Why Is Self-Employment Declining in Georgia—and What It Means for the Labor Market

In the first quarter of 2025, the number of self-employed individuals in Georgia dropped by 13.5 thousand, totaling 434.7 thousand—representing a 3% decrease compared to the same period last year (Geostat, 2025). During the same time, the number of hired employees increased by only 5.3 thousand. As a result, the share of hired workers among all employed persons rose to 68.8%—the highest level in recent years.

These changes can be interpreted in different ways. On one hand, they may indicate the beginning of labor market formalization, where people are leaving informal self-employment for registered, more stable jobs. On the other hand, the decline could also point to a contraction in micro-businesses or small-scale entrepreneurs being squeezed out of the market due to rising costs or falling demand.

Several concrete factors may be at play. In some sectors, particularly agriculture and services, demand may have weakened. Additionally, administrative burdens—such as new regulations, tax requirements, or complex reporting obligations—may be making it harder for small actors to stay in business.

Notably, the labor force participation rate declined by 0.2 percentage points in both urban and rural areas in Q1 2025. This suggests that the labor market is not attracting more people in either type of settlement. However, in rural areas, this decrease was accompanied by a drop in unemployment, which on paper appears as a positive trend.

In cities, by contrast, the decrease in participation came alongside a rise in unemployment, potentially indicating growing competition for jobs or a shrinking number of available positions. At this stage, these indicators raise more questions than they answer.

If the trend continues, Georgia may be heading toward a structural shift in its labor market—where, for the first time, self-employment no longer dominates overall employment. However, to interpret this shift positively, it is crucial to determine whether people leaving self-employment are moving into more stable, better-protected jobs—or simply leaving the labor force altogether.