/SELM2_wk3_Angel

University-to-Work Transition and Labor Markets in MENA: Diagnostics, Constraints, and Policy Framework

1

Content A. Stylized facts on Labor Markets in MENA B. What Are The Main Constraints Preventing New Entrants To Get Jobs?

C. What Policy Options Facilitate School-to-work Transition (International best practices) 2

MNA faces some of the highest unemployment rates in the developing world 30

25 20 15 10

5 0

EAP

ECA

LAC

SA

MENA

MENA (Youth)

MENA (Female)

3

In some countries, unemployment is highest among educated new entrants

Tunisia 2009

Egypt 2006

Unemployment Rate (%) [15-29] 50

44.01

Unemployment Rate (%) [15-29] 44.2

40 30

50

36.1

40

23.77

26.47

20

20

10

10

0

0

Prim. or below

Prep./Sec. Gen.

26.65

30

Sec. Voc.

Tertiary

3.18

4.51

Prim. or below

Prep./Sec. Gen.

Sec. Voc.

Tertiary

4

Female Employment to Population Ratio

And Female Employment remains the lowest in the World

Kuwait

41.8

Qatar

39.8

United Arab Emirates

38.0

Algeria

32.1

Iran, Islamic Rep.

28.0

Oman

22.9

Lebanon

22.6

Morocco

22.0

Tunisia

21.2

Yemen, Rep.

20.4

Egypt, Arab Rep.

19.3

Saudi Arabia

18.0

Jordan

13.3

Iraq

12.5

East Asia & Pacific

63.1

Sub-Saharan Africa

55.1

Latin America & Caribbean

47.7

OECD

47.2

Eastern Europe & Central Asia

44.7

South Asia

33.8

North Africa

23.8

Middle East

22.3 0

10

20

30

40

50

60

70

5

School-to-Work Transition remains low, especially among women Egypt 2006 % At school

% Employed

Tunisia 2009 % Jobless

100%

90%

Enrollment

80%

70% 60%

50% 40%

30% 20%

Joblessness

10% 0% 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 Age

% At school

% Employed

% Jobless

100 90 80 70 60 50 40 30 20 10 0 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 Age

6

Many MNA countries need to cope with a a large youth bulge Egypt 2010

Tunisia 2010 100+

2010

90-94

Male

80-84

Female

70-74 60-64

50-54

Median age 29.1

40-44 30-34 20-24 10-14 0-4

600

400

200

0

200

400

600

Population x1000

7

Informal Employment is Rampant!

A typical country in the region employs 67% of its labor force informally, but the output of these workers only accounts for 27% of GDP MENA GCC non-GCC

MENA GCC non-GCC

67.0 6.4 67.2

Developed ECA LAC EAP SA SSA

8.9 39.4

61.3 76.1 91.0 94.7

0

50

% of the Labor Force not Contributing to Social Security

100

27.2 20.2 34.8

Developed EAP ECA SA LAC SSA

16.4 32.7 36.8

37.6 42.3 43.3 0

50

100

Undeclared Output as % of GDP (Schneider Index)

8

To cope with the lack of jobs, many new educated entrants are opting to work in the informal sector Informality Rates Among University Graduates in Egypt

% Informal Employment

60 50

40

2006

30 20

1998

10 0 20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

Age Group Source: World Bank using the 1998/2006 Egypt LMPS survey

9

University graduates who stay in the informal sector often suffer an important loss of human capital Egypt 2006 Private formal

2.5 2.0

Public sector

1.5 1.0

Private informal

0.5

140.000

Hourly wage (in Rials/hour)

Wage rate (in LE/hour)

3.0

Yemen 2006 120.000

Public Sector

100.000 80.000

Private formal

60.000 40.000

Private informal

20.000 0.000

0.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Years of education attained

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Years of attained education

10

Content A. School-to-work Transition in Egypt B. What Are The Main Constraints Preventing New Entrants To Get Jobs?

C. What Policy Options Facilitate School-to-work Transition (International best practices) 11

Investments in the private sector remain low Private Investment as % of GDP

40

38

35

32

30

26

Percent

25 18

20 15 10

9

11

19

19

20

20

21

22

23

23

13

5 0

12

Employers are concerned with the skills of new entrants into the Labor Market Share of Firms Indicating Labor Skill Level as a Major Constraint to Business Creation Egypt 2008

50

Lebanon 2006

38

Algeria 2007

37

Syria 2003

36

Jordan 2006

33

Morocco 2007

31

West Bank Gaza 2006

25

AMCs*

35.7

Middle East and North Africa

27

Africa

25.5

Latin America and the Caribean

24

Europe and Central Asia

14

South Asia

Source: www.enterprisesurveys.org

13

East Asia and Pacific

6 0

10

20

30

40

50

60

13

A large public sector in some countries still distorts incentives % Employment in the Public Sector 40

36.9

35 30

26.8

30.0

25 20

15

13.5

10 5 0 Lebanon

Syria

Egypt

Iraq

14

Labor taxes and contributions

Labor Regulation remains rigid and Labor Taxes remain high

Algeria Iran, Islamic Rep. Egypt, Arab Rep. Tunisia Lebanon Turkey Morocco Djibouti United Arab Emirates Iraq Jordan Saudi Arabia Oman Yemen, Rep. Qatar Kuwait

29.7 25.9 25.6 25.2 24.1 23.1 22.2 17.7 14.1 13.5 12.4 12.4 11.8 11.3 11.3 10.7

Middle East & North Africa (Non-GCC) Eastern Europe & Central Asia Latin America & Caribbean Sub-Saharan Africa GCC East Asia & Pacific South Asia

25.1 23.1

14.7 13.1 12.1 10.3 7.8 0

5

10

15

20

25

30

35

15

Hiring Regulation in MENA vs. Other Regions

Morocco

89.0

Djibouti

67.0

Lebanon

44.0

Algeria

44.0

West Bank and Gaza

33.0

Iraq

33.0

Tunisia

28.0

Yemen, Rep.

The difficulty of hiring index measures (i) whether fixed-term contracts are prohibited for permanent tasks; (ii) the maximum cumulative duration of fixed term contracts; and (iii) the ratio of the minimum wage for a trainee or first-time employee to the average value added per worker.

22.0

Syrian Arab Republic

11.0

Jordan

11.0

Iran, Islamic Rep.

11.0

United Arab Emirates

0.0

Saudi Arabia

0.0

Qatar

0.0

Oman

0.0

Kuwait

0.0

Egypt, Arab Rep.

0.0

Sub-Saharan Africa

37.3

Latin America & Caribbean

34.4

Middle East & North Africa (Non-GCC)

32.8

Eastern Europe & Central Asia

31.9

South Asia

27.8

OECD

26.5

East Asia & Pacific GCC

19.2 0.0 0.0

20.0

40.0

60.0

80.0

100.0

16

Firing Regulation in MENA vs. Other Regions

Difficulty of redundancy index: Notification and approval requirements for termination of a redundant worker or a group of redundant workers, obligation to reassign or retrain and priority rules for redundancy and reemployment.

Tunisia

80.0

Jordan

60.0

Egypt, Arab Rep.

60.0

Morocco

50.0

Syrian Arab Republic

50.0

Iran, Islamic Rep.

50.0

Algeria

40.0

Djibouti

30.0

Lebanon

30.0

Yemen, Rep.

30.0

West Bank and Gaza

20.0

Iraq

20.0

Qatar

20.0

United Arab Emirates

0.0

Saudi Arabia

0.0

Oman

0.0

Kuwait

0.0

Middle East & North Africa (Non-GCC)

43.3

South Asia

41.3

Sub-Saharan Africa

39.8

Eastern Europe & Central Asia

25.9

Latin America & Caribbean

24.1

OECD

22.6

East Asia & Pacific

19.6

GCC

4.0 0

10

20

30

40

50

60

70

80

90

17

More rigid regulatory frameworks are associated with higher levels of Informality and low levels of Youth Employment 80

50

correlation: 0.31*** N = 143 60

ZWEAZE

NGA

PAN PER

TZA

HTI UKR THA GTM KHM URY HND ZMB BEN BLRARM COGZAR MDA RUS SLV NIC TCD SEN LKA CAF AGO PHL UGA KAZ CIV MLI SLE GHA BFA COL ETHKGZ MOZ MDG NER RWA MWI BRA NPL GIN LVA 40 TGOEST TUN JAM PAK BDI SRB PNG BGR MRT BGD MAR TON ROM UZB BIH EGY ECU VEN MKD KEN LBN KIR ALB SLB HRV FJI DZA CMR BWA DMA WSM NAM LSO LAO TUR MEX VUT LTU MYS MDV FSM BTN PRY PRI SAS PLW MHL YEM ARG TWN GRC SVN ARE CRI POL ITA HUN IND ISR IDNPRT ESP BELCHL JOR KWT SYR 20 MNG CZE SVK SAU IRN NOR OMN SWE DNK VNM HKG DEUFIN FRA CAN IRL CHN AUS SGP NLD GBR JPN AUT CHE USA 0 0

20

40

60

Rigidity of employment (index: higher, more rigid)

80

UAE

45

BOL

Youth employment (%)

GEO

Qatar

y = -0.1244x + 33.567 R² = 0.1486

40 Iran

35 Kuwait Oman

30 25

Algeria

Iraq

Saudi Arabia

20 15

Lebanon Yemen

Syria Egypt Jordan

Tunisia

10 5 0

0

20

40

60

Dificulty of Firing Index

80

100

Content A. School-to-work Transition in Egypt B. What Are The Main Constraints Preventing New Entrants To Get Jobs?

C. What Policy Options Facilitate School-to-work Transition (International best practices) 19

What Policy Options Facilitate Schoolto-work Transition?

INTERNATIONAL BEST PRACTICES

I. Balance between income and employment protection (and lower labor taxes) III. Programs targeted to youth and women III. Employment Services 20

I. Balance between income and employment protection A reform in labor regulation in MENA must go hand in hand with a reform in the social protection system: - Adopting a lifecycle approach: Revising the level of taxes and social contributions and shifting from the concern of protecting particular jobs to a framework of protecting workers (less regulation and more social support, unemployment insurance, and active measures to assist workers during periods of transition).

21

The Majority of countries in MENA do not have Unemployment Insurance schemes

Algeria

Does your country have an unemployment protection scheme?

Yes

Djibouti

No

Egypt, Arab Rep.

Yes

Iran, Islamic Rep.

Yes

Iraq

No

Jordan

No

Kuwait

Yes

Lebanon

No

Morocco

No

Oman

No

Qatar

No

Saudi Arabia

No

Syrian Arab Republic

No

Tunisia

No

United Arab Emirates

No

West Bank and Gaza

No

Yemen, Rep.

No

22

II. Programs targeted to youth and women International Best Practices (a) SUBSIDIES • Turkey designed a subsidy for new youth and women hires (until April 2010) consisting of 100 % of employers’ social security contributions (at the legal minimum wage) in the first year, with a 20 percentage points decline per year in the subsidy in the following four years.

23

II. Programs targeted to youth and women International Best Practices (a) SUBSIDIES Approximate Job Creation Approx.

Net JobNet Creation [Turkey] 250,000 200,000

Jobs

150,000 100,000 50,000 0

Youth (18-29) -50,000

Adult Females (30- Adult Males (3064) 64)

Net Job Creation

-100,000

World Bank (2008)

24

II. Programs targeted to youth and women International Best Practices (a) SUBSIDIES • Subsidies, however, could be expensive. Estimates from Turkish Treasury indicate that generating one extra job through the subsidies would cost between 12 and 17 thousand US dollars

• Subsides may also introduce distortions: subsides can cause deadweight looses (i.e. individuals loose their jobs after subsidy is over) and case substitution effects.

World Bank (2008)

25

II. Programs targeted to youth and women International Best Practices (b) YOUTH PROGRAMS • Youth unemployment rates soared in many Latin American economies during the late 1990s as a consequence of the Tequila and Argentina crisis.

• The Chilean government designed the “Chile Joven” program: A comprehensive “demand-driven” training program for unemployed youth (16 -29).

• The program was so successful that similar models were customized throughout Argentina, Colombia, Dominican Republic, Panama, Peru, Paraguay, and Venezuela.

26

II. Programs targeted to youth and women International Best Practices (b) YOUTH PROGRAMS % increase in Employment rates % increase in earnings 30

26

25

IMPACT OF PROGRAMS

21

20 15

10

10

12 8

10

5 0

Argentina

Chile

D.R. Source: WDR(2007)

27

II. Programs targeted to youth and women (b) YOUTH PROGRAMS PROGRAMS DESIGNED WITH “FIVE” GUIDING PRINCIPALS Public/Private partnerships Skills mix

Practical Experience Flexibility Monitoring and Evaluation 28

II. Programs targeted to youth and women International Best Practices (c) EARLY CHILDHOOD DEVELOPMENT Preschool Education and Subsidized Childcare • Preschool coverage in many MNA countries remains low. Highquality early childhood education translates into economic returns: higher schools attainment and lower repetition/dropout rates throughout a student’s lifetime • A developed child care education industry could be economically important because it creates jobs and allows parents (mainly young mothers) to be economically active, benefits the overall economic competitiveness, and creates new job opportunities.

29

II. Programs targeted to youth and women International Best Practices (c) EARLY CHILDHOOD DEVELOPMENT • Community Mothers (Colombia): a network of women who are employed by the state to look after their neighborhood children between eight in the morning and four in the afternoon (Monday through Friday). (82 thousand jobs) • Minnesota Childcare (USA): publicly financed network of childcare centers in the State of Minnesota (28 thousand jobs) • Chile Grows with you (Chile): comprehensive program that offers preventive care, nutrition, and free access to public preschool and daycare centers for children from poor families.

30

III. Employment Services Employment Services (public and private) aim to facilitate the adjustment of firms and workers to changing labor market conditions.

Employment Services usually perform three roles: • Job search assistance and career guidance; • Management of unemployment benefit; • Referral of job seekers to ALMPs.

31

Employment Services in MENA countries face a number of problems: • • • • • •

Lack of funds; Separation form ALMPs; Understaffing; Fragmentation Limited role of private sector in some countries; Provision of old-fashioned system of employment services of limited menu and scope; • Limited access to labor market information and the wide range of potential modern labor market measures and techniques; • Lack of impact evaluation • Lack of modern ICT technology.

32

In Summary! • There are several policy options that facilitate school to work transition: I. Balance between income and employment protection III. Programs targeted to youth and women III. Employment Services

• The success of the programs depends on the country needs, program design, careful piloting, and careful monitoring and evaluation.

33

Merci

34