more jobs, better jobs: a priority for egypt · unemployment has fallen over time… more jobs,...

More Jobs, Better Jobs: A Priority for Egypt

Tara Vishwanath, Lead Economist PSIA Conference June 1, 2016

Despite economic growth, steadily declining job

quality

More Jobs, Better Jobs: A Priority for Egypt 2

Two of the three survey years coincided with healthy GDP growth

Declining job quality has been a pre-existing condition; evident since 1998

Since then, Egyptians have become even more pessimistic: 42% think the job situation will take more than 5 years to recover, 11% think it will never improve (Gallup, 2013)

0

2

4

6

1998 2000 2002 2004 2006 2008 2010 2012

Growth rate of Real GDP per capita

Arabspring

Round 11998

Round 22006

Round 32012

In this report and presentation:


Document the evolution of the labor market: Lower job quality accompanied by increasing exclusion along multiple dimensions

Why?

Policy reforms needed

Context is going to make reform difficult

Tradeoff between political expediency and difficult economic reforms

Unemployment has fallen over time…


0%

10%

20%

1998 2006 2012

Unemployment rateLabor force participants age 15-64

Informal

Irregular

0%

50%

100%

1998 2006 2012

Informal and irregular job shareWorkers age 15-64

But informal has become normal


0%

50%

100%

Manufacturing Construction Wholesale andRetail

Transportationand Storage

ProfessionalServices

PublicAdministration

Social Services Other Services

Formality rate by industry

0%

5%

10%

Manufacturing Construction Wholesale andRetail

Transportationand Storage

ProfessionalServices

PublicAdministration

Social Services Other Services

Employment by industry as fraction of working-age population

1998 2006 2012

Deformalization has occurred across the board

Having a formal employer is no guarantee of formal

employment


Job type

Formal job: either social insurance or written contract

Employer type

Formal firm: both license and registration

WorkerWage

workers

Informal firm

59%

Informal job

91%

Formal job

9%

Formal firm

41%

Informal job

48%

Formal job

52%

WHY? Public sector employment fell and the private

sector filled the gap with informal jobs


13% 13% 13%

34%27% 27%

31%33%

40%

11% 18%11%

12% 9% 9%

1998 2006 2012

Job statusLabor force participants age 15-64

Formal private Public Informal private Farm Unemployed

71

30

22 21

10 10 106

2 1 1

Re

gis

tra

tio

ns

pe

r 10

0,0

00

po

pu

lati

on

Formal sector firm entry rate2004-2009

80 country average: 24

Employment is concentrated in small, young firms

that do not grow


0

10

20

0 5 10 15 20 25 30 35 40+

Em

plo

ym

en

t (1

fo

r a

ge

0-4

)

Firm age (years)

Employment growth with ageAll nonfarm sectors

Turkey

Egypt

39%

10%

5%3%

12%

4%3% 3%

8%

4%3%

7%

0-4 5-19 20-199 200+

Firm size (employees)

Share of EmploymentBy Establishment Size and Age, Egypt

Young (0-9 years)

Midaged (10-19 years)

Old (20+ years)

Private sector growth has been inhibited by the lack

of competitive pressure


A regulatory regime that stifles the entry of new firms

Even “good” regulations are implemented inconsistently

Firms are hesitant to grow in an uncertain business environment

Favored firms may experience more lax regulation

The result?

Misallocation of capital

Stagnant firm dynamics

Slower job creation


Privileged access to land, credit, and other inputs Politically-connected firms accounted for only 11 percent of employment

but received 92 percent of loans among similarly large firms.

45 percent of all connected establishments operate in energy-intensive industries, compared to only 8 percent of all establishments

Protection from competition 80 percent of all politically connected firms in manufacturing/mining sell

products that are protected by technical non-tariff import barriers.

So politically connected firms: Have incentives to use nonlabor inputs

Face little competitive pressure to innovate

Firms with political connections have an unfair

advantage


0

2

4

6

8

Mil

lio

ns

Job location by type2012

Formal private Public Informal private & farm

Metropolitan Lower Upper

The formal private sector is concentrated in

metropolitan Egypt

Population distribution2012

25%Metropolitan

42%Lower

33%Upper

Three dimensions of exclusion: space, age, and

gender


Egyptians further from core metropolitan areas: Lower formality, lower wages

Young Egyptians : High unemployment, lower formality

Women: High unemployment, Lower labor force participation

Metropolitan Egypt has better access to formal jobs

and a substantial wage premium


0%

50%

100%

1998 2006 2012

Formal employment rate,Labor force participants aged 15-64


0

1000

2000

1998 2006 2012

Real monthly wages (LE 2012)Male wage-workers aged 15-64


Employment is an age issue, but informality is a

generational problem


0%

50%

100%

15 20 25 30 35 40 45 50 55 60

Age

Male unemployment rate by age

1998 2006 2012

0%

50%

100%

15 20 25 30 35 40 45 50 55 60

Age

Male formal employment rate by age

1998 2006 2012

Young Egyptians with secondary education have

become the most vulnerable


45%

27%

18% 19%15%

17%13%

68%

45%49%

54%

44% 46%

53%

1955-1959 1960-1964 1965-1969 1970-1974 1975-1979 1980-1984 1985-1989

Birth cohort

High school graduates (at age 20)

College graduates (at age 24)

Formal employment rate post-graduation

Educated women have been dropping out of the labor

force


50%

38%

31%

19%22% 20%

12%

63% 64%

57%54%

48%

39%

33%

1955-1959 1960-1964 1965-1969 1970-1974 1975-1979 1980-1984 1985-1989

Birth cohort

High school graduates (at age 20)

College graduates (at age 24)

Female labor force participation rate post-graduation

Why? In the absence of public sector jobs, few

options for women


Fewer than 2% of women aged 15-64 work in the formal private sector.

40%

17%

2%

22%

64%

48%

35%33%

Illiterate Below secondary Secondary Post-secondary

Gender gap in hourly wages

Public Formal private

Women appear willing to work in the private sector, but … Lower wages Mobility constraints due

to social norms and perceived risks

Lack of necessary personal connections

18

Create a dynamic and growing private sector

Improve job quality without sacrificing growth

Address inequalities in the labor market

Policies in the short-, medium-, and long-run must be properly sequenced

More Jobs, Better Jobs: A Priority for Egypt

Policy priorities

19More Jobs, Better Jobs: A Priority for Egypt

Institutionalize a competitive environment and level the playing field

Reform energy subsidies to remove the

implicit tax on labor

Reform labor laws to ease

hiring and firing and promote performance

based hiring, pay and promotion

Ease bankruptcy,

liquidation and restructuring

procedures

Equal and fair access to land,

credit and capital

A comprehensive competition policy with a

predominance of rule over

discretion

Creating a dynamic and growing private sector

A series of experiments in Jordan also highlights

similar demand side issues

Title of Presentation 20

Vouchers – Wage Subsidies

150 JD ($210) subsidies

Training – Soft Skills

40 hours of soft skill training

Information – Psychometrics

Soft skills, IQ, language proficiency, personality

Matching

Match employers and job seekers

Vouchers announced

Last date for voucher use

Jan 2010Feb 2010Mar 2010Apr 2010May 2010Jun 2010Jul 2010

Aug 2010Sep 2010Oct 2010Nov 2010Dec 2010Jan 2011Feb 2011Mar 2011Apr 2011May 2011Jun 2011Jul 2011

Aug 2011Sep 2011Oct 2011Nov 2011Dec 2011Jan 2012Feb 2012Mar 2012Apr 2012May 2012Jun 2012Jul 2012

Aug 2012Sep 2012Oct 2012Nov 2012Dec 2012

0 .1 .2 .3 .4Treatment Effect on Employment

Wage Subsidies – Temporary Effect

Do youth think they are too good for the jobs?


-Declined 28% of match opportunities

-Declined or quickly quit 83% of job offers

-Main reason for rejecting opportunity

-The graduate was not “interested in the company or type of job”

-Only 8% rejected an offer because “the wage was too low”

-Vast majority of youth are willing to work in a government job for less pay!

-Most will not take jobs as customer service, Sales, Telemarketing etc

-Most are liberal arts majors

Two directions for policy


Firm intervention

Spur private sector development

Generate more types of jobs that are attractive to graduates

Change attitude towards non-prestigious jobs

Make public sector jobs more comparable to private sector jobs• Work hours, office environment, accountability

- Larger role of universities in promoting different career options

- job fairs, internship programs, career development offices

Thank you!

more jobs, better jobs: a priority for egypt · unemployment has fallen over time… more jobs,...

Documents