This week in Brazil, policy-makers and experts gather together for a week long south-south forum where ideas and innovations in delivering social protection systems are shared. Participants were able to learn and exchange knowledge on implementing systems and possible synergies with related social areas such as nutrition, health and employment programs.
Labor and Social Protection
The Western Balkans Case
The Western Balkans have a lot going for them: ideal location next to the world’s largest economic bloc, a well-educated workforce, relatively low wages and decent infrastructure. FDI and investors should be rushing in … but are they?
Southeast Europe is the next frontier of EU expansion and includes six countries: Albania, Bosnia & Herzegovina, Kosovo, Macedonia, Montenegro and Serbia. These countries have a lot in common and an equal amount of differences. They are all relatively small open economies, with a growth strategy premised on deeper international integration. Some, especially Macedonia, are more advanced in attracting international investors but as a whole, the region seems to be stuck in a classical Middle Income Trap: they are too rich to compete on low-cost manufacturing but are too poor to be global innovators. After a strong recovery following war and conflicts in the 1990s, the growth momentum has stalled over the last five years and the region has been particularly vulnerable to external shocks.
Europe faces a significant job challenge. At an average of 11 percent, unemployment remains stubbornly high while labor force participation, at 58 percent of the working age population, lags behind most other regions of the world. This means, that only every second person in working age currently has a paying job across the region. Addressing the job challenge requires multifaceted labor market policies. We argue however that reducing the tax burden on labor, which remains high across the region, holds the promise of improving labor market outcomes. Such tax cuts could especially target low-wage workers, which often face the highest marginal tax rates and very elastic labor demand and are therefore most likely to be priced out of the formal labor market.
This week, the World Bank, in partnership with the government of Brazil and the State of Rio de Janeiro, is co-hosting a South-South Learning Forum to promote knowledge exchange among policymakers from developing countries on ways to improve the design of social protection and labor systems at the policy, program and service delivery levels.
Over the next 10 years, Africa will have created about 122 million new jobs, says the World Bank Youth Employment in Sub-Saharan Africa Report. Although this is a very exciting forecast, mass job availability alone won’t be enough to address the unemployment issues in Africa, especially when the new jobs are not proportional to the influx of unemployed youth. Furthermore, the pace at which these jobs are being created falls short of the rate of youth entering the job market per year. During the next ten years that it takes for Africa to finally create the new jobs, eleven million youth will have been entering the labor market each year.
“It is not what you know that matters, it is who you know” is how the old adage goes, and so I have observed from my conversations with family and friends during my recent visit back to my hometown in East Jerusalem when I asked what they thought of the often heard complaint among Arab youth that “wasta” is all that matters in landing a decent job nowadays.
- Social Development
- Labor and Social Protection
- Middle East and North Africa
- Yemen, Republic of
- West Bank and Gaza
- United Arab Emirates
- Syrian Arab Republic
- Saudi Arabia
- Iran, Islamic Republic of
- Egypt, Arab Republic of
The three points made in my previous post—that services particularly fail poor people, money is not the solution, and “the solution” is not the solution—can be explained by failures of accountability in the service delivery chain. This was the cornerstone of the 2004 World Development Report, Making Services Work for Poor People. In a private market—when I buy a sandwich, for example—there is a direct or “short route” of accountability between the client (me) and the sandwich provider. I pay him directly; I know whether I got a sandwich or not; and If I don’t like the sandwich, I can go elsewhere—and the provider knows that.
Each month, about one million people enter the labor force in Africa. Another one million start looking for work in India. Add to this millions of others around the globe, and worldwide, some one billion people will enter the labor force between now and 2030.
Why is that date important? That’s the deadline World Bank Group President Jim Kim has set for ending extreme poverty and boosting shared prosperity. Making this happen will require not only a healthy and skilled labor force, but also requires creating ample job opportunities, and ensuring that young adults can find productive work.
The recent article in Mada Masr about Egypt’s new public-sector minimum wage “falling short” makes the right point—that the increase will exacerbate inequality—but for the wrong reason. It is not because the new minimum wage is “not applied on the national level or across sectors.” It is because nearly three out of four Egyptian workers are small farmers, self- employed or work in the informal sector. These workers will not benefit from any increase in the minimum wage, whether it is restricted to the public sector or not. About 41 percent of those in the informal sector earn less than the previous minimum wage of EGP 700, and 75 percent earn less than the new minimum wage of EGP 1,200. The government has just increased the wages of those who are already earning more than about half the workforce.