Jobs in the Arab Region

Symptoms, Diagnosis and Recommendations

PART I: Symptoms

Four Characteristics of Labor Markets in the

Arab Region

2

Growth Rates in Employed and Working Age Population

3

0

50

100

150

200

250

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

(Mill

ion

s)

Arab Region (non-GCC)

Employed Working age popuation

55% not

working

56% not

working

1. Growth created jobs but not nearly enough to

match labor force growth…

Source: Based on the ILO’s EAPEP (Economically Active Population, Estimates and Projections) database.

0102030405060708090

100

% P

arti

cip

atio

n

Females Males

2. Women’s labor force participation is the lowest in the

world

4

Source: Based on ILO-KILM 2012, Kuwait’s 2009 Annual Statistical Abstract, Oman’s Labor Statistics 2009, Saudi

Arabia’s 2009 Saudi Manpower Survey, and the United Arab Emirates’ Labor Force Survey (LFS) 2009.

3. Youth unemployment — highest in the world and

concentrated among the educated

5

Source: World Bank, based on the Republic of Yemen HBS 2005; the West Bank and Gaza LFS 2008; the Tunisia

LFS 2010; the Jordan LMPS 2010; the Iraq HSES 2006; the Egypt SYPE 2009; and the Morocco LFS 2009.

Unemployment Rates by Education Level (2005–2010) Individuals Ages 15–24

0% 10% 20% 30% 40% 50% 60%

Egypt

Iraq

Jordan

Tunisia

WBG

Yemen

Morocco

% unemployed (15-24)

Tertiary Secondary Primary

Palestine

4. Most employed are either in the informal sector or self-

employed. Public sector dominates formal sector jobs.

6

0

10

20

30

40

50

60

70

80

90

100

Jordan Egypt Iraq Tunisia Yemen Morocco

% o

f Em

plo

yed

Po

pu

lati

on

Self Employed &unpaid

Informal private

Formal private

Public

Source: Based on the Jordan Labor Market Panel Survey (LMPS) 2010; the Egypt LES 2010; the Tunisia LFS 2010; the

Iraq Household Socio-Economic Survey 2006, 2007; the West Bank and Gaza LFS 2009; the United Arab Emirates LFS

2009; the Yemen Household Budget Survey (HBS) 2005–06; and the Morocco Household and Youth Survey (HYS) 2009.

Work Status of Employed Individuals in Selected Arab Economies

2005 – 2010

PART II: Diagnosis

Demand, Supply and Labor Market Distortions

7

1. Private sector in the Arab region lacks dynamism

Macro-level: Investments/exports skewed towards lower added value jobs

8

Composition of FDI

0

10

20

30

40

50

60

70

80

90

% o

f F

DI

Manufacturing Telecoms Finance Tourism & Construction Energy High tech Services

Source: United Nations Conference on Trade and Development (UNCTAD) database; WDI 2000–07.

1. Private sector in the Arab region lacks dynamism

9

Micro-level: Very few young firms that adopt new technology and grow into “gazelles”

Relevance: Perceived Skill Shortages % of firms perceive skills of workforce as constraint

2. Education and training systems fail to produce

employable graduates for the private sector

10

7

7

14

25

33

34

43

43

54

Germany (2005)

Korea (2005)

Spain (2005)

South Asia

Africa

East Asia & Pacific

Latin America & Carbbean

Eastern Europe and Central Asia

Middle East and North Africa

Source: Investment Climate Assessment (ICA) Enterprise Surveys (global dataset) 2012.

3. Labor Market Distortions: Most talented individuals prefer

to work in the public sector, which does not provide as much

value-add to the economy as the private sector

Youth’s Preference for Public Sector % youth preferring to work in the public sector

11 Source: Based on Gallup World Poll Survey 2010.

0

10

20

30

40

50

60

70

80

Youth have less stable labor contracts – if any (% share of different work contract types, all sectors)

3. Labor Market Distortions: Protected jobs hurt youth

12

27

53 51 48 35

45 37 41

3

1 10

7 19

7 3 6

69

46 37

44 46 49 55 53

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Youth Prime Age Youth Prime Age Youth Prime Age Youth Prime Age

Egypt Jordan Tunisia WBG

Open ended Term No contract

Source: Labor Force Surveys, WBG (2008), Egypt (2006), Jordan (2010), Tunisia (2010) and UAE (2009).

Palestine

13

4. Existing safety nets don’t protect the poor

Coverage of poverty targeted SSNs in the Arab Region

(% of bottom quintile population)

0

10

20

30

40

50

60

Perc

enta

ge c

ove

red

in b

ott

om

qu

inti

le

Sources: Middle East and North Africa: Authors’ calculations based on national household surveys. Other

regions: World Bank 2012a.

With less than 1/3 of the bottom quintile covered in most Arab countries, the

majority of the poor fall through the cracks of poverty targeted safety nets

Part III: Recommendations

Policy Options and How to Get There

14

While reforms will have to be country-specific,

some general directions are common

• Align incentives for skills with market demand

– Engage private sector in vocational training, curriculum

design, etc.

• Foster entrepreneurship

– Access to finance for young firms, training, and more

conducive business regulations

• Reform public-sector working conditions

– Align pay packages with private sector, more

meritocratic hiring

15

Getting There

1. Leverage the dialogue with new social actors

Facilitate open dialogue on employment with all stakeholders

Engage civil society, especially youth and women, in dialogue on labor market reforms

Getting There

2. Invest in Open Data and Access to Information

Legalize and facilitate access to data

Building capacity in statistical institutions

Benchmarking and evaluation of skills systems

Getting There

3. Improve Business Climate

Eliminate red tape & simplify regulations

Ease access to start-up finance

Streamline employment policies to facilitate entry into formal sector

Getting There

4. Matching Edu. Outputs to Labor Market Needs

Provide information to students and parents on job market opportunities

Institutionalize cooperation with private sector to involve them in curriculum design, financing and training

Provide ALMP to facilitate labor market integration and second chances for vulnerable youth

The time is now. 20

Demographic transition in MENA varies between Tunisia and Yemen

Sources: 2011 population age structure from U.S. Census Bureau.