DRD DISCUSSION PAPER

EVOLUTION OF THE TUNISIAN LABOR MARKET

by

Christian Morrisson O.E .. C .. D ..

Development Research Department Economics and Research Staff

World Bank

Report No~ DRD279

The World Bank does not accept responsibility for the views expressed herein which are those of the author(s) and should not be attributed to the World Bank or to its affiliated organizations. The findings, interpretations, and conclusions are the results of research supported by the Bank; they ,do not ( necessarily represent official policy of the Sank. The designations employed, the presentation of material, and any maps used in this document are solely for the convenience of the reader and do not imply the expression of any opinion whatsoever on the part of the World Bank or its affiliates concerning c4fhe~lggal status of any country, territatzy, city, area, or o£ its authorities, or concerning the delimitations of its boundaries, or national affiliation.

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Evolution of the Tunisian Labor Market

Abstract

Between 1966 and 1980 Tunisia's labor force grew by less than working-age population. The decline in labor force participation was due partly to an expansion of the educational system, and partly to a decline in the participation rates of older men.

Employment expanded at the same rate as did the labor force, and unemployment rates remained constant. This was obtained by letting wages lag behind productivity. Also, some of the expansion in employment is misleading, because the working hours of women fell.

The unique structural feature of the Tunisian labor force is the increase in industrial employment, which has occured at the expense of services as well as agriculture. This is a result of (i) a decline in the share of agricultural output in GNP plus a rise in labor's productivity in this sector, both of which released workers from agriculture; (ii) a rise in the share of industrial output plus a decline in its productivity, both of which attracted labor into manufacturing; and (iii) the constant share of services' output in GNP combined with a moderate rise in productivity in the sector, which reduced its share of employment; (iv) the changes in the product mix also increased the share of industry in employment at the expense of services, because the labor-output ratio was initially higher in the former than in the latter.

Wages in agriculture rose relative to the other sectors, reflecting the enforcement of an above equilibrium minimum wage and producing a surplus agricultural labor force. Urban wage differentials by skill declined, due to the rapid growth of education. Again, an above-equilibrium minimum wage led to unskilled unemployment. Wage increases in the public sector exceeded those in the private sector.

I. MAIN EVOLUTION TRENDS IN EMPLOYMENT

The employment trends shown in Table 1.1 are based on the 1966 and

1975 Censuses, and the 1980 Population and Employment Survey. The results

should be interpreted- carefully because the definitions of employment have

changed. In 1980, the effectively employed population (1,329,000) was

differentiated from the marginally employed (248,000). The latter category,

which consists mainly of women, is in principle intended to cover those

persons who do not declare themselves as employed, but who in fact work for

more than 15 hours a week. This is the case for many wives of agricultural

workers, family helps or part-time home laborers. In the 1966 Census,

however, a part of this group was not counted as being employed a fact that

helps to explain the exceptional increases in female employment in agriculture

) ( ) 1/ (from 8,000 to 113,000 and in services from 21,900 to 57,000 ·- This

methodological difference means that employment growth between 1966 and 1980

(wrongly) appears to be about 50%. In fact, however, if we assume that

100,000 marginal jobs were omitted in 1966 (80,000 ~/ in agriculture and

20,000 in the service sector~/), the corrected growth rate comes down to 37%,

closely 1~atching the rate of population growth: between 1966 and 1980, the

1/ The abnormality of these data is underlined by the fact that the numbers of male agricultural workers were the same in the two years, while the number of male service workers rose only slightly (by 12%).

2/ This corrected figure does not seem excessive, since the 1966 Census suggests that there could in effect be 250,000 women engaged in agriculture who were not included.

3/ This corresponds to the alternative figures for female workers in agriculture and the service sector: 88,000 to 113,000 and 42,000 to 57,000.

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Tunisian population rose by 40%.

The structure of employment has changed profoundly, however. The

primary sector's share has dropped considerably, from 48% to 38%, and so has

that of the tertiary sector, from 37% to 30%~~ While the evolution of the

primary sector is normal, the drop in the tertiary sector's share does not

correspond to the tendency observed in many developing countries.

Furthermore, this drop occurred despite very rapid expansion in public

services, notably in education and health. Within the secondary sector {which

includes manufacturing, mining, construction, public utilities) employment in

manufacturing industries has tripled, accounting for one-half of all new

secondary sector jobs ('\-lith construction and public works accounting for c-..

quarter of this growth).

Even after correcting the downward biased figure for female employ-

ment in 1966, this component still grew more rapidly male employment (110%

compared to ~5%). This growth is real and can be observed in the figures for

manufacturing, where women accounted for over 122,000 out of 196,000 new jobs;

since these jobs are filled by wage-earners, there can be no ambiguity as to

the status of the women (Table 1.1). The proportion of women in manufacturing

rose from 14 percent in 1966 to 22 percent in 1980.

As mentioned above, a substantial proportion of employed,~omen are

family helps. Male workers with the same status also exist, but represent

only a small minority of working males. The distribution of workers by status

(Table 1.2) confirms this, showing that only 3.1% of men in 1966 and 8.2% in

~/ This decrease is somewhat over-estimated since repair activities have been successively included with the service sector and in industry.

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1980 were family helps, compared to 65% of women in 1980.~/ The distribution

between employees and self-employed is relatively stable; even in the

corrected figures, the percentages of employees and self-employed have.changed

very little, although the former's figures have fallen slightly.(from 57% to

52%). The most important change is the increase in the percentage of family

helps and apprentices from 12%~/ to 23%. This can be interpreted as an

indication of the difficulty the modern manufacturing sector ·has in creating

jobs to satisfy demand - an increasing number of jdb seekers, in particular

young people and women who cannot find employment are prepared to accept work

as apprentices or family helps. This development may als~ reflect a change in

the census methodology, however: the number of apprentices in 1966 (3,000)

seems unrealistic. It is likely that this estimate did not take into ~ccount

the thousands of apprentices working in the non-formal sector - a type of

employment that was included in the 1980 statistics.

While the breakdown of the active population by employment status has

altered little, that by educational level has changed considerably (Table

1.3). In 1966 workers with secondary or higher education constituted 7% of

total employment, while in 1975 the corresponding figures was 16%. No direct

statistics are available on the educational level of the active population in

1980, but it is known that almost 400,000 people between 19 and 60 graduated

from post-primary schools. With an employment ratio of 80% this would mean

about 20% of the active population. In twenty years therefore the percentage

of the active population having gone beyond the primary level increased from 7

~/ 62% in 1966 if 100,000 women are added.

~/ I.e., 134,000 family helps (corrected data) + 3,000 apprentices in 1966.

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to 20 percent. The increase in workers having completed prim!lry ~ducation is

also spectacular - from 14 to 35 percent. The result is that the percentage

of the active population having completed primary, secondary or higher educa-

tion increased from 20 to 55 percent in 20 years. It should be recalled that

this increase benefited mainly the non-agricultural sector where the

percentage of those employed with at least a primary education was 73% for

1980 as against 34% in 196o.II In this sector the breakdown by educational

level is now closer to that in industrialized countries (in particular those

of Southern Europe) than that of the developing countries.

The educational level of the active population varies greatly by

region. The region with the lowest percentage for secondary or higher

education is the North-West (8.2%) and the highest percentage is found in the

Tunis region (27.2%). While the variation largely reflects the educational

profiles of the agricultural and non-agricultural sectors, the North-West

still lags behind other predominantly agricultural areas (such as the Centre-

East where the comparable percentage is 14%).

Data on the regional distribution of the active population show that

the employment share of regions where the labor force is more educated

increased between 1966 and 1980 at the expense of other regions. The combined

share of the Tunis, Centre-East and Centre-West regions increased from 42% to

51.5%, while that for the South, Sfax, North-East and North-West fell from 58%

in 1966 to 48.5%.

II Assuming that in 1960, a m1n1mum of 27,000 workers in agriculture completed primary education (according to the 1966 Census there were 31 1 000 in that year compared to 140,000 in 1980 (according to the 1975 Census, this group numbered 121,000 in 1975).

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The three main sources - the 1966 and 1975 Censuses and the 1980

employment survey- indicate unemployment rates of 15.1, 15.7 and 12%

respectively. But as the 1980 survey used a narrower definition of

employment~/ it cannot be concluded that unemployment fell between 1975 and

1980. Unemployment mostly affects men (who comprise 85 to 90% of the jobless)

and people with a low educational level. In 1975, 85% of the unemployed had

not been schooled beyond primary level (and almost half had had no schooling

at all). Young people were particularly ha~d hit - in 1966, 40% of the male

unemployed were under 25 and tha corresponding figure for 1975-80 had risen to

62%.2/

The preponderance of male unemployment is an indication that the

majority of women are not considered as candidate for employment when the head

of the family is a farmer or a small trader even if they are inactive apart

from the few weeks when their assistance is necessary. This situation is

connected with the lack of schooling for girls - in 1980, 50% of women between

20 and 29 were illiterate as against 15% of the men. These figures are even

higher in rural areas, where neither the family nor the person concerned

considers that an illiterate woman with no chance of finding employment

qualifies as unemployed.

8/ According to the 1975 Census, individuals were considered as unemployed if they had not been at work on the day of the Census, whereas in 1980, the survey only considered as unemployed those persons who had not been at work during the week prior to the survey.

9/ The phenomenon is still more accentuated for women: 65% of the female unemployed in 1966, an~ 82% in 1975-80, were under 25.

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In 1980 only 24% of unemployed males came from the agricultural

sector, while 67% were in construction and services where the activities of

the non-formal sector are still very important.

The constancy of the percentage of unemployment in the labor force is

surprising, given that the working age population has increased more quickly

than the total population. 101. One factor holding the unemployment rate down

has been a substantial fall in labor force participation: this will be

discussed in the next section. Another factor that has stabilized

unemployment has been the fact that for most of the period, wages have risen

more slowly than, or at the same rate as productivity.

According to Table 1-4 there were three phases of wage movements.

First, between 1961 and 1971, real wages increased at the same rate as produc-

tivity. At the second stage, the rate of increase in wages fell considerably

below that of productivity, a situation that lasted until 1981 in the non-

agricultural sector, but came to an end in 1977 in agriculture. Third, the

most recent phase shows an inverse trend, with real wage increases in non-

agriculture sectors far exceeding product~vity increases. These trends are

reflected in the composition of value added: the wages share (or labor share)

fell between 1971 and 1981 (or 1976 in agriculture) and subsequently rose.

The combined effect of the small increase in the labor force and a

moderate increase in wages can be summarized for the three sub-periods.

During th~ 1960s, the departure of the non-Muslim active population, followed

by the emigration of Muslims and the increase in schooling rates for the 15-21

10/ For example, the number of males aged between 20 and 60 years increased by 61% between 1966 and 1980 versus 41% for the population as a whole.

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year olds, slowed the increase in the numbers of labor force participants;

m6~nwhile, wage increases were very small. After 1971-72, emigration had a

much smaller effect on labor supply but additional unemployment was avoided by

a policy of having wages lag behind productivity.!!/ In 1977, this policy was

reversed in agriculture; minimum wages rose sharply, causing farmers to reduce

the numbers of hired workersa Then because of discontent among urban workers,

the latter were also granted very substantial wage increases while labor

productivity remained unchanged. Because the relevant statistics end in 1980,

the effect of this new policy on unemployment cannot be assessed; it is to be

feared, however, that the unemployment rate is increasing. If this is the

case, current policy threatens both to aggravate the hardship of the poorest

people who are unemployed (and not workers receiving the minimum wage) and to

encourage capital intensive activities. We turn now to a more detailed

description of labor supply and demand.

11/ This was made easier thanks to the speeding up of growth: thus, in spite of their lag behind productivity, real salaries increased more quickly in 1972-76 then before 1972.

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II. LABOR SUPPLY

Tunisia's population growth rate averaged 2.4 percent a year over the

1970-75 period -- lower than neighboring Algeria's 3.3 percent or Morocco's

3.1 percent over the same period, but on a rising trend. The rate was

estimated at 1.8 percent in 1960 and 2.7 percent in 1980. The trend reflects

a decline in emigration, which has been partly offset by a decline in natural

increase. The latter fell between 1960 and 1966 (from 3.5 per cent to 3

percent); since 1967, it has been fairly stable at about 2.7 percent. Changes

in the natural increase are the result of falling birth and death rates:

between 1960 and 1966 the death rate fell very slightly while the birth rate

fell considerably (from 50.6 to 46.2 per thousand). Since 1967 the birth rate

has continued to fall (from 42 per thousand in 1967 to 34.9 per thousand in

1980)~/ and the death rate has matched this (falling from 15 to 7.7 per

thousand), thus e~plaining the stability of the natural rate of increase.

The migration balance has changed greatly since 1960. The 166,000

departures - between 1961 and 1965 mainly involved non-Muslims born in

Tunisia. After 1965, however, Muslim Tunisians accounted for the bulk of the

migration flow, i.e., 118,000 between 1966 and 1970, 67,000 between 1971 and

1975, and 8,000 between 1976 and 1980. These flows were affected by the two

oil shocks. Between 1971 and 1973 1 emigration continued at the same rate as

in 1966 to 1970; the first oil then reversed the flow (returns exceeded

departures in 1975-76). Emigration resumed in 1977-78, but towards Libya

12/ This decrease of the birth rate is partly due to a. large increase in the literacy rate and in the school enrollment ratio for girls.

- 9 -

rather than Europe, and there was a second reversal of flows in 1979-80.

These fluctuations in migration have had a considerable impact on

labor supply. In the early 1960s131 the departure of non-Muslims opened up

thousands of jobs for skilled workers and the self-employed! Between 1966 and

1973 total departures amounted to 190,000, the great majority being men of

working age; in these 8 years, therefore, emigration reduced the labor supply

by at least 10 percent. On the other hand, the migratory baiance for 1974 and

1980 was virtually zero. This cessation of emigration explains the net

increase in the labor force from 1974 a trend that is likely to continue if

fertility remains constant. Clearly, the fertility rate is the decisive

variable for the long run labor force trend, since a significant new increase

in emigration seems unlikely.

Accelerated population growth has brought about substantial changes

in Tunisia's demographic structure, with the working age population aged

between 20 and 60 growing by 61 percent, as against only 41 percent growth of

total population. The difference is even greater for young men between 20 and

30, whose numbers increased by 70 percent~ The labor force grew much more

slowly than the working age population, however. Activity rates for people

over 55 have fallen, because since 1960 the percentage of agricultural workers

has been falling compared to that of non-agricultural workers, who retire

earlier. Meanwhile, increasing numbers of young people (particularly in the

15-19 age group) have enrolled in secondary and higher education, thus

reducing labor force participation at this end of the age distribution. It

should be noted that in future years the expansionary effect of population

13/ The rnovement had actually started as early as 1956-58.

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growth on the labor force will continue to be important, while the factors

operating in the opposite direction will diminish in importance. The

reduction in the percentage of farmers and the increase in the numbers

undergoing education will tend to slow down.

This analysis of variations in activity rateo needs to be completed

by the inclusion of women, whose activity rate has increased rapidly. Between

the 1966 census and the 1980 employment survey the gross female activity

rate14/ increased from 3 to 11.5 percent. Admittedly, if the 1966 data are

corrected (see page 2 above), the 1966 figure increases to 7.5 percent, but

the upward trend remains clear and certain, as the new jobs are in regular

employment. This trend partly reflects increased schooling for girls in cer-

tain areas. In 1975 the proportion of women in towns having completed at

least primary $Chool was very low for those over 35 (2 to 7 percent) but rea-

ched 27 percent for those between 25 and 30. Women with at least primary

education are more likely to look for work than illiterate women, and the

spread of schooling for girls in the years to come will continue to raise

activity rates among the female populatione Since these rates are still low

(the gross rate was 11.5 percent in 1980 and the specific rate was 19.5 per­

cent),l5/ there is still a considerable margin for further increases, which is

not the case for men. For the latter the specific rate was at its maximum in

14/ The gross activity rate is equal to the ratio active population total population

15/ The specific rate is equal to the ratio: active population population over 15 years old

- 11 -

1980, reaching over 97 percent for the 30-50 age group (a level that had also

been reached in 1966).

This analysis of population growth and activity rates suggests that

labor supply will continue to grow rapidly over the next 10 to 15 years. The

consequences of the rising bir.th rates of the 1970s and 1980s will combine

with the increasing female activity rate 9 while factors working in the

opposite direction (emigration, male secondary education and the falling

agricultural population) will become of decreasing importance.

Regional migration has had an obvious impact on the geographical

distribution of the active population. The share of the total population in

the growth regions (Tunis, Centre-East and Centre-West) increased from 39.7 to

48.1 percent between 1966 and 1980. Flows between regions are influenced by

unemployment rates; in 1980, these rates were higher in declining regions [the

North-East and North-West (17.4 percent on average)], the South (12.2 percent)

and in Sfax (12.9 percent) than in the growth regions [Centre-East and West

(8.8 percent) and Tunis (8.7 percent)]. The regions of Tunis and the Centre

thus attract migrants because the chances of finding a job are greater; in

addition, wage levels and educational levels are also higher in these

regions. 161

Lastly, labor supply has changed qualitatively because of the

remarkable growth of education since the 1950s. The percentage of literates

in the population aged over 10 rose from 32 percent in 1966 to 52.5 percent in

1980. The breakdown of the population by educational level in 1975 reflects

16/ In 1980, the percentages of illiterates among 15-19 year olds in these two regions were 6~5 percent and 14.8 percent respectively, versus a range of 17.9 tc 38.4 percent in the other regions.

- 12 -

these changes: the percentage of those who have completed at least primary

education ranges from 6.5 percent for people between 40 and SO to 32.5 for

those between 20 and 25, and over 50 percent for those between 15 and 20~ The

same is true for secondary education: 3 percent for the 40 to 50 year olds as

against 26 percent for the 20-25 year olds. These variations by age group

correspond approximately to changes for the same age group between one period

and another.

These rapid changes reflect the resources devoted to education •

Between 1960 and 1980, the numbers in primary schools rose from 400,000 to

over one million, and those in secondary schools fro 40,000 to 270,000. The

numbers completing secondary education changed in the same proportions. As

noted earlier~ the expansion of education increased the supply of skilled

labor and also of women (since girls completing school look for jobs whereas

illiterate girls do not).

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III. OVERALL LABOR DEMAND

In this section we consider changes in total demand without making

any distinction between labor qualifications. Table 3.1 shows th~ evolution

of production and employment by sector between 1960 and 1980; continuous

series have been established for production (Table 3.2), but for employment we

can only rely on the censuses of 1956, 1966, 1975 and the 1980 employment

survey. Employment figures for 1960 were therefore estimated by

interpolation.

Table 3.1 gives the broad outline of movements in demand. From 1960

to 1986, GNP at factor cost multiplied 3.4 times in real terms. Growth rates

varied greatly by sector: agricultural production doubled whereas production

in manufacturing industries multiplied 5.3 times; energy and tourism grew by

factors of 11 and 25 respectively, reflecting the discovery of oil and the

rapid expansion in tourism from very low 1960 levels.

The effects of output growth on labor demand also varies by sector.

For example, the labor demand effect of rising oil production is scarcely

worth considering; on the other hand, employment growth in manufacturing

industries has largely exceeded output growth and labor demand has tripled in

20 years. Public sector employment demand has almost quadrupled, thanks to

extensive State interventions, notably in education17/ and health. Generally

speaking, the three sectors which nave created the most employment between

17/ The number of teachers increased from approximately 10,000 in 1960 to 46,000 in 1981, accounting for almost one-quarter of salaried personnel in administration, not counting non-teaching staff employed by schools, colleges and universities.

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1960 and 1980 are manufacturing industries (+204,000), public administration

(+149,000} and public works (+113,000). To understand better how labor demand

changed between 1960 and 1980, we used a method proposed by Banerji and

Riedel,l8/ who divide the overall variation of employment into four

components:l9/

1. the effect of productivity variations with a given structure of

production, excluding production growth.

2. the effect of production growth, with no change in productivity or

production structures.

3. the effect of changes in production structures with no change in

productivity or production growth.

4. interaction between these factors.

18/ R. Banerji and J. Riedel. Industrial Employment Expansion under Alternative Trade Strategies: Case of India and Taiwan: 1950-1971. Journal of Development Economics, December 1980.

19/ 1 0 0 1 0 0 -1 0

L -L =EX. (~. -i.) + E~. (X.- X.) 11 ~0 1 1 0 ~ ~

+ E (!L - ~.) (X. - X. )

1 -1 + E~Q (X.- X )

1 1

~ ~ . ~ 1

Lj = total employment in year j

Lj = 1

X~ l.

-1 X.= 1

employment in sector i in year j

= production in sector i in year j (at actual cost)

1 () () EX. • X./ EX. =production in sector i in year 1

1 ~ l. if the production structure was the same as in year 0.

eJ == employment per unit of product i, in year j. ~

(the 4 components indicated correspond in the right order to the 4 of the above equation).

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Table 3.3 gives these components by sector and at the aggregate

levele In aggregate and other things being equal, production growth could

have created, 2,458,000 jobs. But productivity gains and structural changes

in production (the.share of agriculture, the most labor intensive sector, fell

from 29% to 17% of GDP) cut demand by 1,137,000 jobs. Since the interaction

balance is strongly negative (-823,000), the net outcome is only a modesb

increase (498,000), despite high output growth.

The most important negative effects are in agriculture, where labor

demand would have increased by 1,565,000 workers if the sector's share in

total production had been maintained at 29% and if productivity (Y/L) had not

increased from 190 to 460 dinars. These two effects had a considerable

impact; the first represent a loss of 885,000 jobs, the second a loss of

380,000 jobs. It is important to remember, however, that the productivity of

agricultural labor was very low in 1960; most jobs in the traditional sector

were part-time, labor reserves existed in rural areas, and, while two-thirds

of the active population were employed in ag~lcultural activities, they were

often in a state of under-employment. It is possible that this situation

improved between 1960 and 1980. If all 1960 agricultural jobs had been

converted into full-time ones, agricultural labor demand would have r1sen, not

fallen, between 1960 and 1980 -- and this brief history illustrates the

difficulty of measuring agricultural productivity and interpreting producti­

vity variations in this sector.

In industry, which the created most employment from 1960 to 1980, the

growth of the sector's output share supplied 182,000 jobs, while production

growth added 231,000 jobs. As productivity increased only gradually, the nega­

tive effect of productivity growth on jobs was modest (a reduction of 39,000).

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In the three other sectors (construction, services and public

administration), the incidence of productivity growtn201 and structural

production changes is not worth considering (except for the service sector,

where productivity gains produced a loss of 60,000 jobs). In summary, the

increase in l&bor demand is mostly explained by changes in the size and

structure of production rather than in productivity. In terms of changes in

labor demand by sub-periods (1960-66, 1966-75 and 1975-80), job gains caused

by changes in the structure of output occurred mostly between 1960-66 and

again between 1975-80, while the period 1966-75 appears to be relatively

stable. Job losses caused by productivity gains disappear in agriculture as

of 1975; in industry they only appear in 1960-66 and then in 1975-80. 21 1

Similarly, the evolution in services is not constant: losses date from 1966-

75, whereas in 1960-66 the productivity component contributed positively to

employment demand. These results show the need for special care when making

forecasts: clearly, if we had forecast the evolution of job demand in 1966

and 1975 on the basis of previous variations, errors would have been made.

The discussion has so far ignored the skill-mix element in labor

demand. Jn reality'· this factor could be rather important: thus, the

emigration of non-Muslim residents in the 1960s produced~a shortage of

qualified and administrative labor, and the creation of non-agricultural jobs

was related to the political situation and not to economic evolution.

20/ The variation in productivity in administration cannot be measured; instead, salary variations are assumed to equal productivity changes.

21/ In 1966-75, 12,000 jobs were created by a fall in productivity.

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Finally, labor demand was also affected by cyclical factors. In

1966, demand growth was braked by recession. A real crisis ·Occurred in

agricultural production, which fell by 27 percent between 1965 and 1966; the

1965 level was regained only in 1971. Construction, transport, and ser~ices

also remained stagnant from 1965 to 1970-71. As agriculture accounted for

half the job market in 1966, while construction, transport, and services

provided almost another 30%, labor demand obviously could not increase from

1966 to 1970 (a fact not reflected in our data, which only relate to 1966 and

1975).. On the other hand, the decrease in agricultural production did not

lower employment: small farmers who experienced a fall in their revenue

could not find better paid jobs elsewhere. Between 1966 and 1969, the

Government set up an extensive and administered co-operative system, whose

members did not depend for their jobs on the agricultural situation.

Likewise, the recession had no immediate adverse effect on employment in

commerce and services: in the informal sector, workers tended to accept lower

incomes rather than become unemployed, while workers in the commercial sector,

which is mainly organized into co-operatives, were barely affected.

After 1970, the Tunisian economy experienced rapid and fairly

consistent growth (production, excluding rents, increased by 133% between 1970

and 1981). There were minor crises in the tourist sector in 1973-74 and 1977-

78, owing to the international situation and domestic management problems.

But these factors had little effect on the growth of overall labor demand

because of the small role of tourism in overall employment.

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IV. CHANGES IN DEMAND AND WAGES BY 5ECTORS

For a better understanding of changes in labor demand and wages, we

need to distinguish between several sectors with their own characteristics,

for demand and supply depend in each case on specific factors. As in other

countries, agriculture constitutes a clearly distinct sector, whereas manufac­

turing cannot be separated from commercial and service activities. In fact,

when analyzing the operation of urban labor markets, the only pertinent

distinction is that between the public and quasi-public sectors on the one

hand, and activities such as manufacturing, building and trade on the other

(in which both manpower and business function competitively).

a. A~riculture

In the early 1960s, labor supply in rural areas was elastic because

of large, though not precisely measured, surpluses. At the going earnings

rate, therefore, a large number of supplementary workers could have been

hired. Available information suggests that the situation had not changed by

1970: between 1963 and 1970, neither agricultural production nor labor demand

showed much growth. Migration to cities helped to counterbalance rural

population growth, but the process was inhibited by the slow growth of jobs in

urban areas -- which in turn reflected the choice of capital intensive techni­

ques in industry during a period of import substituting industrialization.

Consequently, labor supply in 1970 had the same characteristics as in 1963

(i.e. approximately the same earnings and the same labor surplus).

- 19 -

Agriculture did in fact experience significant changes, but higher

production was matched by modernization, which induced an equivalent

productivity increase. 221 As a result of these opposing influences on labor

demand, agricultural employment remained constant. Another reason for the

non-growth of agricultural employment is that agricultural wage-earners were

under-employed in the 1960s, with the result that their employers were able to

increase their rate of activity and production without any new hiring.

Finally, for social reasons {agricultural eorkers belong to the poorest

classes of the population), the government sharply raised the minimum

agricultural wage (SMAG): from 1971 to 1983 it grew by 91% in real terms

while average real wages for all sectors increased by only 61%. Also,

agricultural workers have probably enforced the observation of SMAG more and

more widely; even in rural areas, the socioeconomic context has changed

greatly since 1960, owing to the greater availability of information through

radio and television and increasingly widespread literacy among boys (even in

poor families) ..

To summarize, a new equilibrium for agricultural wage-earners has

been reached, at a level almost the double of that of the 1960s, while

employment is slightly lower than it was then. If the government had not

increased SMAG so sharply, employment would have reached a higher level and

farmers might not have been prompted to mechanize as quickly as they did; the

capital-employment ratio doubled during this twelve-year period.

22/ Increased literacy in rural areas also helped to increase manpower quality and productivity.

- 20 -

b. Non-Agricultural Employment 1970-1983

As already mentioned, non-agricultural activities are characterized

by segmentation: state-owned firms and public administration offer higher

salaries than private firms for the same skills, except in the case of wage­

earners with the highest skills. This creates a labor market disequilibrium

for low- or unskilled manpower: at the existing wage r~te, large amount of

excess labor is available. For skilled manpower on the other hand, an

equilibrium between supply and demand can be assumed.

Before carrying out a detailed analysis of demand changes in the

competitive and protected sectors, let us outline their main trends. In the

case of skilled labor; both demand and supply increased very rapidly (the

latter reflecting education programs undertaken since the 1950s). Overall,

therefore, employment increased somewhat more than wages. By contrast, the

wages of unskilled labor nearly doubled. The unskilled labor market in urban

areas was in disequilibrium in both 1970 and 1983, reflecting increased supply

caused by rural emigration on the one hand, and unduly high wages on the other

hand. This disequilibrium worsened, as can be seen from increased unskilled

unemployment. The next two sections present a detailed analysis of demand in

the competitive (mainly private) sector and the protected (mainly public)

sector, respectively.

The Urban Competitive Sector

This sector's primary characteristics is th~t it consists mainly of

small or medium-sized privately-owned firms. For simplicity's sake, our

analysis will focus on the main activities in the sector, comprising textiles,

construction materials, mechanical and electrical industries, construction and

- 21 -

public works, tourism and transport.

Most components of this sector increased significantly in the 1970s

(Table 4.1), with output growth rates of 9.7% in manufacturing and 9.2% and

8.7% in construction (against only 5.9% for the' economy as a whole, and 6.3%

for trsde and other services). The rapid growth· of some manufacturing

industries and tourism reflects successful external earnings; between 1970 and

1985, for example, textile exports increased from 1,000 to 37.,'000 tons, while

growth in the mechanical and electrical industries ~s explained both by import

substitution and by rising exports. Sales of tourism services can be measured

by the number of nights spent by non-residents. This index, starting from

base 100 in 1966, climbed to 233 in 1970 and 780 in 1985. In all these

sectors, the annual growth rate of employment (+4.7% for textiles, +9.8% for

the mechanical and electrical industry, +7.1% for tourism) is a direct result

of gains in foreign markets (and in the domestic market in the case of

mechanical and electrical goods).

Employment growth in building and public works, as well ~s the cons-

truction material industries, has also been rapid (+ 5% and + 13.3% respec-

tivel.y between 1972 and 1981), but in these cases growth has been induced by

domestic demand, which in turn consists mainly of household demand. 23 / The

urban population increased roughly fourfold between 1956 and 1986, reflecting

high population growth and accelerated urbanization. Moreover, in rural areas

(where housing conditions were very bad) transformation or conversion of old

buildings has been undertaken. In urban areas, housing accounts for an

23/ Other factors are public investment in roads and infrastructure, and building of hotels and of factories.

- 22 -

important share of household expenditure, (between 20 and 37% in 1975). Old

housing of unsatisfactory quality is progressively being abandoned or pulled

down in favor of modern buildings, for which households must either pay high

rents or (if they are buyers) put aside savings.

By contrast, the sector comprising trade and various services

experienced only moderate employment growth (+2.6%), which was less than the

national average between 1971 and 1983. The elasticity of employment with

resp~ct to production is relatively low (.34), because this sector had excess

labor in the early 1970s. This is usually the case since this type of

activity can more easily absorb surplus labor than manufacturing. As a

consequence, the share of trade and various services in employment demand fell

rapidly between 1970 and 1983 to the benefit of manufacturing and building and

public works.

Competitive sector activities share the common characteristic of

being relatively labor-intensive. If the construction materials sector is

excluded, the capital-labor ratio is lower for industries in this sector than

for those in the protected sector (chemical, food industries, mining

industries, energy). Moreover, labor intensity has increased in the

competitive sector relative to the rest of the economy in the 1970s. This

evolution can easily be explained: since these firms operate in competitive

domestic and foreign markets, they have absorbed their labor surplus. In

addition, they have been leading in residual (disembodied) productivity gains,

which substituted for high capital labor ratios ..

- 23 -

Analysis of the 1971-83 growth of employment and capital stock, and

the quality and/or mobility effects thereo£24 / is provided in Table 4.2. On

the whole, the two production factors increased at a similar pace (except in

trade and various services where capital remained constant). These inc~~ases

explain only part of the growth of output, however. Even when mobility and

qualiti effects are taken into account, a high residual remains; for instance,

in the case of building and public works (whose production grew by 8.7% a

year), the residual amounts to 3.1% per year. Thus, up to 36% of the produc-

tion increase is attributable to a residual factor. In the textile industry,

the residual factor contributes more than 50% to the increase in production.

These findings suggest that important "productivity reserves" were

available in 1971. Firms were able to increase the apparent productivity of

labor without using capital-intensive methods by using previously under-

employed manpower on a full-time basis; under-employment of this kind was

widely prevalent in traditional trade firms as well as in those engaged in

building and public works: organizational improvement and modernization of

techniques of production also contributed. 25 / The rapid increase in

productivity allowed firms to raise wages but also to raise productivity still

further, thus increasing profitability~ Finally, it is worth noting that the

urban competitive sector created the majority of new jobs; as we shall see,

the protected sector granted higher wage increases but created fewer jobs.

24/

25/

The mobility effect results from a change in the intersectoral structure of employment and investment.

In the textile industry, where the residual factor is highest, foreign firms (alone or in partnership with local ones) have played a major part in the modernization process.

- 24 -

To conclude; changes in labor demand in the competitive sector since

1971 have been strongly influenced by the prior pattern of under-employment in

the late 1960s, and by labor-intensity in export industries. Under these

circumstances, changes in employment have been mainly driven by changes in

production (Q) and by variations of the wage/price ratio. In fact, if we take

into account the years when this ratio increased by more than the average2~/

as a dummy variable, we have for 1971-1983:

Log E = .11 + .67 Log Q- .02 Dummy

(11) (25) (2.6)

R2 = 98 .

The Urban Protected Sector

This sector includes on some productive industries (chemicals?

food, 27 / mining, oil, electricity) and public administration. It differs from

the competitive sector in several ways; specifically it has:

a higher capital/labor ratio,

higher ~ages, and

a lower production increase than the average since 1970.

26/ The coefficient of variation o£ the wage price r~tio is not significant because of relatively fixed employment levels. Only very high increases in the ratio will significantly reduce hiring. Such-increases (equal to or higher than 6.9%) occurred in 1972, 1974, 1981 and 1982.

27/ This industry includes both state-owned and privately-owned firms.

- 25 -

There are many indications that, at the current wage rate, supply

exceeds demand for both skilled and unskilled manpower -- a disequilibrium

that is made evident by the consistent su~plus of applicants for many

positions in public administration or state-owned firms. This excess labor

supply is due to large salary differentials; in 1981, for instance, the

average salary in the protected sector was double that in the textile industry

or in building and public works firms. 281 The higher salaries in the

protected sector reflect/ inter alia, a tradition of high salaries in the

civil service that dates back to before independence, high levels of union

membership, and the low share of wages in the total costs of capital intensive

activities such as oil refining.

Since 1970, production growth in the protected sector has been less

than the average (between 4.2% and 5% from 1971 to 1983, versus 5.9% for the

economy as a whole) or has just matched it (i.e., 5.9% for administrative

services). Employment grew relatively quickly, however, suggesting that

employment is ~uch more elastic with regard to product in the protected sector

than it is in the competitive sector, which may mean that this hiring was not

absolutely essential. The increase in employment is, however, only sizeably

in absolute terms in the public sector. Simultaneously with offering higher

wages as early as 1970, this sector 4L~o granted higher wage increases than

the competitive sector in the decade that followedc For example, between 1969

and 1981, the nominal value of the average salary in state-owned firms

28/ This is partly due to differences in skills, but also partly due to industry status. For example, the average salary in the chemical industry is 50% higher than in the construction materials industry, even though the two industries' capital/labor ratios and skill requirements are comparable.

- 26 -

multiplied 2.9 to 3.8 times (except in the case of food firms), whereas it

multiplied 2.7 times in the textile industry and just 2 times in construction

and public works (for firms in the modern sector). Civil servants also

enjoyed a particularly favorable salary trend: between 1977 and 1980, their

average salary rose by 24% in real terms, compared to a rise of 13% for wage­

earners in the private sector.

- 27.-

V. LABOR DEMAND AND SKILLS

It is hard to disaggregate labor demand by skill on the basis of

available statistics. This section uses a simple four-category distribution

as follows:

NO, unskilled or semi-skilled workers

Nl, skilled workers (blue or white collars)

N2, Technicians, foremen

N3, Professionals, executives

People in N2 and N3 will almost always have completed high school or

be graduates. Some proportion of skilled workers will also have attended high

school, at least for the early years until they became sixteen. Thus an

absolutely larger number of individuals undertook high school studies than the

individuals classified as belonging to the N2 + N3 groups. By contrast, many

unskilled or semi-skilled workers have not even completed primary school.

Table 5.1 presents some estimates of the distribution of workers

(public sector, some services, and agriculture are excluded) by skills

category. Figures are available from the Census of Industries for the

following modern sector industries: mining and energy, manufacturing,

construction public works, and transportation. Unfortunately, neither the

informal sector nor some small modern sector firms are covered by the census;

thus in 1975 it identified 155,000 wage-earners instead of the 459,000 workers

actually engaged in these industries. The same industries are covered by the

surveys of "Ministere des Affairs Socialesu (1975, 1976 and 1977), but with a

better percentage.

Lastly the survey by Basis and Morrisson excludes all firms in

- 28 -

construction or in the informal sector. Thus, the figures in Table 5.1 are

inevitably biased: the percentage of skilled, or very skilled workers is

overestimated since there are more skilled people in the modern sector than in

the informal sector.

There is some agreement between these estimates: the sum of N2 + N3

varies between 10% and 13%, and the percentage of unskilled and semi-skilled

workers is 50-60%. From these figures M. Boumediene29/ tried to estimate the

distribution of all wage-earners (Table 5.2). 301 The percentage of unskilled

or semi-skilled workers (including agricultural laborers) appears as very high

(63% to 66%) whereas the percentage of N2 + N3 is only 14% to 18%. This

percentage of very skilled workers exceeds the percentage of N2 + N3 1n

private firms (agriculture excluded) because of the inclusion of the public

sector, which is very skill intensive (N2 + N3 = 55% in 1972).31/

We have analyzed the skill composition of hired labor only, because

the absence of data makes it hard to do the same analysis for independent

labor. We can only assume that very few farmers can be ranked in skill levels

2 or 3, and that the percentage of people who have this level of education

among independents in the non-agricultural sector is 12%. This is derived

from a comparison with the skill mix of wage-earners in the parallel

sectors. Under these hypotheses the total quantity of very skilled employees

29/

30/

31/

M. Boumediene - Distribution and redistribution of some revenues in Tunisia and in Maghreb (1983).

Assuming the same distribution for non-agricultural wage-earners (public sector excluded) as that of Basis and Morrisson.

Such a percentage seems likely, since it implies 71,000 wage-earners and we know that teachers of all levels then totaled only as many as 30,000.

- 29 -

in all sectors would amount to 188,000, that is 14.4% qf the active

population. Such an estimate is consistent with the distribution of the

active population according to the level of education in the 1975 Census.

Interpolating other skill levels, the conclusion is that in 1975, the

percentages of NO, Nl and (N2 ~ N3) in the active population were 67%, 18.6%

and 14.4%, respectively.

This structure of skills is changing rapidly due to the decreasing

share of agricultural labor (consisting mostly of the unskilled or semi­

skilled) and the increasing share of civil service employees (more of whom are

in the N2 and N3 categories than in the less skilled categories). In

addition, Industrial Census Data (Table 5.1) show a significant increase

between 1967 and 1981 in the share of N2 and N3 among non-agricultural workers

excluding the public sector, while the percentage of apprentices and unskilled

workers in this group has decreased.

Two factors are thus interacting:

the structure of labor demand is changing (sectors that are

intensive in unskilled or semi-skilled labor are declining in

importance, wl~ile sectors with high shares of labor are expanding),

Within each sector, the percentage of relatively skilled labor is

rising as technology changes, both in the protected and in the

informal sector.

This evolution of labor demand has not created major diseqilibria.

As noted earlier, there was a short-term shortage of skilled labor in the

1960s, when many non-Muslim skilled workers left Tunisia. Subsequently,

however, the supply of skilled labor has risen rapidly thanks to educational

expansion.

- 30 -

The rapid growth of skilled labor has compressed the wage structure

in. the 1970s. In 1977, moreover, the "Pacte Social" granted a 33% increase in

the minimum wage and a uniform increase of 10 dinars on all salaries.

Three estimates of skill-related relative wages have been gathered in

Table 5.3 for the 1970-72 period. Broadly speaking, they cover the modern

sector, excluding agriculture and the public sector. The ratio of NO to N3 is

6.5/1. This ratio has subsequently fallen sharply to 5.7/1 in 1975, 4.7/1 in

1977 and 3.6/1 in 1984 (according to the surveys of the Social Affairs

Department). The wage structure has also been compressed for Nl and N2; for

instance, the excess wage received by N1 has been reduced from 65% to 30%.

As mentioned earlier, the decrease in the wage differential reflects

the rapid increase in the supply of skilled labor as well as the government'~

decision to reduce wage dispersion (the "Pacte Social", (1977). Some writers

have criticized this policy, 321 but it should be noted that it was in line

with changes in skilled labor supply and demand. Moreover, it is possible

that wage dispersion in the 1960s was excessive because many foreign

professionals or executives were receiving unwarranted bonuses at the time.

During these years, many highly skilled expatriates were also employed in the

public sector -- at double (or more) the salaries paid to Tunisians in

comparable posts. 33/

The decrease of wage dispersion can be seen in the differing growth

patterns of rninimum and average wages between 1967 and 1977. During this

period, minimum wages increased by 210% while the average wage (taken from

32/ World Bank. Tunisia Employment Report, 1984.

33/ There were 4,000 foreign teachers in 1969 compared to 11200 in 1981.

- 31 -

Industrial Censuses) rose by only 130%. From 1977 to 1981, the growth of

minimum wages was still higher and faster: +87% in 4 years compared to +42%

for the average non-agricultural wage. 34 /

On the whole, Tunisia's wage differentials and indices of income

distribution inequalities35 / as closer to those in European Countries than to

the often very unequal distribution observed in many other African Countries.

34/ World Bank. Tunisia Employment Report, 1984,.

35/ In 1972, the figures for the Gini coefficient and the Theil index were .28 and .17 respectively, and inequality fell between 1972 and 1977 (.24 and .11 for the same inequality indices) (M. Boumediene).

- 32 -

VI. WAGE POLICY

Three periods can be distinguished: direct wage control in the

1960s'; collective bargaining at the industry level after 1973; and the "Pacte

Social" after 1977. 36 / In the first period, wage scales in the public sector

and state-owned firms were decided by the Government. In fact, the whole

modern sector's wage structure was determined on this basis, because there

were very few private firms in the modern sector until 1970-71.

The expansion of the private sector in the 1970s changed the labor

market. Collective bargaining replaced wage-setting by the government as of

March 1973: sectoral collective agreements were to develop out of free

negotiation between employers and trade unions, while wages were to be agreed

upon, using the minimum wage (SMIG) as a basis. Between 1974 and 1977, 39

sectoral collective agreements were negotiated, covering 95 percent of modern

sector wage-earners.

This practice was broken by the "Pacte Social" of 1977, under which

wages were to be adjusted annually on the basis of the minimum wage (SMIG);

the SMIG in turn was to be adjusted regularly in accordance with the consumer

price index (estimated for low-wge earners). Thus adjustments in wages were

only to vary with price changes.

Because the Government wanted to reduce wage dispersion and to raise

the purchasing power of unskilled workers, it changed the wage structure in a

36/ Since 1982, as the "Pacte Social" could not be renewed, sectoral collective agreements have again become the rule. On the other hand, since 1983, instead of regulating wages on the basis of the minimum wage, government has preferred to control wages on the basis of the growth of total labor income.

- 33 -

once-for-all move in 1977 before starting the ind~xation system. It gave a

single flat across-the-board wage increase, which had· the effect of raising

the minimum wage more than higher wage levels. Between 1976 and 1982, the

rate of growth of SMIG was 70 percent in real terms, whereas the rate of

growth of the average wage was only 3.6 percent in real terms. 37/

The Government's wage policy, which has by and large determined wages

in the whole country, exemplifies a dirigist mentality. Between 1977 and

1982, tripartite negotiations on SMIG between employers, wage-earners and

government has effectively regulated all wages, since the latter were fixed in ..

accordance with scales that used SMIG as a basis.

While this policy was effective in the private sector, it was not as

powerful there as in the public sector~ The latter.can be subdivided into

public administration and parastatals. In both these subsets the government

strictly enforces its policy of revaluing SMIG and reducing wage dispersion

through fixed increases. Meanwhile, however, another set of measures was

implemented having an opposite effect, i.e., making state-owned firms the

entities over which the wage control policy has had the least influenceo

Between 1971 and 1980, public sector wages in fact increased twice as quickly

as in the private sector. This was achieved by the multiplying of bonuses

and, wage supplements, and by a malfunctioning promotion system under which

promotion became an indirect means of giving raises. As every wage-earner

enjoys automatic wage increases based on SMIG or on promotions linked to

seniority, every firm tends to undermine the system by granting extra benefits

37/ As this policy was deterring highly skilled workers, the Govermaent allowed differential wage increases according to ability in 1981.

- 34 -

to some of its employees.

Similar practices are evident in public administration. Since it is

subject to the same system, it has been obliged to grant all sorts of bonuses,

promotions and allowances/compensations. For the highest positions, it is

impossible to grant any legitimate wage raises, since no salary can be higher

than the 800 index. In such cases, extras substitute for wage increases.

Thus, the habit of granting extra wages has been generalized. These bonuses

often amount to an important part of the basic wage (i.e., 30 to 50%, and

sometimes more). Bonuses vary greatly from one ministry to another, and from

one worker category to another. 38 / As in state-owned firms, the criteria for

granting bonuses are ambiguous, and many bonuses do not match their ostensible

purpose. In some cases, they have been used to avoiding the compressing

effects of the 1977 Pacte Social on wage structure; in other cases, they have

helped to balance a manpower shortage when the official salary for a given

skill is much lower that the private sector equilibrium wage.

Thus, the Government has announced and enforced an official wage

policy (based on increases in SMIG, reductions in wages dispersion, and fixed

wage scales), while per~orce practicing a system of awarding bonuses that

contradicts the official policy. This has led to a salary regime that is

both complex and not very rational.

Returning to the official wage policy for the private sector, the

system has three drawbacks: it impedes promotions based on ability; it

prevents mobility; and it increases unemployment. As people receive an

38/ For example, bonuses amount to 120% of the basic wage for an "ingenieur general., compared to 54% for an "administrator general" who receives the same basic wage (being ranked similarily in the wage scale).

- 35 -

automatic wage increase with seniority, they avoid changing firms; since

promotions are automatic, workers are not inclined to train for new skills, or

to increase their productivity; meanwhile, firms cannot reward workers for on­

the-job training or productivity increases.

Finally, the effect df official policy on income distribution needs

examination. The average income of a household of minimum wage e~rners is now

well above the poverty threshold, and such households are ranked in

intermediate deciles, rather than in the lowest one. The ~age policy has

increased the number of the unemployed, however, by raising the minimum wage,

especially since the 1977 increase of 33% above the equilibrium level for

unskilled labor. Every year, thousands of unskilled youths are leaving

primary school and searching for a job. As soon as they are 18, the employer

must legally give them the SMIG. The system thus induces employers to hire

young people under 18 at a wage below the SMIG, and then to fire them when the

become 18. As a result, the unemployed are mainly young (62 percent of males

and 82 percent of females are less than 25); the unemployment rate would have

been lower if the SMIG came into effect only after 25.

In summary, wage policies since 1960 have involved undue official

control over both high and low wages. In the case of the better paid, the

very rapid increase in educated manpower could have been allowed to reduce

wage dispersion automatically by the larger pool of skilled labor. Because

the Government instead artificially compressed the wage structure, both the

private and the public sector were induced to give more bonuses and extra

wages -- often unrelated to productivity -- in order to hire and retain the

highly skilled labor that they needed. Meanwhile, low-income families could

have been better helped by guaranteeing a minimum household income rather than

- 36 -

by raising SMIG (which has created youth employment); fiscal measures would

have been a more efficient way of achieving social aims than direct and

continuous control of the labor market.

Changes in employment since 1960 have involved many successes,

including employment creation in building and manufacturing, an increase in

skilled labor that has made foreign technical assistance almost redundant

(Tunisia is able to send technicians and professionals to the Middle East and

to Africa), a reduction in wage dispersion, and an unemployment rate that has

stayed constant in spite of rapid growth in the labor supply. Nevertheless,

two difficulties remain: (i) the pressure to raise wages above equilibrium

levels and the resulting unemployment along young, unskilled male workers; and

(ii) the excessive compression of skilled-unskilled wage relativities, leading

to lower motivation among workers to raise productivity or enhance skills.

Table 1.1

EmploymenT in 1966, 1975 and 1980 (in thousands)

1966 Census!1 1-975 Census PopulaTion Survey 1980

Male Female Total Male Female Total Male Female Total

Agriculture 440.4 88.0 528.4 439.9 69.0 508 .. 9 438~5 113.2 551.7 (8.0) (448.4}

Mining 23.4 0.2 23.6 26.2 0.4 26.6 28.5 1.7 30 .. 2

Manufacturing 79.4 24.2 103.6 111.9 123.2 235.l l53*8 l46.l 299.9 tw .......

I

Electrfcty, Water 16.4 0.7 17.1 10.9 0.5 II .4 16.2 0.8 11.0

Construction 59.0 0.3 59.3 127.3 I • I 128.4 154.6 I .5 158.1

Transport 31.5 I .2 38.7 53.2 2.8 56.0 66 .. 3 3.7 10.0

Commerce, Banks & Insurance 71.4 2.1 73.~:i 115.3 9.0 124,.3 111,.1 8.7 119.8

Other Services 19J ~2 41.9 233.1 166.0 47.4 213.4 214 .. 6 57.0 271.6

(21 .9)

Unidentified Activities 71.8 3.8 75.6 55.0 7.2 62.2 49.1 iO.O 59.1

TOTAL 991.0 161.9 1152.7 1105-9 260.4 1366.3 1235.0 341.9 1576.9

(61.9) ( 1052. 7)

·~; The figures in parentheses are non-adjusted.

Table 1.2

Otstrtbution of Emetoyment by Status

1966 1975 1980

Mate Female Total Male Female Total Mate Female Total

Employers 2 .. 2 0.2 1 .. 9 2.7 0 .. 3 2.2 2.3 0-2 t.a

Self-employed 23.8 8.6 21.6 24.7 29,.3 25.5 25.5 3.9 20.8

Sztiarled workers 62.3 .25.5 57.0 58.4 37.2 54.5 58.4 28.4 52.0

Famtly work~rs 3. t 61. 7!1 I I .5 4.2 22.6 7.7 8.2 65.0 20.5 l:J (p

Apprentices 0.3 0.2 0.3 2 .. i 3 .• 1 2.3 2.7 2,.3 2.6

other 8.3 3.8 7.7 7.9 7.5 7.8 2.9 0.2 2~3

TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

-!/ Family workers: A correction + 100,000 (cfo Tabla 1.1) is taken into account.

Table 1.3

Distribution of Employment by Level of Schooling

Below Primary Primary Secondary

1960 80% 14% 6%

1966 77% 16% 7%

1975 51% 33% 16% w l,.Q

1980* 45% 35% 20%

* Estimate- see text.

Table 1.4

Wage and Value Added per Person Employed

Rate of Growth of Real Wage!-' and of Value Added per Person!?./

196t-1971 1972-1976 1977-1981 1982-1983

Average Wage in Agricultural Sector Average Wage In Non-Agricultural Sector (4.6%>:1

Guaranteed M1nlmum Wage in Agr. Sector Guaranteed MJnlmum Wage in Non-Agr. Sector

Value Added per Person in AgriculturaJ Sector Va1ue Added per Person in Non-Agricultural Sector (4.2%>£1

~I Nominal wage deflated by the_gross domest!c product deflator. ~/ Produc-tion at 1980 prices divided by active population ..

0.7 2.0 I • I I • I

6.4 5.1

4.2 1.4 6.0 7.7

2.9 4 .. 1

1.8 10.7

4.5 o.o

£1 This figure is relat~d only to firms included in the manufacturing census. Wage and valued added per person are expressed in nominal terms.

Percentage of Wages Percentage of Labor lncom~1

1971 1976 1981 1983 1971 1976 1981 1983

Non-agri~ultural sector 43 19 32 39 60 56 45 54 Agricultural sector 27 17 J7 18 76 50 59 64

d/ Labor income of a self-employed person is equal to the average wage of wage-earner in the same sector.

+:--0

l

Table 3.1

Production and Emplo~ment in 1960z 1966£ 1975 and 1980

1960 1966 1975 1980

Y/L a b a b a b Y/L a b

Agriculture .. 19 124.6 650*** 120.4 529 237.9 509 .46 254.8 552 Min!ng .25 5.0 20 6.9 24 II .6 27.0 .47 13.7 30

Oil and Electricity 1.4 8.4 6 21 .. 1 17 71.2 12.0 5.4 92.2 17.0

Manufacturing .36 35.1 96 54.7 104 I I I • I 235.0 .62 186.2 300.0

Construction I • 71 32.2 45 45.7 59 77.0 129.0 .73 115.0 158.0

Transport I .82 27.6 34 37.9 39 66.1 56.0 1.5 105.3 70.0

Tourism 2.6 9.5 48.5 66.5 ..j::'-........

I Housing Rental I 32.4 44.5 63.2 79.1

I Commerce and Services I .15 135.2 *( 120)** 150.2 209* 292.6 181.0* 2.2 396.0 203.0*

Administration I • I 53.9 (50)** 83.2 97 156.3 157.0 1 • 1 216.9 189.0

Total (rent excluded) I .41 424.6 1021**** 52~.6 1078 1072.3 1306.0 .95 1446.6 1519.0

Y/L: Production per person employed~ in thousands of dinars. a : Production (value added) in m iII ions of d i oars. b : Employment (In thousands).

• Tourism Included. ** Estimate (inteltpolated from 1956and 1966 figures). *** Only the variation of male employment (730 in 1956) has been taken into account. **** Including foreign workers (=50).

- 42 -

Table 3.2

Gross Domestic Product at 1972 Prices ( 1960-81) (In millions of dinars}

1960 1961 1962 1963 1964

Agdcutture 124.6 134.7 130.3 140.0 145-.3 Mining 5.0 4.8 4.2 5.1 5.6 Oil and Electricity 8.4 8.4 a.8 9.6 14.6 Manufacturing 35.1 45.7 42.5 44.3 48.9 COnstruction 32.2 40.6 47.2 48.5 46.0 Transport 27.6 29.4 33.6 37.9 40.4 Tourfsm 2.6 2.8 4.1 4.3 5.3 Housing Rental )2.4 34.6 37.8 39.9 41.5 Commerce and Servlces 135.2 140.8 144.8 140.9 152.0 Administration 53.9 60.0 67.0 69.7 70.0

1965 1966 1967 1968

Agriculture 165.7 120.4 103.1 124.0 Mining 5.6 6.9 5.3 7.4 Oil and Electricity 14.9 21.1 33.8 42.1 Manufacturing 52.3 54.7 56.0 59.8 Construction 44.7 45.7 44.6 39.9 Transport 37.2 37.9 38.1 39.3 Tourtsm 6.5 9.5 12.4 15.1 Housing Rent a I 42.3 44.5 47.5 50.0 Commerce and Services 160.5 150.2 152.7 157.0 Administration 73.6 83.2 87.5 95.2

1969 1970 1971 1972 1973 1974

Agriculture 136.6 146.1 178.1 225.0 204.1 228.8 l•fl n I ng 8.7 8.4 10.0 10.3 9.2 15.4 OTI and Electricity 47.5 55.8 54.7 58.6 60.3 64.7 Manufacturing 65.5 65.0 76.3 98.3 97.6 109.0 COnstruction 44.1 43. I 47.2 ss.o 57.2 63.0 Transport 40.8 47.6 45.3 52~6 57.9 62.9 Tourism 18.9 21.2 31.5 36.7 32.2 3l ~3 Housfng Rental 52.8 53.8 54.9 59. I 60.8 61.9 Commerce and Services 159.9 171.7 193.6 232.2 240.9 266.3 Administration 96.8 107.5 109.0 117,0 .126.3 144.0

1975 1976 1977 1978 1979 1980 1961

Agriculture 237.9 252.6 230.0 243.6 232.0 254.8 271.5 Mlnfng II .6 10.9 11.2 11.5 12.7 13,7 14.8 or I and Electricity 71.2 ,61.9 70.0 9.5 87.8 92.2 90.3 Manufacturing 111 .• 1 129.5 136.2 145.7 161.5 186.2 209.2 Construction 77.0 8~\.1 93.1 96.6 108.2 115.0 131.0 Transport 66.1 73 .• 0 84.2 90.3 100.7 105.3 110.7 Tourism 48.5 49.3 45.3 48.9 62.1 66.5 68.8 Housing Rental 63 .. 2 65.0 156.6 70.5 74.6. 79.1 82.5 Cow~erce and Services 292.6 312.8 316.7 340.6 365.2 396.l 420.7 Admtnlstratlon 156.3 171.5 188.7 l90.5 198.8 216.9 238.8

- 43 -

Table 3e3

Decomposition of Variations tn Emplo~ment

(thousands) 1

Components

Period 2 3 4 Total

1960-66 Agriculture -103 161 -183 3

Mines - 3 5 3 - 1

Energy 1 8

Manufacturing - 29 24 30 - 16

Construction - 3 11 8 - 1

Transport - 6 8 4 - 2

Commerce and Services 60 30 - 11 10

Administration 13 12 15 7

Total - 70 252 -126 0 57

1966-75 Agriculture -271 .542 - 28 -263

Mines - 8 25 - 8 - 5

Energy - 13 17 23 - 32

Manufacturing 12 106 I 12

Construction 18 60 - 20 12

Transport - 7 40 - 11 - 5

Commerce and Services -124 214 23 -141

Administration - 13 99 - 14 - 12

Total -408 1104 - 34 -435 228

1975-80 Agrfculture 5 178 -141 0

Mines - 2 9 - 5 0

Energy 1 4 - 1 0

Manufacturing - 56 82 77 - 38

Construction - 23 45 19 - 11

Transport - 12 20 14 - 7

Commerce and Services - 31 63 - 11

Administration - 21 55 6 - 8

Total 139 457 - 30 - 75 213

1960-80 Agriculture -380 1565 -885 -397

Mines - 9 48 -13 - 16

Energy - 4 14 45 - 44

Manufacturing - 39 231 182 -170

Construction - 1 108 1 - 2

Transports - 16 82 14 - 44

Commerce and Services - 60 289 - 6 -140

Administrations - 3 120 31 - 9

Total -512 2458 -625 -823 498

For meaning of columns, see text.

Table 4.1

Averaoe Annual Growth Rate of labor Productivit~ and of the Ca2ital-labor Ratfo -1972-81

Product Employed Capital Average Prod. Capital Stock Per Worke!" labor Ratio

Agriculture and Fishing ~ ~ ~ ~ ±:2

Agriculture 2.8 - 5.0 2.8 5.0 Fishing 4.5 6.4 6.7 -1.7 0.3 Manufacturing

2.:Z ~ ~ ~ 6.6 Food 4.9 10.8 16.3 -5.3 5.0 Construction Materials 20.2 13.3 27.9 6.0 12.9 Machines and E I ectr i ciTy 11.7 9.8 6.6 1.8 -2.9 Chemical 5.0 5.5 19.0 --.5 12.8 Textile and Clbthing 13.3 4.7 9.2 8.2 4.3 Other Non-food 10.4 6.8 6.0 3.4 -0.7

Total Non-food ~ ~ ~ ~ 6.8

Mines and Public Utilities hl !d .1.!.:! .h! 7.0

+="-Mines and Energy !:.! 12.0 2.8 .j::-. ~ ~ Mines 3.3 -1.1 11.5 4.4 12.7 Hydrocarbons 3.6 9.0 11.2 -4.9 2.0 Electricity 11.7 7.6 12.9 3.8 4.9 Water 9.5 10.0 14.2 -0.5 3.8 Construction and Public Works

~ 5.0 4.7 2..:.?. ::Qd Transport

~ 3.3 12.6 ~ 9.0

~ ~ :?.:..!. 3.3 ld ::2.:1 Other Non-administrative Services 6.3 2.6 -0.1 ~ -2.6

Total non agr~ exc. adm. 6.0 2.7 9.2 3.3 6.3 Administrative Services 5.3 5.1 5.3 0.2 0.2

TOTAL ECONOMY 5.9 2.9 7.6 ~ 4.6

Agriculture and Fishing Agrlculture Fishing

ManufacTuring Food Construction Material Mechanical and Electrical Chemical Textiles 1 Clothing and Leather Miscellaneous Total Non-Food

Minas and Public Utilities

Mining and Energy Mining Hydrocarbons Electricity Water Construction and Public Works

Transport Tourism Other Services

Non-Agricultural Production Sector

Production Sector

'TOTAL ECONOMY

Table 4.2

Average Annual Growth of Factors of Production and of Technological Progress 1972-81

Share of Product Wages in Value Prod. (1980)

53.1 53.1 53.1

58.4 35.9 65.7 53.0 50.1 74.8 75.6 65.5

25.9

12.8 67.5

1.9 42.9 42.6 56.0

85.5 19.7 40.3

41.5

43.8

51.0

2.9 2.8 4.5

9.7 4.9

20.2 11.7 5.0

13.3 10.4 11.9

5.4

4.2 3.3 3.6

11.7 9.5 8.7

8.8 8.5 6.3

7.0

6.0

5.9

(Percentages)

Employed ( 1) (2)

Capital Stock Technical ( 1) (2) Progress

0.2 0.11 o.o o.o 6.4 3.40

6.8 3.97 10.8 3.88 13.3 8.74 9.8 5.19 5.5 2.76 4.7 3.52 6.8 5.14 6.2 4.06

5.1 2.39 5.0 2.35 6.7 3.14

13.9 5.78 16.3 10.45 27.9 9.57 6.6 3.10

19.0 9.48 9.2 2.32 6.0 1.46

13.4 4.62

4.3 1.09 11.6 8.60

1.4 0.18 -1.1 -o. 74 9.0 0.17 7.6 3.26

10.0 4.26 5.0 2.80

3.3 2.82 7.1 1.40 2.6 1.05

12.0 10.46 11.5 3.74 11 .2 10.99 12.9 7.40 14.2 8.15 4.7 2.07

12.6 1.83 3.3 2.65

-0.1 -o.06

4.6 1.91 10.8 6.32

2.7 1.18 9.2 5.17

2.9 1.48 7.6 3.87

0.4 0.5

-2.0

-o.1 -9.4

1.9 3.4

-7.2 7.5 3.8 3.2

-4.2

-6.4 0.3

-7.6 1.0

-2.9 3.8

4.2 4.5 5.3

-1.2

-o.4

0.7

Quality of Labor. (1) (2)

0.6 0.35 0.5 0.18 1.4 0.92 0.8 0.42 0.6 0.30 0.4 0.30 0.3 0.23 0.6 0.39

Labor Mobi llty ( 1) (2)

Quality of Capital

( 1) (2)

1.0 0.47 0.9 0.42 1.4 0.66

MObility of Capital

( 1) (2)

1.3 0.76 1.6 0.67 -1~4

1.6 1.03 -o.58

1.6 0.55 1.5 o. 71 1.5 0.75 1.6 0.40 1.6 0.39

1.0 Ot66 1.6 0.55 -2.0 -o.39

0.4 0.10 2.3 0.60 1.5 0.96 -o.6 -o.39

2.8 0.36 2.2 1.49 1.6 0.03 2.5 1.07 3.5 1.49

-0.1 -0.06

2.1 2.1 2.1

1.80 0.41 0.85

1.5 1.31 1.7 0.55 1.6 1.57 1.6 0.91 0.6 0.34 1.6 0.70

1.3 0.19 0.9 0.72 1.2 o. 72

1.1 o.46 o.1 o.o4 1.4 o.82 -o.8 -o.47

o.6 o.26 o.1 o.31 t.3 o.73 -o.s -o.45

0.7 0.36 0.5 0.26 1.0 0.49 0.9 0.44

Other Factors

-o.07 o.os

-2.66

-t .25 -10.61

0.43 2.27

-8.25 6.80 3.18 2.31

-5.28

-4.73 -1.74 -6.00 -o.98 -4.73 3.16

2.21 3.37 3.73

-2.08

-1.25

-o.as

..1::'­l..n

Table 4.3

Ca~ital Per Worker (In 1980 Dt nars)

.l2I!. 1972 .!ill 1974 .!.ill ~ .!2.rr .!ill. !ill ~ ~ 1m ~ Agriculture and Ffshing 1,389 1,447 1,514 1,577 1,648 1,714 1,793 1,870 1,995 2,117 2,286 2,464 2,639 Agriculture 1,331 1,394 1,462 1,518 1,585 1,648 1,721 1,794 1.920 2.047 2.222 2,400 2,563 Fishing 4,424 4,047 3,843 3,365 4,075 4,041 4,166 4,262 4,319 -1,215 4,076 4,206 4,631 Manufacturing lndust.rles 1,731 1,808 1,881 1,945 2,078 2.233 2,432 2,679 2,978 3,128 3,092 3,249 3,433 Food 3,772 3,797 4,115 4,280 4,584 4,920 5,431 5,734 5,875 5.753 5,466 5~790 5,990 Construction Material 3,571 3,459 3,440 3,375 3,575 4,778 5.621 7,754 8,821 9,027 8,921 9,657 10,373 Mechanical and Electrical 5,748 5,541 5,242 5,005 4,796 4,496 4,429 4,346 4,429 4,438 4,306 4,544 5,045 Chemfcai 3,613 5,541 5>aoli 6,557 7,352 7,965 8,966 9,017 11,750 14,038 13,254 11,526 11,245 Textiles, Clothing and leather 555 550 612 663 729 764 790 812 806 796 799 853 884 M I see II aneous 2,382 2,346 2,441 2,475 2,448 2,397 2,351 2,275 2,228 2,281 2,298 2,221 2,283 Total Non-Food 1,583 1,662 1,718 1, 771 1,873 2,003 2,223 2.400 2,697 2,863 2,834 2,955 3,130

+:--Non-Manufllcturing Industries 3,466 3,588 3,848 3,872 4,042 4,368 4,972 5,410 5,714 6,297 6.527 7,236 8,053 0\

Mining and Energy 13,204 14~279 16,225 16.875 18,328 20,832 24,474 26,735 29.338 32,617 34,053 37.523 41.761 Mining 3,015 3,155 3,473 3,469 3,502 3,992 5,124 5,889 a, 11a 8,366 8,721 8,764 8,793 Hydrocarbons 258,250 248.111 239,600 236,182 247,167 290,167 292,500 299,067 276,000 283,444 289,526 318,190 347,957 Electricity 30,484 32,438 31,158 37,829 38,784 40,293 42,409 45,208 43,315 51,638 50,803 48,167 47,257 Water 24,857 29~952 35,409 25,545 31,321 30,700 25.,745 29,125 31,796 4~.~68 41.529 47,014 52,123 ConsTruction end Public WOrks 345 322 332 357 370 369 403 379 3~3 299 327 355 381 Services 2,495 2,710 2,860 3.,071 3,150 3,246 3,460 3,168 3,833 4,024 4,293 4,550 4,168 Transport 5,992 6,744 6,941 7,680 8,322 8,984 10,249 11,171 11,639 12,894 ~4,325 15,621 16,836 Tourism 19,436 17,531 18,125 18,270 15,512 15,039 14.431 13,555 14,996 14,071 13,289 13,264 13,594 Other Services 468 459 462 448 431 421 415 398 385 370 363 350 340 Non-Agricultural Production Sector 2,471 2,626 2,775 2,889 2,997 3.,159 3,359 3,698 3,955 4,211 4,345 4,655 411978 Production Sector 1,955 2.074 2,196 2,302 2,411 2,.549 2,766 2,960 3,185 3.407 3,574 3,849 4,132 Administrative Services 4,589 4,456 4,308 4,187 4,122 4,078 4.108 4,307 4,473 4,561 4.596 4.421 4.331 TOTAl ECONOMY 3,185 3,282 3,379 3,464 3.,562 3,711 3,940 4,186 4.451 4,712 4,908 5,178 5,463

Table 5 .. 1

Population of Wage-Earners by Qualification level (Modern Sector: Manufacturing, Transport)

Percentage Distribution

NO Nl

Survey of Ministry of Social Affairs (Ministere des Affaires Sociales}

RAI

Average 1976-77 (38.8 unskilled or apprentices + 17.2 semi-ski lied}

1967 1971-72 1973-74 1975-76 1977-78 1981

Estimate by Bsais, Morrisson 1971

Estimate by National Sta-tistical Office, 1971 (lnstitut National de Ia Statistlque)

56.0 31.2

89.8 7.0 34.0 56 .3( 1) 33.0 56.4( 1) 28.0 61.0(1) 25.5 62.5(1) 20.0 65.7(1)

59.2 30.3

{86.4]

N2 N3

9.4 3.4

3.2 6.4 3.3 7. I 3.5 7.2 3.8 7.9 4.1 ~

9.2 5 .I " 1.1 2.8

10.0 3.6

Table 5.2

Distribution of Wage-Earners b~ Qualification Level

NO Nl N2 N3 SA TOTAL

1972 Non-agricultural sector 000' 237 121 31 II 400 (Administration excluded)

Percent (59.2) (30.2) (7.9) (2.7) ( 100)

Non-agricultural sector 000' 252 164 95 18 529 (Administration included} Percent {47.6) (31 .0) ( 18.0) (3.4) (100)

+ Agricultural Sector 252 164 95 18 288 817 Percent (31 .0) (20.0) (II .6) (2.2) (35e2) ( 100)

1971-1971

Estimate by Bsais, Morrisson (percent) (59.2) (30.3) (7.7) (2.8) ( 100)

Estimate by National .p.. (X) Statistical Office (86.4) (10.7) (3.6) ( 100) (lnstitut National

de Ia Statistique)

1972

Administration (000 1 ) 15 43 64 7 129 Percent (11.6) (38.4) (49.6) (5.4) ( 100)

1976

Non-Agricultural Sector (000 1 ) 315 163 114 44 636 (Admin i stratic'r< inc I uded) Percent (49.5) (25.6) ( 18.0) (6.9) ( 100)

+Agricultural Sector (000') 315 !63 114 44 230 866 Percent (36.4) (18.8) ( 13 .. 2) (5. I) (26.5) ( 100)

Table 5.3

Range of Wages (1970-1984) (Index= 100 for Unskilled Wage-Earners, NO)

Qua I i fi cation

NO Nl N2 N3

Qual if icatlon

NO Nl N2 N3

Large Firms Survey

100

168 260 568

Ministry ~f Social Affairs Survey (1975)

100 180 279 567

Boumediene Bsais, Morrisson Survey

( 1971)

100 161 336 620

Ministry of Social Affairs Survey (1977)

100 149 233 470

!1 Based on ILO survey and fiscal survey analyzed by R. Cranier.

Average Estimat~1 ( 1972)

100 100 167 165 273 290 760 649

Ministry of Social Affairs Survey (1984)

100 130 207 360

..p.. \.0

- 50 -

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Some Recent DRD Discussion Paper!

262. Effective Tax Rates Under Varying Tax Incentives, by A.J. Pellechio, G.P~ Sicat, and D.G. Dunn.

263. A Model for Analysis of Taxation of Capital Investment in Developing Countries, by A.J. Pellechio.

264. The Role of Managerial Ability and Equipment Quality in LDC Manufacturing, by I. Nabi.

265. Personal Income Taxes in Developing Countries: International Comparisons, by G.P. Sicat and A. Virmani.

266- Indirect Tax Evasion and Production Efficiency, by A. Virmani.

267. Protectionism and the Debt Crisis, by S. van Wijnbergen.

268. Inventories as an Information-Gathering Device, by S. Alpern and D. J. Snower.

269. Welfare Dominance: An Application to Commodity Taxation, by s. Yitzhaki and J. Slemrod.

270. The Causal Role of Minimum Wages in Six Latin American Labor Markets, by M. Paldam and L. Riveros.

271. Tax Evasion, Corrumption and Administration: Monitoring the People's Agents Under Symmetric Dishonesty, by A. Virmani.

272. Characteristics and Operation of Labor Markets irt Argentina, by C.E. Sanchez ..

273. Growth a~d Structural Change in East Africa: Domestic Policies, Agricultural Performance and World Bank Assistance,/ 1963-1986, Part I, by U. Lele and R. Meyers.

274. Growth and Structural Change in East Africa: Domestic Policies, Agricultural Performance and World Bank Assistance, 1963-196 7 Part II, by U. Lele and R. Meyers.

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276. Korea's Macroeconomic Prospects and Major P~l~cy Issues for the Next Decade, by V. Corbo and s.w. Nam.

277. The Pricing of Manufactured Goods During Trade Liberalization: Evidence from Chile, Israel, and Korea, by v. Corbo and P.D. McNelis.

278. Fiscal Policy and Development Strategy in Southern Asia, by G.F~ Papanek.