AFD, World Bank, ILO
November 2011
Reflection note on EM5, a joint CMI programme Renegotiating citizenship: Employment and social protection1 policies, pillars of a new social contract in the MENA region?
The post-independence models of public solidarity are wearing out in the MENA region. To varying degrees, this trend affects the states’ social fabric and government legitimacy, and has contributed to unprecedented popular unrest. Despite important historical differences among countries, the social contract between state and society has relied on costly and weakly targeted subsidies on essential goods and services (water, bread and essential foodstuff, petrol and electricity), and a “right” to public employment for the educated2. The liberalisation policies of the 1990’s were predicated upon the continuation of these modes of national solidarity, complemented in varying degrees by weakly targeted voluntary tithes within the religious communities. At the turn of the 21st century, (i) the massification of higher education, (ii) the demographic transition in the MENA region, and its effect on the number of young people entering the labour market, as well as women joining the workforce, combined with (iii) a labour market of insiders and outsiders, (iv) increasing international product market competition, and (v) the steady increase of the price of raw materials, has put these production and redistribution models under stress. The perpetuation of the redistributive models in the new contexts has gradually crowded out fiscal space for structural reforms, and produced an impression of downward social movement among part of the middle classes, as well as pauperisation in marginalized areas – both rural and urban, especially as growth models are to be reinvented. This delicate situation creates potential for long-lasting social unrest, with a population recently awakened to the power of ‘voice’ in the Arab Spring. In Tunisia, Egypt, Morocco as elsewhere in the region, there is increasing awareness that governments will need to negotiate the transition to new types of employment and social protection strategies – a process that will imply a more inclusive dialogue, including representatives of civil society. This renegotiation of the social contract will imply reconsidering actions both in the short (emergency response) and long terms (structural reforms, including compensating the potential losers compared to the status quo). Indeed, while the emergency social programmes put in place following the Arab Spring risk undermining long-term reforms, they could also plant the seeds of new social protection policies and safety nets. For this, they would need to be endogenous (i.e. the product of local political compromises), sustainable (i.e. not exercising an excessive strain on the countries’ public finances) and conducive to higher employment in the long term. The links between education, employment and growth models is another aspect to be reassessed in the framework of the renegotiation of the social contracts. International donors active in the region (World Bank, ADB, ILO, EC, AFD, etc.) are reconsidering their operations in the MENA region in light of these new dynamics. Each donor will be redefining its strategy, based on very different experiences and understandings of “social protection” and “the social contract”. Yet any attempt to impose readymade models from the outside will be resisted, and will slip against the specificities of the region.
This programme would adopt a large definition of « social protection », as the protection against various economic and social risks. It would thus cover promotion (getting people into employment, and improving employment), prevention (social insurance – health insurance, pension, unemployment insurance) and protection (against poverty and vulnerability: social safety net). Striking the balance between production and protection is key to the success of the EM5 program, but more largely of employment and social protection strategies in the region. 1
2
The IMF writes “Recent fiscal policy measures highlight the urgent need to develop better-targeted social protection mechanisms. MENA stands out compared to other regions for its heavy reliance on universal price subsidies as a social protection tool. Food and fuel subsidies amount to 8% of GDP in the MENA region. […] There is also scope to improve income support in the region. In particular, the region needs to strengthen and modernize the existing social insurance programs and expand their coverage, and to introduce national unemployment insurance as an essential complement of any labor market reform.” (Economic Transformation in MENA: Delivering on the Promise of Shared Prosperity, May 2011).