youth employment in the mena region global youth conference 2012 caroline freund, chief economist...
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YOUTH EMPLOYMENT IN THE MENA REGION
GLOBAL YOUTH CONFERENCE 2012
Caroline Freund, Chief Economist MENA
MENA has the highest youth unemployment rates and the lowest participation in the world
Source: KILMnet (2008)
East
Asia
Sout
h Asia
Sub-
Saha
ran
Africa
Wor
ld
OECD &
EU
LAC
S.E.
Asia
& P
acifi
c
Centra
l/SE
Euro
pe &
CIS
Middl
e Ea
st
North
Afri
ca0
5
10
15
20
25
30
9.1 10.1 11.3 12.3 13.115.2 16
18.5 18.8
24.4
Unemployment Rate (15-24)
Middle East
North Africa
South Asia
ECA
OECD
LAC
S.E. Asia & Pacific
SS. Africa
East Asia
0.0 20.0 40.0 60.0 80.0
YouthWomen
Labor Force Participation
In some countries, the more educated have higher unemployment rates, in others the less educated do
Alge
ria
Egyp
t
Jord
an
Leba
non
Mor
occo
Syria
Tuni
sia
WB&
GS0
5
10
15
20
25
30
35Unemployment rate of persons with primary level or less education (%)
Unemployment rate of persons with secondary level education (%)
Unemployment rate of persons with tertiary level education (%)
SOURCE: Algeria, Morocco and WBG (ILO-KILM, 2009); Egypt, Jordan, Lebanon, Syria and Tunisia, ETF 2006.
And youth are disproportionately represented in in the informal sector (with very low levels of productivity)
0
10
20
30
40
50
60
20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59
% In
form
al E
mpl
oym
ent
Age Group
Informality Rates by AgeAmong University Graduates in
Egypt
Source: World Bank using the 1998/2006 Egypt LMPS survey
1998
2006
In part, it is demographics
Growth is a big factor
00.10.20.30.40.50.60.70.80.9
1
-2
-1
0
1
2
3
4
5
6
7
8
9
1990-99
2000-08
0
2
4
6
8
10
12
GDP growth 2000s Unemployment, total
Perc
ent
MENA China
Growth in MENA has been weak Employment elasticities are not low
Demand-side factors: Low private sector job growth
7
Low Investments in the Private Sector
911
13
18 19 19 20 20 21 22 23 2326
32
38
0
5
10
15
20
25
30
35
40
Perc
ent
Private Investment as % of GDP
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
%Fi
rms
Iden
tifyi
ng C
onst
rain
t as
Maj
or o
r Sev
ere
Demand-side factors: Business Climate
Demand-side factors: Labor Regulations
Firing regulations in MENA remain quite strict and firing costs remain high, creating disincentives to hiring new workers.
Labor taxes and mandatory contributions are the highest in the world, which increases the cost of labor, thereby reducing demand for new workers
As a result, high incentives for firms to have informal workers
GCC
South Asia
East Asia & Pacific
Sub-Saharan Africa
Latin America & Caribbean
Eastern Europe & Central Asia
MENA (Non-GCC)
0.0 5.0 10.0 15.0 20.0 25.0 30.0
Labor Taxes and Contributions as % of Commercial Profits
GCC
East Asia & Pacific
OECD
Latin America & Caribbean
Eastern Europe & Central Asia
Sub-Saharan Africa
South Asia
MENA (Non-GCC)
0.0 10.0 20.0 30.0 40.0 50.0
4.0
19.6
22.6
24.1
25.9
39.8
41.3
43.3
Difficulty of redundancy index (0-100)
Source: Doing Business (2010)
Supply-side factors: Wrong skills
Skills mismatches: enterprise surveys indicate that firms identify worker skills among their top five constraints to business climate in the region, especially in North Africa.
6
13
14
24
25.5
27
35.7
25
31
33
36
37
38
50
0 10 20 30 40 50 60
East Asia and Pacific
South Asia
Europe and Central Asia
Latin America and the Caribean
Africa
Middle East and North Africa
AMCs*
West Bank Gaza 2006
Morocco 2007
Jordan 2006
Syria 2003
Algeria 2007
Lebanon 2006
Egypt 2008
Share of Firms Indicating Labor Skill Level as a Major Constraint to Business Creation
Source: www.enterprisesurveys.orgAMCs: Arab Mediterranean Countries
Poor job matching mechanisms that don’t “clear the market”
• Inefficient job search mechanisms. The poor, especially use informal search mechanisms. • Inefficient employee search processes. Employers use personal relationships to find new employees
How workers (don’t) find jobs in Lebanon
Misaligned expectations
The civil service remains large for MNA countries’ levels of development.
Since public sector jobs are still associated with relatively generous benefits, many educated individuals (mainly women) still queue for public sector jobs.
And family social support structures are such that youth can spend prolonged periods unemployed.
Lebanon Syria Egypt Iraq0
10
20
30
40
13.5
26.830.0
36.9% Employment in the Public Sector
1. Promote private sector employment creation and income support (demand)
• Address private sector development, including broader regulatory reform, competition policy, infrastructure bottlenecks• Complementary programs to promote employment and provide income support (regional incentives, wage subsidies, entrepreneurship programs, public works)
2. Support regulatory reforms and capacity building (demand)• Make it easier for firms to hire people• Protect workers in period of transition (unemployment insurance)• Ensure sure labor costs/taxes are not high vis a vis productivity • Increase capacity of labor offices and labor ministries to provide
services
3. Address inadequate skills (supply)
• Train and re-train workers• Make training demand-driven
Bank Strategy: 4 pillars to address labor constraints
4. Help people get jobs faster (job intermediation) • Modernize public agencies that help workers and firms get together• Foster coordination with private intermediation agencies• Prepare /help individuals to obtain employment abroad
Short-run measures: Employment Response Packages
Employment Response Packages include a mix of programs/policies for employment generation, temporary employment, and income protection Programs targeted to Skilled workers:
Subsidized wages and/or social security contributions, training, labor intermediation programs, international placement, business promotion (Tunisia, Egypt, Jordan)
Programs targeted to Unskilled workers: Public works, regional development programs, entrepreneurship programs/micro-credits, training (Rural Tunisia, Yemen)
Medium-run measures: More Dynamic Labor Markets and Stronger Labor Market Institutions to accompany Private Sector Development
Reforming labor and business regulation, firm entry and exit, simple uniform rules, level playing field, promoting private intermediation, revising social security systems (including tax wedges, social contributions and pensions), liberalizing professions, and reforming the social protection system to protect workers rather than jobs (more social support, unemployment insurance, and active measures to assist workers during periods of transition).
Modernizing labor intermediation and public employment services through investment operations (and fee for service) with Labor Ministries and Labor Offices in order to assess and monitor ongoing employment programs, reform ALMPs systems, and develop/design labor market information systems.
Challenges
Political Economy Politically sensitive reforms are needed (labor
regulation, social security, and labor taxes) Reluctance of government to engage in
projects in the social sectors Access to Data
Access to micro-data for policy design in MENA is restricted (strong confidentiality policies)
Most labor market programs in MNA are not evaluated