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The Arab youth in the labor market: Mismeasured, misunderstood and mistreated
- 1. The Arab Youth in the Labor Market: Mismeasured, Misunderstood and Mistreated Zafiris Tzannatos SILATECH ZTzannatos@Silatech.org ERF 20th Annual Conference on Social Justice and Economic Development March 22-24, 2014 Cairo, Egypt
- 2. Regional Aggregates • How to define the Arab Region? – Iran accounts for 46% of the population in the “Middle East” (excluding the GCC) – Egypt accounts for 41% of North Africa (or is it in the Middle East?) – Nationals in Saudi Arabia account for 78% of the nationals in the GCC countries • Weighted or unweighted averages? There is a difference between – The average Arab – The average Arab country • Does it matter if 55% of the population is under the age of 25 years? – Do children matter for labor market outcomes? – And what does low labor force participation rates for the youth mean, if the youth are in schools?
- 3. Context 1980s : THE LOST DECADE – Continuing “Arab socialism”, “Paternalism”, Patriarchy” amidst low oil prices, fiscal stress, very low GDP growth and very high unemployment – Old social contract reached its limits 1990s-2000s: ARAB “RENAISSANCE” – Pro-market reforms adopted, GDP growth resumed, inflation was tamed, employment increased, unemployment decreased – Underlying philosophy: “Economic reforms first, political later” 2010/11: ARAB SPRING – Good economics but bad politics? – Or bad economics, too? 3
- 4. Following the reforms of the 1990s, economic growth accelerated (though it remained low compared to other regions and therefore per capita incomes increased only slowly ) GDP average annual rate of growth (%), 2000-2010 8.8 6.9 5.6 5.4 5.3 5.1 5.1 5.0 4.9 4.6 3.4 East Asia South Asia SSAC/SEE (non-EU) & CISSAEP GCC Middle EastMiddle East excl. GCCArab States North Africa LAC 4 “The Renaissance”
- 5. Irrespective of other criticisms of the economic reforms (esp. whether they created competitive markets or crony capitalism) Economic growth was NOT jobless Employment-output elasticity, 2000-2010 0.76 0.70 0.66 0.32 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 Yemen Syria MiddleEast Jordan Lebanon Algeria Egypt NorthAfrica Tunisia Morocco Libya Qatar SaudiArabia UAE GCC Oman Kuwait Bahrain Philippines Mongolia India Thailand Korearepublic Asia Malaysia Indonesia SriLanka VietNam China
- 6. Though everywhere the wage share declined over time, it collapsed in MENA, especially North Africa 6
- 7. Despite economic growth, only three Arab countries score more on the HDI compared to the level of their per capita income And Human Development Lagged behind Economic Development Growth 9 23 1 -3 -5 -10 -11 2 0 -5 -6 -8 -15 -21 -14 -19 -27 -34 -36 -50 -57 oPt Jordan MiddleEast Iraq Syria Lebanon Yemen Tunisia Libya Algeria Egypt NorthAfrica Morocco Sudan Bahrain SaudiArabia UAE GCC Qatar Oman Kuwait GNI per capita rank minus HDI rank in the Arab region, 2011 7
- 8. Initial protests were suppressed but kept coming back with added force
- 9. Citizens in Arab Countries Have Seen Slow Increases in Incomes and Have Had Low “Voice” CHN BLR AGO ARM KAZ KHM GEO MNGBTN INDNGA MOZVNM SLETJK MDAETHRWALAO LTUUKRRUS TCD ALB BGRTZA TTOMDV SVKPAN CPV ESTLKA BGD ROM LVASTPAFG PER POLTHA LBN GHAIDN UGA MAR KORARGSRBTMP HKGJOR TWNSUR URYDOMIRN SGPTURBIHZMB MUSBWAKGZ QAT MNEMLITUN ECU NAMBFACOL CZESAM CHLPHLMYS NPL SVNEGY HRVBRAMKDPAK COG ZAFPRY VCTGUY CRIOMN NER HUN ALG PNGMWIBOL SWE ZAR DJI LSOHND DMALBY MRT FINKENSEN LUX SYR AUS GRCATG LCASLB AUT GMB SLV ISR GRDVEN DEUSYCSWZ MLTCYP NZLIRQ NLD ISLBLZ CHEBRBNIC BEN CANVUT GBRBELGTM MEXBDI TON ESP KWT NORFJI USABHRKSA YEM FRAJPNGIN IRLCMR DNKGAB JAM KNAGNB PRT COM UAE MDG ITATGO BHSKIRHTICAF BRN You want to be here High: Income Growth Voice and Accountability -2 -1 0 1 2 3 4 5 6 7 8 9 10 -2 -1.5 -1 -.5 0 .5 1 1.5 2 Voice and Accountability-KKZ Index 2010 But not here Even here 9
- 10. On youth issues
- 11. In 2010 there were 23m youth more than 1991 Youth unemployment has been and still is the highest in the world 26% in 1991 25% in 2010 Why? Popular explanations include High fertility Too many people, especially youth (the “Bulge”) Bad quality education, training Employment protection legislation Attitudes of the youth and adults, culture, religion ….
- 12. 30 35 40 45 50 55 60 65 70 75 80 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 Life ExpectancyChildren per women Fertility rate: -1.3% per year Life expectancy: +0.6 per year How did “they” miss this? When was the youth “bulge”? Fertility Rates and Life Expectancy, Arab Region: 1950-2050 (excluding Comoros, Djibouti, Mauritania and Somalia) Source: United Nations Population Division; World Population Prospects: The 2012 Revision
- 13. Myth 1: Too many youth? Ratio of youth-to-adult population 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 1970 75 80 85 90 95 2000 05 10 15 20 25 30 35 40 45 2050 Youth/AdultPopulation(%) Middle East-GCC North Africa GCC World-MENA 13 ME NA GCC World
- 14. Myth 2: Too many unemployed youth? In 1990, there were more than 30% unemployed youth than adults In 2010 there were 5% more unemployed adults than youth 1990 2010 Ratio of youth-to-adult unemployment
- 15. Arab youth have the highest unemployment rate AND SO DO ADULTS Unemployment Under-employment (>30 hours involuntarily)
- 16. Unemployment in MENA is a gender issue (deficient demand?) Unemployment rates by sex, 2010 16
- 17. Some good news (it was always good news but was missed) Status of Youth 1991 2010 Change Total in million) 37,227 60,405 23,178 U-rate (U/(E+U)) 26% 25% -4% In school (S) 17% 32% 88% Employed (E) 32% 27% -14% Unemployed (U) 11% 9% -19% Inactive+NS 41% 32% -20% TOTAL 100% 100% (NS-NE)/Total 51% 41% -20%
- 18. Talking of Education … Education enrolments rose fast but what did the youth get out of it? Or was the quality of education bad because of the curriculum (and the public sector teachers)?
- 19. Global Returns to Schooling, 120 countries (Montenegro and Patrinos, 2013) 0 2 4 6 8 10 12 14 16 Middle East and North Africa South Asia Eastern/Central Europe Aging Lower middle income Rich economy Formalizing Conflict Youth buldge Small island High Income World High income East Asia/Pacific Latin America and Caribbean Low Income Upper middle income Resource rich Urbanizing Sub-Saharan Africa Agrarian
- 20. Global Returns to Schooling by Education Level 3.5 6.9 8.9 16.8 0 5 10 15 20 25 Middle East and North Africa Eastern/Central Europe High Income East Asia/Pacific World Latin America and Carobbean South Asia Sub-Saharan Africa Tertiary Secondary
- 21. Returns to Primary Schooling 4.8 8.3 9.3 9.4 9.6 11.0 13.4 0 2 4 6 8 10 12 14 High Income Eastern/Central Europe Latin America and Carobbean Middle East and North Africa South Asia East Asia/Pacific Sub-Saharan Africa
- 22. Employment creation in low productivity sectors Components of labor productivity growth 1999-2008 (World Bank WDR 2013) 22
- 23. In relation to income, agriculture remains a significant employer Annual growth 1995-2005 by country per capita income 23
- 24. Employment creation was not formal 0 5 10 15 20 25 30 35 2000 2001 2002 2003 2004 2005 2006 2007 2008 Changes in the rates of informal employment and unemployment Algeria, 2000-2008 Share of informal employment Unemployment rate 24 Family businesses in the region are collectively responsible for over 85 percent of non-oil GDP of the 22 Arab countries. http://www.zawya.com/story/Private_sector_role_in_creating_200m_jobs_for_Arabs_stressed-ZAWYA20131112052620/ - Nov 12 2013
- 25. 25 Relying on foreign workers is not confined only to the GCC countries Jordan: Employment Growth (number) 2000-2009
- 26. Technology Driven Job Polarization in EU 2000-2010 % changes in labor supply/skills upgrade (ISCED) and labor demand for skills/tasks (ISCO) (Maselli, 2012) -20 -10 0 10 20 30 40 50 Low-Skilled Medium-Skilled Hgh-Skilled Supply Demand
- 27. “Lack of Competition” Driven Job Polarization in MENA? -20 -10 0 10 20 30 40 50 Low-Skilled Medium-Skilled Hgh-Skilled Supply Demand
- 28. 28 Does it matter that employers in the MENA region “repeatedly and consistently” state in various surveys that there is a shortage of skills? (% of Firms Stating Skills Are a Major Constraint)
- 29. Skills is the least concern of Arab investors Probability of finding a given constraint to investment Business, investment and enterprise surveys, MENA 2000s 55 47 45 45 40 40 37 36 31 Tax Rates Cost of Finance Access to Finance Macro Instability Tax Adminstration Informality Access to Land Corruption Skills 29
- 30. If there were demand for skills, the firms would provide training: In MENA they do not 30
- 31. 31 The educated Arabs leave their countries: there is no demand for skills in their countries (High-skilled emigration rates to the OECD and GCC countries, 2000s in per cent Source: “Labor Migration from North Africa: Development Impact, Challenges, and Policy Options”, The World Bank, MENA Region, January 18, 2010.
- 32. And Arab employers do not miss the skilled % of employers reporting inadequately educated workforce • Highest skill shortages are reported in Germany, Switzerland and Austria (more than 12%) • 14% in the GCC • 9% in other oil-producing MENA economies • 5% in Tunisia and Egypt • 3% in Lebanon Source: World Economic Forum 2012 32
- 33. Biggest schooling failure: The education of managers! % of managers who have not completed secondary education 33
- 34. Prospects 34
- 35. Mismeasured in the future The World Bank (WDR 2013) estimates globally “600m jobs needed over the next 15 years to keep current employment rates” The Arabs are 5% of the world population, so would 30m or even 60m jobs (2m to 4m jobs/year) not be enough?
- 36. Quoted in the WEF 2012 report: “Addressing the 100 Million Youth Challenge” • “The Arab world must create up to 80 million new jobs by 2020” 10m/year • “The Arab world faces the daunting task of creating 80 million jobs over the next decade to keep pace with population growth” 8m/year • “About the 100 million jobs needed by 2020” 12.5m/year • “By 2020, just to keep unemployment rates at present levels 80 million new jobs will have to be created. To actually bring unemployment rates down to more sustainable levels, a figure of 100 million new jobs is more appropriate” 10-12.5m/year
- 37. 17 157 68 117 38 233 82 130 10 38 6 Children (<15) Youth (15-24) Elderly (65+)Working Age (25-64) Population in 2010 Labor force increasePopulation in 2030 10% 11% 16%62% Share in population growth (124m) 10% 71% 19% Population and Labor Force Growth 2012-2030, 18 Arab Countries (excl. Comoros, Djibouti, Mauritania, Somalia) Share in labor force Growth (54m) New jobs required: 54m Unemployed in 2013: 13m Total for 6% U-rate: 60m
- 38. Low future economic growth, almost half of what would be required to absorb new entrants and reduce unemployment Projected annual GDP growth (%) till 2015 38
- 40. All in all … The problem is with the economy and the adults and the adults control the economy and the youth
- 41. Thank you