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FEATURE STORY

MENA: A job has always meant more than a salary

April 9, 2013

As the various transitions continue to unfold, the quest for decent jobs remains a central theme.

“Al Karama!” – “Dignity!” was one of the main rallying cries of the ‘Arab Spring,’ as thousands of young people took to the streets demanding economic and social justice. Rising unemployment has been cited as one of the main causes for the series of protests that launched an unprecedented period of change in the Middle East and North Africa (MENA) region.  As the various transitions continue to unfold, the quest for decent jobs remains a central theme. Jobs provide a livelihood, but they mean much more than a salary: without one, a person can lose his sense of self-worth and fulfillment.

In the MENA region, it is only once you can support yourself (and afford to marry, amongst other things) that you are recognized as an adult - and a fully respected member of society. The common fate for the many unable to achieve this is to be relegated to the margins of society. This can lead to great frustration and, as events have shown, also poses a risk to social cohesion and security.

Ultimately, it all comes down to dignity, or rather, the lack of it. The Arab Spring and its call for jobs and dignity, made this connection explicit. Jobs are indeed one of the most vital components in achieving the Arab Springs’ goals of social and economic justice. Job creation is no longer just an option but rather a priority and a necessity for most countries in the region.

MENA’s unemployment rate of 10% (2007) remains the highest in the world. At the same time, informal sector constitutes 67% of all employment (compared to 61% in Latin America and 40% in Europe and Central Asia). Unemployment and inactivity are more prevalent in MENA than in other middle-income regions. While unemployment rates have decreased from 14.1% in 2002 to 10% in 2007, they remain the highest in the world. The lack of employment opportunities is also reflected in the high levels of informality. High-paying or formal jobs are few, and private employment is overwhelmingly of low value added. Overall, the region’s labor markets can be characterized as inefficient, inequitable, and locked in a low-productivity equilibrium. High wage differentials and low mobility to better-quality jobs underscore the fact that human capital is not allocated to its most productive use.

The fact that access to desirable jobs depends more on circumstances beyond individual control than on merit leads to an inequitable distribution of employment opportunities. While some of the most coveted jobs are in the public sector and provide high individual returns, these are not necessarily associated with the highest productivity.

The statistics related to female employment in the region tell an even more dramatic story. Women in MENA have made great strides in education, often now outnumbering men at the tertiary level, and have demonstrated a strong desire to work. However, their accomplishments have not translated into employment gains. The labor force participation rates for women in MENA languish at an average of 25 percent, one of the lowest in the world.   

High unemployment among educated women and large gender wage gaps point to an untapped pool of educated women who are willing to work but are unable to find suitable jobs. A combination of cultural, economic and legal hurdles inhibits women’s transition from school to work. MENA women in general face limited labor market mobility: employment is often concentrated in a very narrow group of occupations that have to be located close to home or have access to safe public transport. It also appears as if they are prevented from using the same range of job search methods as men (such as calling or visiting prospective employers etc.). Moreover, there is a greater mismatch between the skills acquired by women and the demands of the labor market, as compared to men.

The result, along with very high unemployment rates (as high as 40 percent amongst young women in Egypt and Jordan) is that many women eventually drop out of the labor force entirely. Currently, three out of every four working-age women are inactive, meaning outside the labor force, which is the lowest rate of female labor force participation in   any other region of the world. If they were better served by labor markets, all MENA women, regardless of their educational attainment, would have more opportunities of finding more fulfilling and productive uses of their time if labor markets served them well. The good news is that many of the constraints, such as women’s limited mobility, can be positively influenced by policy.

There is a tremendous reservoir of untapped human resources and talent that is ready to be unleashed.  The MENA region has invested heavily in the education of both men and women over the past decades. To capitalize on this ongoing investment, it is crucial to ensure that the quality and relevance of the skills acquired are in line with the needs of the labor market. It is equally important to provide multiple pathways in education, backed up by ‘second chance’ options for those that end up without the necessary skills, in order to develop a productive workforce.

The importance of merit in access to education and hiring must be emphasized. More meritocracy signals market needs more clearly both to education and training systems. By doing so, it creates a demand for the “right” skills in the “right” areas and reduces mismatches. By improving the quality and relevance of skills, by closing information gaps and partnering with the private sector in training, young people will be more employable, with the chance of a far better return on their investment in education.

This report "Jobs for Shared Prosperity - Time for Action in MENA uses jobs as a lens to weave together the complex dynamics of employment creation, skills supply, and the institutional environment of labor markets. The report goes beyond the traditional links between jobs, productivity, and living standards to include an understanding of how jobs matter for individual dignity and expectations and the many layers of exclusion. Just as important, this report complements the economic perspective with an analysis of the political economy equilibrium, with a view to identifying mechanisms that would trigger a reform process.

As such, the report has three objectives: first, it seeks to provide an in-depth characterization of the dynamics of labor markets in MENA and to analyze the barriers to the creation of more and better jobs. Second, the report proposes a medium term roadmap of policy options that could promote the robust and inclusive growth needed to tackle the structural employment challenge for the region. Third, the report aims to inform and open up a platform for debate on jobs among a broad set of stakeholders, with the ultimate goal of contributing to the evolution of a shared view of the employment challenges and the reform path ahead.

The Arab Spring offered vast opportunities for breaking with the past and adopting a development model benefitting all citizens. The conclusions and recommendations of this report could form the basis of such a road map for change. The report identifies the specific barriers preventing inclusive growth and private sector–led job creation and offers a series of policy options for overcoming them. Moreover, in recognition of the urgency of the situation, and of the difficulty in achieving the necessary consensus to effect change, the report proposes a series of steps to initiate the process. It recommends embracing the new spirit of openness to engage a wide cross-section of society. The goal would be to establish a common understanding of the nature of the problem and a shared commitment to a program for solving it. The report further suggests ways of bolstering the credibility of the reform process with short-term interventions, such as youth-targeted employment programs and investments in essential infrastructure that address immediate needs and produce visible results. Addressing the job situation in a comprehensive manner is something that MENA countries can least afford to overlook during this time of change.

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Main messages:

  • Labor markets in MENA make poor use of the available human talent and resources, thus inhibiting the economic potential of countries and people in the region.
  • Change the rules to create a dynamic private sector that capitalizes on the full range of the region’s human capital.
  • Let skills flow into productive private sector jobs by realigning employment conditions in both the private and the public sector and rethinking labor regulation. Lower the barriers holding back women who want to work.
  • Make young people employable by closing information gaps, improving quality and relevance of skills, and partnering with the private sector in training.
  • Use short-term interventions to respond to immediate needs while building the credibility and consensus for medium-term, game-changing reforms.