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