This blog is part of a weekly series that we hope will provide some food for thought on the critical questions outlined in the forthcoming MENA Flagship Report on Jobs.
There is more to unemployment than the simple fact of not having a job. It brings with it a whole set of additional difficulties, and on a large scale can have far reaching social consequences. This is especially true for young people struggling with a lack of stable employment and weak prospects for landing any permanent work. Jobs are an important source of social identity, and without one, young people can be cast adrift. This can lead them to feeling alienated and marginalized, which can in turn make them susceptible to radical ideas – either political, religious or otherwise.
The experience with economic crises over the past 100 years has suggested that an increase in joblessness and insecurity tends to be accompanied with the rising influence of more radical forms of ideology, politics and religion. In a more fragile environment, low employment can fuel a vicious cycle whereby frustration over the lack of prospects can produce social disturbances, such as riots, which erode business confidence and cause investment to evaporate, which leads to more frustration and more riots, and so forth.
The recent upsurge in social instability in the Middle East and North Africa (MENA) can be tied to the region’s enormous jobs challenge, with the social impact of malfunctioning labor markets contributing indirectly to the current disturbances.
Queuing for jobs
Compared to other regions, relatively few people in MENA countries have stable employment. Less than one fifth of the working age population work in the formal, private or public sector. The demand for the available formal jobs is huge , especially those in the public sector, as they tend to offer a good wage and generous benefits. Such jobs are, however, not open to fair competition and tend to be filled through processes that rely on connections rather than skills match and competencies. Queing and waiting for jobs in the public sector is also common, drawing significant talent and energy away from the private sector.
The fact that more than 80% of the working age population does not have formal employment makes the MENA region unique. Nearly one half of the working age population is neither working nor actively looking for work and thus remain outside the labor force. About one in fifteen is officially looking for work and considered formally unemployed. Among these, a high percentage belong to the younger generation. The remaining, about one quarter of the working age population, is engaged in informal jobs without a contract or any form of social protection.
There is little peace without employment
Economists have observed that employment is not only critical for economic development, poverty reduction and improvements in living standards, but also for social cohesion and stability. This has, in fact, become one of the themes of the upcoming 2013 World Development Report. Employment therefore plays a vital social role beyond its direct benefits for both employers and employees. While free market forces do not directly support this critical social role, there is a vivid and ongoing discussion about the function of the state in promoting employment. Unfortunately, subsidies for energy and labor saving capital, strict labor market regulations and poorly designed employment protection, as in the case throughout the MENA region, tend to be counterproductive.
In search of solutions
To enhance prosperity and stability, MENA countries need to expand employment. In the private sector, new jobs can emerge when laws and regulations and their enforcement practices make it easier to start new enterprises, obtain financing, compete in the marketplace, and hire and manage the workforce. National resources spent on excessive benefits for the public sector workforce – and on energy price subsidies – could instead be directed toward targeted social protection schemes, including needs-based social safety nets and programs for skills development, as well as actively matching candidates with specific skills to appropriate available jobs. This would benefit a much wider population, and align with each individual country economic development strategy, social objectives and market needs.
An effective system for social protection and employment would in turn allow for the reform of labor laws and regulations, to make them less burdensome. Instead of reinforcing the privileges of those few fortunate to have formal employment, as current labor laws inevitably do, the legal and regulatory framework could offer greater flexibility to employers and employees alike; making it easier for employers to create jobs and for the government to protect workers‘ income in the event of temporary job losses.
As part of the effort of many MENA countries to create a new social contract, stakeholders should acknowledge the wider social benefits associated with employment. In this spirit, for instance, labor unions would seek not only to guard the conditions of those with jobs but also to fight for the rights and aspirations of those who seek jobs, including young women and school graduates, among the groups that are now overwhelmingly excluded from the job opportunities. Employers could work with schools and other institutes of learning to train not only better employees, but also entrepreneurs, and students and parents could demand better, more relevant education.
A better jobs eco-system in MENA countries would brighten the prospects of the many job seekers, and contribute to a more stable future for their entire societies.
This blog is part of a weekly series that we hope will provide some food for thought on the critical questions outlined in the forthcoming MENA Flagship Report on Jobs. The common thread and objective of these blogs are to spur a conversation on “what to tell your Finance Minister .” This is in preparation for the World Bank Annual Meetings in October 2012, where the report's main messages and the results of the live chat will be presented to MENA policy makers. We want to know what YOU think is holding people back, and what can be done to create more and better jobs in MENA.
Read the previous weeks' blogs in the series: