RIYADH, 24 May 2004 — The Middle East and North Africa (MENA) region faces a new challenge in job generation over the next two decades, according to a report by Dr. Tarik Yousef, consultant at the World Bank Center for Contemporary Arab Studies, and one of the keynote speakers at the “Human Resources Development Forum” workshop tomorrow.
“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,” Dr. Yousef said.
With unemployment now 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. He added that 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 daunting. Yet the cost 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,” he said.
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. The social contracts established in the independence era have given rise to enduring institutions, interests, norms and practices — structuring the constraints and incentives governments now face as they contend with demands for and against policy reform.
The contracts, which have defined state-labor relations across the region, remain a powerful presence in debates about social and economic policy reform, even as their impact on employment, wages, working conditions, foreign investment, trade and overall macroeconomic performance has become deleterious.
Understanding what a social contract in MENA embodies — its origins, its developmental consequences, its effects on labor markets — is crucial to any assessment of labor market prospects and possibilities, Dr. Yousef said.
He said that despite the turmoil that accompanied the emergence and consolidation of social contracts in MENA countries, subsequent decades were marked by unprecedented levels of economic growth and social development. Between 1965 and 1985, MENA’s economic growth rates were among the highest in the world, averaging 3.7 percent per capita a year. The social contract also meant low levels of poverty and income inequality.
The social payoffs from these policies have been enormous with dramatic reductions in mortality and increases in life expectancy, school enrollment rates and literacy levels, he said. He said that these results had important political consequences. They reinforced redistributive mechanisms that sustained the well-being of large segments of MENA populations, deepening their popularity among social groups that governments identified as core constituencies, Yousef said.
From the 1960s through the 1980s, these groups emerged as prominent winners in the political economies created by the interventionist-redistributive social contract. The welfare gains also helped cement an “authoritarian bargain”, with citizens trading restrictions on political participation in exchange for economic security and the public provision of social services, welfare, and other benefits. But over time, gaps widened between the embedded set of institutional arrangements and expectations and the diminished capacity of governments to sustain redistributive commitments. By the early 1980s, the inability of MENA social contract to sustain the economic gains of previous decades became clear and by the late 1980s, the strains had grown into a major economic crisis.
The triggers of the crisis were declining oil prices, shrinking demand for migrant labor and reduced remittance flows. In response to the growing economic difficulties, most governments in MENA adopted some form of stabilization program. Policy shifts were marked by caution and gradualism, but across the region, government cut subsidies, reduced public expenditure, and reformed exchange rates regimes. By the early 1990s, these effects of the reforms began to makes themselves felt.