Download - Session 1 imed drine & james thurlow
Creating Jobs for the Youth Imed Drine and James Thurlow World Institute for Development Economics Research, United Nations
University (UNU-WIDER)
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There are many similarities across MENA countries
• Youth unemployment rates are extremely high
• Unlike most regions, unemployment rates are highest amongst more educated youth
Youth and adult unemployment Youth unemployment by education
0%
5%
10%
15%
20%
25%
30%
35%
Alg
eria
Egyp
t
Iran
Jord
an
Mo
rocc
o
Syri
a
Tun
isia
Turk
ey
Un
em
plo
yme
nt
rate
Youth
Adult
0%
10%
20%
30%
40%
50%
60%
Jord
an
Egyp
t
Tun
isia
Un
em
plo
yme
nt
rate
Basic education
Tertiary
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But there are also many differences
• Youth unemployment rates are much higher for women in some countries, but not in others
• Pressures to find a job also vary across countries
Youth unemployment by gender Youth willingness to work in next 7 days
0%
10%
20%
30%
40%
50%
60%
Egyp
t
Jord
an
Mo
roo
co
Tun
isia
Un
emp
loym
ent
rate
Male
Female
0%
20%
40%
60%
80%
100%
Jord
an
Egyp
t
Tun
isia
Shar
e o
f u
ne
mp
loye
d Male
Female
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MENA has region-wide problems, but needs country-specific solutions Case study: Youth unemployment in Tunisia
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High and persistent youth unemployment
• Most unemployed youth are actually less educated
• But unemployment rates rise with education levels
• So providing more schooling may not solve the problem
• Q1: Why don’t wages fall to reduce unemployment?
40%
53%
7% Primary
Secondary
Tertiary
Share of unemployed youth by education
Unemployment rates
0%
10%
20%
30%
40%
50%
60%
Ad
ult
You
th
Pri
mar
ly
Seca
nd
ary
Tert
iary
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Wide regional variation in unemployment rates
• Tunisia has a coastal “core” and an inland “periphery”
• Youth unemployment is much higher in the periphery
• Male-female differentials
narrow towards the core
• Average monthly wages
are much higher in the core for similarly-educated workers
• Q2: Why don’t young people
(women) migrate to the core?
Unemployment rates (%)
23%
35% 28%
44%
0%
10%
20%
30%
40%
50%
Core Periphery
Male Female
6
458 372
0
200
400
600
Core Periphery
Average monthly wage in private sector (3.5 years after high school; dinar)
• There are vacant jobs available
• But youth’s “reservation wages” may be high relative to their skills
• Demand-side explanation:
– Firms value experience and
skills more than education
Evidence: Fewer adults have
completed primary school and
yet they have less unemployment
0
50
100
150
200
250
2004 05 06 07 08 09 10
Vacancies (1000s)
Hiring (1000s)
Q1: Why don’t wages fall?
Primary
Secondary
Tertiary
Education levels of the employed
Adults
Youth
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Vacant jobs in major urban centers
• Supply-side explanation:
– We suspect that educated youth won’t accept lower wages
– They overestimate the value of schooling
because their “reference wage” has been
biased by the public sector
Evidence: Wages are higher in the
public sector at similar education levels
– Families provide a strong fallback position
Evidence: 85% of unemployed youth rely on their family for their incomes and housing
Q1: Why don’t wages fall?
8
625
461 518
396
0
100
200
300
400
500
600
700
Public Sector Private Sector
Total "Techniciens superieurs"
Monthly Net Wages (dinar)
Q2: Why don’t young people move to the core?
• The usual explanations don’t apply to Tunisia:
– No language barriers or ethnic discrimination
– No lack of jobs in the core coastal region
– Education levels of youth are not lower in the periphery
0%
20%
40%
60%
80%
100%
Male Female Male Female
Shar
e o
f u
ne
mp
loye
d
Tertiary
Secondary
Primary
Negligible education differences between regions
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Q2: Why don’t young people move to the core?
• Regional unemployment gaps are largest for women
– Means that women’s migration is particularly constrained
– May be due to cultural preferences
• But unemployment gaps also exist for men
– A lack of job information or social networks
Evidence: 80% of the youth who find a job rely on personnel effort (“connections”) and not official channels
– High migration costs and family fallback reduces mobility
Evidence: Although poorer, periphery households still support 87% of unemployed youth (higher than in core)
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Tunisia needs youth-focused labor market policies
• Reservation wage problem
– Current policy: US$100 a month to university graduates
– Better policy: wage subsidy for all young formal employees
Lowers effective wage demands, reduces the “cost of inexperience”, and incentivizes on-the-job training
• Regional mobility problem
– Current strategy: Public sector investment and jobs in the periphery (this is costly and unsustainable)
– Better strategy: Subsidize youth mobility (e.g., reduce migration costs by providing better information systems, housing and transport for young job seekers)
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In the long-run, MENA needs a new growth strategy
• Youth unemployment is a major problem for MENA
• But adult unemployment is also too high
• So while youth-focused labor market policies are crucial, they will not be enough to address MENA’s long-term challenges
• Arab Spring offers us a good opportunity to think about new development models that could promote global competitiveness and labor-intensive growth
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