Unlocking the Employment Potential in the Middle East and North Africa Toward a New Social Contract

by World Bank

• ISBN13: 9780821356784
• ISBN10: 082135678X
• Format: Paperback
• Copyright: 2004-04-05
• Publisher: World Bank Publications
• More Book Details

Summary

Over the next two decades, the Middle East and North Africa (MENA) region faces an unprecedented challenge. In 2000, the labor forces of the region totaled some 104 million workers, a figure expected to reach 146 million by 2010 and 185 million by 2020. Given this expansion, the economies of the region will need to create some 80 million new jobs in the next two decades. With unemployment now at about 15 percent, the more ambitious goal of absorbing unemployed workers in addition to the new entrants implies the need to create close to 100 million jobs by 2020, a doubling of the current level of employment in the first two decades of the 21st century.In no small measure, MENA's economic future will be determined by the fate of its labor markets. The problems to be overcome are enormous; their complexity is daunting. Yet the costs of inaction and the benefits of dynamic labor markets underscore the imperative of acting quickly and decisively. If current trends continue, economic performance and the well-being of workers will be undermined by rising unemployment and low productivity. If labor market outcomes improve, however, MENA's growth will accelerate, raising the living standards of the population across the region.Unlocking the Employment Potential in the Middle East and North Africa argues that meeting this employment challenge will require the transformation of MENA's societies and economic structures. MENA needs a new development model based on a reinvigorated private sector, greater integration into the world economy, and better management of oil resources. These drivers of future growth and job creation require a foundation of better governance. Moreover, this transformation necessitates a new social contract.

Table of Contents

Foreword	xvii
Acknowledgments	xix
Acronyms and Abbreviations	xxi
Overview: Creating 100 Million Jobs for a Fast-Growing Work Force	1	(16)
1. Introduction	17	(6)
Labor Market Outcomes in the Post-World War II Period	17	(1)
Scope and Methodology of the Report	18	(1)
Structure and Organization of the Report	19	(2)
Findings in Comparative Perspective	21	(2)
2. Evolution of State-Labor Relations in the Middle East and North Africa	23	(22)
Legacy of the Social Contract	23	(1)
Definition of the Social Contract	24	(9)
Characteristics of the Social Contract	25	(1)
Context That Produced the Social Contract	26	(1)
External Factors That Contribute to the Social Contract	27	(1)
Domestic Factors That Influenced the Social Contract	28	(1)
Rise of Mass Politics	28	(1)
Mass Politics and the Nationalist Movement	29	(2)
The Changing Political Arena	31	(1)
Codification of the Social Contract	31	(2)
The Social Contract and Labor Markets	33	(12)
State Regulation and Intervention Were Extensive	33	(3)
Economic Growth Marks the 1960's and 1970's	36	(1)
Oil Helps Sustain the Social Contract	36	(2)
The Social Contract Addresses MENA's Deficiencies	38	(1)
The Social Contract Is under Strain: The 1980's and 1990's	39	(1)
Oil Prices Collapse and Economic Crisis Occurs	39	(1)
Governments Respond to Economic Difficulties	39	(3)
Vulnerability to External Shocks Increases	42	(1)
Adjustment Challenges the Social Contract	42	(1)
Costs of the Redistributive Preference Are Rising	43	(2)
3. Demography, Labor Growth, and Employment Outcomes	45	(44)
MENA's Demographic Transition	45	(10)
Mortality Rates Have Declined Rapidly	46	(1)
Fertility Transition Was Slow	46	(1)
Differences within MENA Are Significant	47	(1)
Determinants of Fertility Must Be Understood	48	(1)
MENA Conforms to Global Patterns	49	(1)
Orientation of Government Policies Has Changed	50	(1)
Age Structure Is Changing Rapidly	50	(4)
Demographic Burden Becomes a Demographic Gift	54	(1)
Effect of Delayed Transition on Labor Force Growth	55	(16)
Demographic Transition Drives Labor Force Growth	56	(1)
Labor Force Participation Rates Have Been Rising	57	(1)
Migration Fuels the Expansion of Labor Supply in Oil-Exporting Countries	58	(2)
Patterns of Demographic Transition Determine Country Profiles	60	(1)
Rural Migration Contributes to Urbanization	60	(2)
Effect of Young Working Adults Is Growing	62	(1)
Gender Profile of the Labor Force Is Changing	63	(3)
Labor Force Is Increasingly More Educated	66	(1)
Gender Gaps Are Narrowing by International Standards	67	(1)
Education Matters More for Female Labor Participation	68	(3)
Labor Market Outcomes in the 1990's	71	(18)
High Unemployment Emerges	71	(2)
Real Wages Have Stagnated or Declined	73	(1)
Many Factors Lead to Adverse Labor Market Outcomes	73	(4)
Employment and Output Trends Are Linked 74
MENA's Growth Performance Needs Closer Examination	77	(1)
MENA Had Exceptional Performance before the 1980's	78	(1)
Oil Bust Signaled the Beginning of Economic Crisis	79	(1)
Stabilization and Reform Programs Followed	79	(2)
Crisis in Accumulation Deepened	81	(1)
Investment by the Public Sector Is Not the Answer	81	(2)
Response of Private Investment Was Limited 82
External Instability Correlates Negatively with Private Investment	83	(3)
Insecurity Affects Labor Markets Directly	85	(1)
Toward a Fuller Understanding of Labor Market Outcomes	86	(3)
4. Structure of Employment and Earnings in the 1990's	89	(38)
Structure of Unemployment	89	(5)
Youth and Female Unemployment Are High	90	(2)
Unemployment and Education Are Strongly Linked	92	(2)
Public Sector Employment in the 1990's	94	(7)
Dynamics of Public Sector Employment	96	(2)
Efforts to Downsize: Some Countries Falter, a Few Succeed	98	(1)
Gender and Occupation in the Public Sector	99	(2)
Role of the Public Sector Reinforced by Education	101	(1)
Structure of Labor Markets	101	(5)
Agriculture Declines While Manufacturing Is at a Standstill	102	(2)
Services Are the Most Dynamic Sector	104	(1)
Mixed Patterns Exist in Job Creation	104	(2)
Informalization of Work in the 1990's	106	(5)
Challenge of Measuring the Informal Sector	106	(1)
Dynamic Informal Sector or Informalization?	107	(1)
Expansion of Informal Employment for Everyone	108	(3)
Gender Equity in Access to Labor Markets	111	(3)
Real Wages and Wage Formation	114	(6)
Flexibility Suggested among Trends in Real Wages	114	(2)
Higher Returns to Education in the Public Sector	116	(1)
Decline of Public-Private Wage Differences	116	(2)
Measurement of the Gender Wage Gap	118	(2)
Income Inequality That Remains Moderate	120	(6)
Growth and Redistribution Protect Welfare Gains	121	(1)
Wage Inequality Remains Greater than in Other Regions	121	(1)
Poverty Rates Are among the Lowest in the World	122	(2)
Poverty Is Not Associated with Unemployment	124	(2)
What We Have Learned	126	(1)
5. Labor Market Reforms: Opportunities and Constraints	127	(44)
Reforming the Labor Market in a Dynamic Setting	127	(2)
Rationalizing the Role of the Public Sector	129	(8)
Wage Bills Are High but Productivity Is Low in the Public Sector	129	(2)
Public Sector Reforms Are Critical for Reducing Unemployment	131	(1)
Wages and Benefits Drive Preferences for Public Employment	131	(1)
Menu of Policy Options Is Large and Flexible	132	(2)
Rationalizing the Public Sector Has Effects	134	(3)
Looking at Labor Market Institutions in the Private Sector	137	(13)
Social Protection That Balances with Flexibility	139	(3)
Strong Dynamic Effects of Labor Market Regulations	142	(2)
Hiring and Dismissal Procedures That Influence Employment	144	(1)
Uneven Progress with Labor Reforms	145	(1)
High Indirect Labor Costs	145	(5)
Quantifying the Effects of Labor Reforms	150	(3)
Political Economy of Labor Market Reforms	150	(1)
Aggregate Effects of Reforms: Positive but Modest	151	(2)
Using Active Labor Market Policies in MENA	153	(6)
Upward Trajectory in the Use of Active Labor Market Policies	154	(1)
Wide Use of Public Works Programs	155	(1)
Increases in Microfinance and Unemployment Lending	155	(2)
Training and Retraining Programs for the Unemployed	157	(1)
Evidence of the Limitations of Active Labor Market Policies	158	(1)
Considering the Special Case of Labor-Importing Countries	159	(6)
Labor Force Nationalization Policies Are Gaining Momentum	159	(3)
Effectiveness of Policies Is Unclear	162	(1)
Subsidies Are Potentially Effective but Expensive	163	(1)
Similar Considerations Apply to All Active Labor Market Policies	164	(1)
Taking Stock of What Has Been Learned	165	(1)
Appendix	165	(6)
6. Foundations of Future Growth and Job Creation	171	(34)
Traditional Engines of Employment Growth	171	(4)
Option of Public Sector Employment Will Diminish	171	(2)
Future Role of Regional Migration Is Limited	173	(1)
Migration to Europe Is Constrained by Policy	173	(2)
MENA's Need for New Engines of Job Creation	175	(10)
Foundations of New Development Policies	176	(1)
Reinvigoration of the Private Sector	177	(3)
Necessity for Integration into the World Economy	180	(2)
Improved Management of Oil Resources	182	(1)
Better Governance Needed to Complete the Three Transitions	183	(2)
Road to Completing the Transitions	185	(10)
Initial Conditions and Country Groupings	185	(2)
Transition in Resource-Poor Countries	187	(2)
Transition in Resource-Rich, Labor-Abundant Countries	189	(1)
Transition in Resource-Rich, Labor-Scarce Countries	190	(1)
Sequencing of Reforms and Adjustment of Costs	191	(4)
Strengthening of Governance Aspects of the Transition	195	(1)
Role of Human Capital in the Transition	195	(8)
Maintaining and Expanding Access to Education	196	(1)
Building on Past Success	197	(2)
Improving Educational Quality and Addressing the Skill Mismatch	199	(4)
Facing the Challenges Ahead	203	(2)
7. Toward a New Social Contract	205	(16)
MENA Needs a Vision of the Future of Its Labor Markets	205	(2)
Successful Reform Requires a New Social Contract	207	(2)
What Needs to Be Done Is Widely Acknowledged	209	(2)
Reforms Have Been Too Limited and Too Slow	211	(1)
Overcoming the Obstacles to Reform Is Critical	211	(1)
Soft Budget Constraints and Political Challengers Have Impeded Reform	212	(2)
Governments Have Decoupled Economic and Political Reform	214	(1)
Today, Economic and Political Reforms Must Be Linked	215	(3)
Support from External Partners Is Critical	218	(1)
Main Responsibility Rests with MENA	219	(2)
Statistical Appendix	221	(10)
Bibliography	231	(22)
Index	253