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Tunisia Moves to Modernize its Social Protection and Labor Policies

May 20, 2016

This village kiosk—part of a unexpected “jobs ecosystem”—was set-up by two women who launched a small business of handmade crafts and other goods to the new groups of workers in impoverished regions of southern Tunisia.

World Bank Group

  • Democratic progress is yet to be matched with economic progress in Tunisia, whose GDP for 2015 may be as low as 1%.
  • Though Tunisia has created many more public sector jobs, unemployment is still high at 15%.
  • Making benefit payments and labor programs more efficient could help; so could switching state subsidies from fuel to investing in the private sector to create jobs.

In 2011, Tunisia set itself on a new trajectory, peacefully ousting a 30-year dictatorship. In the five years that have followed, Tunisians have passed a new constitution and held democratic elections. Tunisia’s also managed to maintain stability, despite security threats at home and unrest next door in Libya. But, though it’s moved forward politically, social inequity inside it persists, with little progress on the sort of economic reforms needed to address the underlying roots of the country’s democratic uprising.  

Critical reforms are needed because Tunisia’s dismal real GDP growth rate—forecast at just 1% for 2015—needs fixing. Without bold measures, Tunisia’s short-term economic outlook is bleak; though lower than in 2011, unemployment remains high at a staggering 15% as of 2015.

Tunisia’s social protection and labor policies are a central tenet of the type of reforms needed.

A new World Bank report, Consolidating Social Protection and Labor Policy in Tunisia: Building Systems, Connecting to Jobs, focuses on modernizing Tunisia’s social protection and labor programs, both critical to the nation’s social and economic stability as it moves forward. The report assesses the performance of Tunisia’s key social protection and labor programs in terms of equity, efficiency, and sustainability.

Importantly, the report—prepared together with an array of governmental and non-governmental technical experts—finds that, since 2011, unemployment in Tunisia has largely been mitigated by adding tens of thousands more jobs to the public sector. However, this has placed immense, unsustainable pressure on the national budget.

Lessons learned from recent analyses and pilot projects, suggest that new, public-private models for active labor market programs targeted at low-skilled workers can help boost livelihoods while the economy waits for broader job creation investments to take hold.

Examples of this include decentralized, on-the-job paid apprenticeships and small businesses, such as a village shop set up by two women as the indirect result of a pilot employment program that had been launched to help stimulate the local economy in parts of southern Tunisia suffering from a drop in border trade with Libya.  It offers a glimpse of the possibilities the future could hold. 

Currently, for Tunisians who are without access to a government job, and who lack the skills for the formal private sector, the only option is the informal sector. More than a third of the workforce toils without the security of having a proper contract or the prospect of receiving a pension, in part due to social security and labor regulations with a bias towards public sector employment. 

Even those with formal unemployment could face uncertainty in retirement. The pension system faces deficits that may reach at least 2% of Tunisia’s GDP by 2018, by conservative estimates, with the result that the most vulnerable members of society, such as the self-employed, often remain uncovered by pension schemes.

Only 37% of Tunisia’s population of 11 million contributes to pension payments, only half the population is covered by health insurance, and there are no unemployment benefits for people who lose their jobs.  Moreover, although nearly a quarter of Tunisians (23%) receive benefits, less than half (40%) of those who do are among Tunisia’s poorest people.

Tunisia’s welfare system for the poor faces issues concerning its sustainability as well as issues concerning the poor targeting of benefits and a lack of mechanisms to ensure either transparency or exit strategies for boosting livelihoods. The latest estimates suggest that, of all Tunisia’s social safety net beneficiaries, only 40% of them are officially people living below the national poverty line. Benefits are generous, often amounting to about 21% of total income, but the absence of clear protocols to ensure accurate targeting and active policies to promote livelihoods and jobs remain a hindrance for low-skilled individuals.

To move ahead, the Bank proposes that a systems-based approach to reform would accelerate progress.  The policy note argues that without significantly improving the institutional coordination of financing and the delivery of social benefits, Tunisia’s social protection and labor system will be ill-equipped to strengthen economic and social inclusion overall.   

As part of Tunisia’s first, post-transition, five-year development plan (2016–21), the government, in close consultation with the private sector, unions, and civil society stakeholders, could:

  • In the short-term, streamline the design and delivery of key welfare and work-related services, including that of active labor market programs to respond to local needs and low-skilled households better through public private partnerships,
  • In the mid-term, strengthen governance and institutions, notably by revisiting institutional mandates, by developing a unified policy with clear aims, and by rolling out a unique identification system for all social and labor-related benefits, services, and programs. These could include active labor market programs, social safety nets, pensions, health insurance, and future unemployment benefits; and
  • In the long-term, bolster the financial sustainability of the broader system, notably by re-allocating and restructuring financing for social security and switching universal subsidies to more productive investments that can stimulate job creation and improve human capital.

Tunisia has been taking steps towards these reforms since 2012. The more it can promote political and institutional consensus building on the design of critical reforms, the greater the chances its efforts will pay off.