Wacky Ways of Middle East Youth Unemployment

♠ Posted by Emmanuel in ,, at 8/13/2012 06:52:00 AM
Over a year ago I penned a much-visited post depicting the world's worst levels of youth unemployment in the Middle East / North Africa (MENA) region that continue to contribute to pressures for regime change in any number of MENA countries. Today, I have an update on certain peculiarities of the MENA situation that make it unique from the rest of the world. While there are any number of regions with a problem with youth unemployment--North America and Western Europe are certainly not exempted--remedies for the MENA region must take its contextual specificities into account.

The IMF's Masood Ahmed recently enumerated a number of.these challenges. Of particular interest for being atypical are the following:
(1) In contrast to much of the rest of the world, the better educated are more likely to be unemployed since they are holding out for better employment opportunities. Think of the implications here: Were scores of the young Arab Springers in reality a bunch of brats who lived lives of leisure out of choice and blamed others for their predicaments? It's certainly a researchable proposition...
Unusually, education in this region is not a guarantee against unemployment. In fact, unemployment tends to increase with schooling, exceeding 15% for those with tertiary education in Egypt, Jordan and Tunisia.

In most regions of the world, the duration of unemployment spells is shorter for youth than for adults, reflecting the natural tendency of youth to more frequently move between jobs. In most MENA countries, however, youth unemployment appears to be the result of waiting for the right job. Thus, unemployment spells may be longer, especially for educated youth, who may require more time to find a good job match for their skills.
Take that, "education is the solution to everything" fantasists. Snootiness aside, it may also be the case that skill mismatches are rife among the unemployed holdouts:
Labour market mismatches have been driven by the inability of the economy to create highly skilled work but also by the inappropriate content and delivery of education...

In addition, entrepreneurs regularly cite the lack of suitable skills as an important constraint to hiring and unemployment rates are highest among the most educated. Taken together, this suggests that education systems in the region fail to produce graduates with needed skills.
(2) Government jobs are not only more common than elsewhere but also more remunerative. In effect, the relative cushiness of civil service makes working in the private sector unattractive with less pay and job security:
The MENA region also has the highest central government wage bill in the world (as a percentage of GDP) – 9.8% of GDP compared to a global average of 5.4%. The high wage bill partly reflects the fact that government employment in MENA is comparatively high, but it also reflects the fact that public sector wages in MENA were on average 30% higher than private sector wages, compared to 20% lower worldwide. Around the turn of this century, the public sector accounted for about one-third of total employment in Syria, 22% in Tunisia, and about 35% in Jordan and Egypt.

Public-sector employment shares are even higher as a percentage of nonagricultural employment – reaching 42% in Jordan and 70% in Egypt. The dominant role of the public sector as employer throughout MENA has distorted labour market outcomes and diverted resources away from a potentially more dynamic private sector. Government hiring practices have typically inflated wage expectations and placed a premium on diplomas over actual skills, influencing educational choices and contributing to skill mismatches.
(3) Once more, these comparatively cushy government sector jobs only makes private sector work look like the pits--especially to the hordes of unemployed youth who would prefer to remain so:
The comparatively greater job security, higher wages, and more generous on-wage benefits offered by the public sector have inflated wage expectations among new entrants. In fact, public sector wages are 48% and 36% higher than those offered by the private sector in Egypt and Tunisia, respectively. Relatively high wages and benefits encourage workers to seek jobs in the public sector instead of potentially more productive jobs in the private sector.

In addition, generous childcare and maternity leave policies encourage females to focus on obtaining public sector jobs. However, public sector jobs remain valued because of job security, high compensation and benefits, and lack of opportunities in the private sector. It appears that the system essentially has created a dual labour market, with the public sector representing the high-wage, high-benefit sector.
It's been quite a while since someone from the IMF authored such an overtly anti-government largesse piece, but I suppose there is a purpose here. Foremost in my mind is Egypt once again vowing to avail of a $3.2B bailout package from the IMF. That is, in addition to crimping fat energy subsidies, there will likely be IMF conditionalities on "rationalizing" the public sector imposed on Egypt. We'll see.

In the meantime, the suggestions provided for improving the unemployment situation there are certainly worth thinking about.