Daunting challenges lie before the Arab-speaking workforce today. Forty million jobs must be created in the next decade to employ the region, home to the highest rate of youth unemployment – not to mention that many countries are still undergoing a period of political transition. The fundamental question about job creation now is where these countries should be headed and how they are getting there.
Moving to a knowledge and innovation-based economy is an idea whose time has come. The links between knowledge and innovation (and by extension, to productivity) are undisputed. And in the same way that productivity is the enabler of an economy, education can be considered to be a fundamental pillar of the knowledge economy.
Despite the region’s clear commitment to education, returns in terms of average years of schooling – have been modest in the Middle East and North Africa (MENA). And although secondary and tertiary enrollment rates have doubled in MENA since 1990, they remain less than one third of the rate of university enrollment in the United States and Western Europe.
Another concern is what these students are studying. In more than half of the MENA countries, approximately two-thirds of secondary school students major in the social sciences or humanities. In a world where technological innovation plays a pivotal role, the overwhelming focus on social sciences or humanities raises the question of whether the region’s youth can remain competitive. To rise to the challenge of global competition and rapid technological change, students must master a variety of so-called soft skills—problem solving, communication, teamwork, as well as mastery of ICTs and foreign languages—that are essential for employability and productivity.
The last but most pressing area of concern is women’s participation in the labor force. The rate of female labor force participation in the MENA region (at 25 percent) is both half the global average and the lowest in the world. This is a problem that requires a revised legal framework as well as changes in social and cultural norms. This also brings into question regulations that have so far restricted women’s entry into economic and political life.
All in all, if a move is to be made in the direction of a knowledge economy in MENA, investing in high quality education is essential. This is the key to creating good and decent jobs that are so needed in the region today. The STEP meaning Skills Toward Employment and Productivity approach provides a simple yet comprehensive way to look at skills development for more jobs and higher productivity. It also helps to orient the areas of action needed in the Arab world. These issues, and more, are further explored in the World Bank’s report: Transforming Arab Economies: Traveling the Knowledge and Innovation Road  (World Bank 2013).
Step 1: Developing the technical, cognitive and behavioral skills conducive to high productivity and flexibility in the work environment—by starting right through early child development, emphasizing nutrition, stimulation, and basic cognitive skills.
Step 2: Ensuring that all students learn—by building stronger systems with clear learning standards, good teachers, adequate resources, and a proper regulatory environment. Lessons from research and ground experience indicate that successful systems must address key decisions involving how much autonomy to allow and to whom, accountability from whom and for what, and how to assess performance and results.
Step 3: Training to build additional job-specific skills that employers demand—by developing the right incentive framework for both pre-employment and on-the-job training programs and institutions (including higher education). There is accumulating experience showing how public and private efforts can be combined to achieve more relevant and responsive training systems.
Step 4: Encouraging entrepreneurship and creativity —by creating an environment that encourages investments in knowledge and innovation. Emerging evidence shows that addressing the need for creativity, leadership, time management and communication skills requires innovation-specific skills (which can be built early in life), connecting people with ideas (e.g., through collaboration between universities and private companies) and risk management tools, including safety nets.
Step 5: Matching the supply of skills with the demand —by moving toward more flexible, efficient, and secure labor markets. None of the first four steps matter if people cannot find jobs that match their skills. Avoiding rigid job protection regulations while strengthening income protection systems, complemented by efforts to provide information and intermediation services to workers and firms, provides the final complementary step in the process to transform skills into actual employment and productivity.
Source: World Bank 2010.
Sources: World Bank. 2010. 2010a.Stepping Up Skills for More Jobs and Higher Productivity. Human Development Network, World Bank, Washington, DC.
World Bank. 2013. Transforming Arab Economies: Traveling the Knowledge and Innovation Road. Prepared by the CMI (Center for Mediterranean Integration) with the World Bank, EIB (European Investment Bank), and ISESCO. Washington, DC.