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Youth Employment in the MENA Region Global Youth conference 2012

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. Labor Force Participation. Source: KILMnet (2008).

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Youth Employment in the MENA Region Global Youth conference 2012

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  1. YouthEmployment in the MENA RegionGlobal Youthconference 2012 CarolineFreund, ChiefEconomist MENA

  2. MENA has thehighestyouthunemploymentrates and thelowestparticipation in theworld Labor Force Participation Source: KILMnet (2008)

  3. In somecountries, the more educatedhavehigherunemploymentrates, in othersthelesseducated do SOURCE: Algeria, Morocco and WBG (ILO-KILM, 2009); Egypt, Jordan, Lebanon, Syria and Tunisia, ETF 2006.

  4. And youth are disproportionatelyrepresented in inthe informal sector (withverylowlevels of productivity) Informality Rates by Age Among University Graduates in Egypt 2006 1998 Source: World Bank using the 1998/2006 Egypt LMPS survey

  5. In part, it is demographics

  6. Growth is a big factor Growth in MENA has been weak Employment elasticities are not low

  7. Demand-sidefactors: Lowprivate sector jobgrowth LowInvestments in thePrivate Sector Private Investment as % of GDP

  8. Demand-sidefactors: Business Climate

  9. Demand-sidefactors: 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 Source: Doing Business (2010)

  10. Supply-sidefactors: Wrongskills Share of Firms Indicating Labor Skill Level as a Major Constraint to Business Creation • Skillsmismatches: enterprise surveys indicate that firms identify worker skills among their top five constraints to business climate in the region, especially in North Africa. Source: www.enterprisesurveys.org AMCs: Arab Mediterranean Countries

  11. Poorjobmatchingmechanismsthatdon’t “clearthemarket” How workers (don’t) find jobs in Lebanon • Inefficientjobsearchmechanisms. Thepoor, especially use informal searchmechanisms. • Inefficientemployeesearchprocesses. Employers use personal relationshipstofind new employees

  12. Misalignedexpectations • 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.

  13. Bank Strategy: 4 pillars to address labor constraints • 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)

  14. 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)

  15. 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.

  16. Challenges • PoliticalEconomy • 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 forpolicydesign in MENA isrestricted (strongconfidentialitypolicies) • Most labor marketprograms in MNA are notevaluated

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