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.
Labor and Social Protection
“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.
Taxing Labor versus Taxing Consumption?
Europe’s welfare systems face substantial demographic headwinds. Increasing life expectancy and the approaching retirement of “Baby Boomers” will increase public expenditures for years to come. Rightfully, much attention is focused on containing additional spending needs for pensions, health and long term care. But how is all this being paid for?
Currently, the majority of social spending, including most importantly pension benefits, in most countries in Europe and Central Asia is financed through social security contributions, which are essentially taxes on labor. This has two important implications. First, in terms of fiscal sustainability, the growth in spending is only a concern if expenditures grow faster than the corresponding revenues. Since labor taxes are the predominant source of financing for most welfare systems in both EU and transition countries, aging will not only increase spending, but simultaneously exert pressure on revenues. With the exception of countries in Central Asia and Turkey, the labor force, and hence the number of taxpayers that pay labor taxes will decline by about 20 percent on average across the region. Second, already today, labor taxes, including both personal income taxes and social security contributions account on average for about 40 percent of total gross labor costs in Europe and Central Asia (including EU member states), compared to an average of 34 percent in the OECD. This means that for every US$ 1 received in net earnings, employers on average incur a labor cost of US$ 1.67. And out of the 67 cents that are paid in labor taxes, 43 cents (or 65 percent) are directly used to finance social security benefits. By increasing the cost of labor, the high tax burden potentially harms competitiveness, job creation, and growth in countries in the region.
Two weeks ago, I blogged about some productive impacts of cash transfer programs. For these effects, as well as the myriad other blog posts and papers on this topic out there, a key point is that the benefits of these transfers extend well beyond the actual individual recipient of the transfer.
People, Spaces, Deliberation bloggers present exceptional campaign art from all over the world. These examples are meant to inspire.
Thursday, February 20 is World Day of Social Justice. This video from the International Labor Organization features eminent voices from Kofi Annan to Shakira and asks "What is social justice and what does it mean for people the world over?"
Please add your voice and tell us what social justice means to you, by leaving us a comment.
Lessons from the recent history of Central Europe and the Baltics
Economic growth has returned to Central Europe and the Baltics. With the exception of Slovenia, all countries are expected to see positive growth in 2014 - ranging from a tepid 0.8% in Croatia, to more respectable growth rates of 2.2% in Romania and 2.8% in Poland, to highs of 3-4.5% percent in the Baltic Republics. Europe, more broadly, is also turning the corner and is expected to grow at around 1.5%.
Amidst this much welcome growth, however, one question remains: will economic growth be good for the bottom 40 percent and can they expect to see their incomes grow?
Governments (and donors alike) don’t like dealing with informality. It’s messy, dirty, essentially unmeasurable, and its character varies dramatically. From one industry to the next. From one city to the next. It’s also beset with fiendishly difficult problems – informal firms are often household enterprises (employing mainly family labour, and not hired labour). Thus, they have to make impossible trade-offs between production and consumption.
And yet – the size and the importance of the informal sector in most countries shows no signs of abating. On average the informal share of employment ranges from 24 per cent in transition economies, to 50 per cent in Latin America and over 70 per cent in sub-Saharan Africa. In India, employment within the informal sector is growing, while that in the formal sector remains stagnant. Yet - very little is known about the relationship, whether symbiotic or competitive, between the two sectors.
In a new paper, I notice that in India formal firms tend to cluster with informal firms – especially in industries like apparel, furniture and meal-making. The firms coagglomerate not only so that they can buy from and sell to one another – but importantly, also because formal firms tend to share equipment with and transfer technical knowledge to their informal counterparts. Such technical and production spillovers are found in clusters of domestic-foreign, exporter-non-exporter and high-tech-low-tech firms. It is no surprise then that formal and informal activity could be complementary. Informal can also be an outlet for entrepreneurial activity, especially in places with high levels of corruption, or where formal firms are often mired in complex regulations.