaced by technology but also creates new forms of employment, such as in the micro-task sector. Shapiro & Mandelman (2021) underscore the impact of the labor market and employee outcomes, revealing a negative relationship between digital technologies and self-employment. The unevenness of the labor market is confirmed by Fu et al., (2021). The transformation of employment has led to flexibility and mobility in the workforce, shaping sectors of family workers and the self-employed within the economic structure, as supported by the findings of our study through monitoring employment vulnerability in the analyzed countries under hypothesis 2. The results underscore the importance of government policies adapting protective measures to non-standard forms of employment. Bailey (2022) discusses the dual labor market, while Ayoo (2022) and Brattia et al., (2021) examine its structure. In this context, the dual labor market (Bentolila et al., 2019) encompasses formal and informal employment, which are not isolated due to labor mobility as noted by Tomkiewicz (2018). He describes the contradictory nature of the labor market in countries with communist backgrounds, illustrating limited unemployment growth, a finding corroborated by the present study. Devan & Ernst (2020) argue that a flexible labor market is valuable if it leads to efficient resource allocation. Researchers found that in developing countries, employment flexibility depends on low-productivity work in the informal economy and non-standard forms of employment. This has negative consequences for workers and the economy. Individuals employed informally, on contract, or self-employed are typically socially unprotected. Concurrently, as employment in the informal sector grows, human resources are devalued, reducing consumer demand and constraining economic growth opportunities. Rong et al., (2020) highlight that Foreign Direct Investments (FDI) play a constructive role in increasing employment demand in developing countries. The concluding stage of this study involves the application of sequential analysis, comparing economic structures across key sectors (agriculture, industry, manufacturing, services) over the temporal range of 2000 and 2022 in the context of projected skills characteristic of the labor market until 2027, to identify new forms of employment. In this context, experts (World Economic Forum, 2023) categorize skills relevant to new forms of employment as including creative and analytical thinking, technological literacy, lifelong learning, resilience and flexibility, systems thinking, AI and big data proficiency, motivation and self-awareness, talent management, and customer service orientation. This reflects economic entities' pursuit of workforce flexibility and cost optimization and employees' desire for greater control over their work schedules and conditions. This study determines that new forms of employment will target family workers and the self-employed outside of social protection systems within the context of small and medium-sized enterprises, startups, and innovative projects. These forms of employment reflect a growing demand for flexibility and independence among workers and respond to the requirements of global labor markets. It is empirically substantiated that new forms of employment are shaped by changes in the economic structure, where the service sector holds a dominant share of the country's GDP. Devan & Ernst (2020) with Geng & He (2021) confirm the findings of this study, noting the growth in the utilization of non-standard forms of employment in developing countries. Drugova (2018) and Izmailova (2018) highlight the impact of technological progress on the labor market, stimulating new forms of employment such as freelancing and outsourcing, and suggest focusing on human capital preparation that will be in demand in the medium term. Thus, the results at the concluding stage confirm hypothesis 3, which asserts that the labor market of developing countries is undergoing significant changes under the influence of socio-economic and technological trends in the context of changes in economic structure. Support for new forms of employment and innovations will stimulate the development of modern sectors and job creation, contributing to economic growth. However, it is crucial to strike a balance between supporting new technological initiatives and maintaining social protection for all citizens. As noted by Alfes et al., (2022), developing countries are experiencing significant social, economic, and political transformations. Therefore, the labor market in these countries has become the subject of in-depth research in recent decades. One of the key features of the labor market in developing countries is its instability and uncertainty. New forms of employment are associated with the integration of technologies and innovations into economic sectors. They are based on reduced state control and new working time norms that do not entail legal and social constraints on continuous work. Active support for new forms of employment promotes job creation and the development of innovative sectors of the economy, as clearly evidenced by the experiences of China and Kazakhstan in the context of our study.

Conclusions

The theoretical contribution of this article lies in its detailed analysis of labor market trends in developing countries and their impact on the socio-economic nature of the labor process. The findings underscore the necessity of flexibility, adaptability, and innovation for all participants in the labor market. Special attention is devoted to the skills characteristic of the labor market up to 2027 as key aspects for successful adaptation in the context of global factors. The article also highlights the importance of social support mechanisms and the increasing role of responsibility in ensuring stability and equality in the labor market.

The main empirical conclusions of the study demonstrate that significant changes have occurred in the economic structure of developing countries over the past 20 years. The increase in the share of the employed population in the service sector and the diversification of the economy have resulted from the adoption of technologies and innovations. These changes have generated demand for new forms of employment in the service economy. It is forecasted that, under the influence of technologies, employment in traditional sectors will decrease, while it will increase in the service sector due to innovations and new operations. The effects of new forms of employment include labor market flexibility, reduced unemployment, and economic inclusion for family workers and the self-employed. However, it is important to consider negative aspects such as low levels of social protection, which make workers vulnerable to economic shocks, low productivity, and exacerbation of inequality and poverty.

Limitations of the study include its focus on changes in developing countries without considering specific conditions in other regions, as well as a limited statistical base on the informal economy, which reduces the reliability of the data obtained. These aspects necessitate further research and regulation to achieve a more comprehensive understanding of labor market dynamics.

The findings of this study can be applicable to governments of developing countries in developing and implementing labor policies aimed at improving employment conditions and social protection; educational institutions and training organizations in adapting education and training programs to meet the needs of the modern labor market, focusing on key skills; business communities and innovative structures in developing new approaches to economic development based on flexibility and innovation within contemporary market demands; international organizations in developing support programs and collaborating with developing countries in the field of labor. Thus, the study results can have a significant impact on various aspects of social, economic, and educational policies of developing countries, contributing to their sustainable development and adaptation to the modern challenges of the labor market.

Given the limitations of statistical data on the informal economy, future research could focus on developing methods for collecting and analyzing information on informal forms of employment. This would provide a more comprehensive understanding of actual economic activity and working conditions in developing countries.