By Sarah Bliss
Correspondent, Arabic and Economics Undergraduate Student
Though many in the West see only the shining skyscrapers of Dubai and the oil fields of Saudi Arabia, the economic situation in much of the Middle East and North Africa (MENA) is characterised by a number of structural concerns, including the chronically high rate of youth unemployment and underemployment.
Recent demographic statistics have concluded that almost a third of the population of the MENA region is under 15 years old, and almost half is under 25 years old, which has led to a so-called “youth bulge” that presents both a challenge and opportunity for the region as a whole. It is currently placing a massive strain on the Middle East’s labour markets, and in many places, the situation will likely only worsen as many of the Gulf Cooperation Council (GCC) countries – such as Saudi Arabia – move to make fiscal cutbacks to balance their budgets in the face of falling oil prices, potentially slowing public sector job growth and unemployment support structures.
According to the International Labour Organisation, the current youth unemployment rate in the MENA region is approximately 27 percent, which is almost double the global average. Perhaps surprisingly, the youth unemployment rate is actually higher for university graduates than for non-graduates. There is also a significant gender gap in regional youth unemployment, with young women – who make up the majority of university graduates (up to 64 percent in countries such as Kuwait) – facing much higher unemployment rates almost double that of their male counterparts.
Unemployment rates remain high among these demographic groups for a number of structural reasons. First and foremost, the sheer number of young people entering MENA labour markets each year is too high to be absorbed by existing employment opportunities; in many cases, there simply aren’t enough jobs. Additionally, in regions such as the GCC, which are net labour importers, there are so many expatriates working in the region that there aren’t enough jobs for newly graduating nationals in major industries such as oil and gas. Finally, there is also a mismatch in both the perceptions and realities of public and private sector employment in the region, especially in the Levant.
Historically, public sector employment has been very attractive to job seekers, since public sector jobs are often associated with stability, favourable salaries and benefits, while private sector employment is often viewed as unstable and often also pays lower wages. This situation has been exacerbated by governments’ current inabilities to expand the public sector – due to already bloated bureaucracies and high wage bills along with the ramifications of structural adjustment programmes adopted in and around the 1980s – and the stagnation of growth in the private sector in the past few decades, where investment has stagnated at around 15 percent of GDP in the past few years (compared to approximately 30 percent of GDP in East Asia).
The situation then becomes increasingly dire upon observing the distinction between the formal private sector and the informal private sector. Most of the employment growth in recent years has been in the informal private sector, which is even less stable than formal private sector. In many cases, this means that new graduates are forced to either wait for their desired public sector jobs to become available, leading to long-term unemployment or their ultimate withdrawal from the labour force, or accept unstable, lower-paying employment in the private or informal sector and often being significantly underemployed.
Most of the employment growth in recent years has been in the informal private sector, which is even less stable than formal private sector.
Such high rates of youth unemployment have a number of implications for the MENA region moving forward. As these high rates of unemployment continue, many youth feel increasingly disillusioned and left behind as their economic situation and potential for social mobility remains unsure. This disillusionment, especially amongst such a large segment of the population can – and has – led to significant unrest and instability economically, politically and socially. However, if this new and growing pool of talented, educated youth is harnessed successfully and put to work, the region could potentially experience accelerated economic growth and increased prosperity. This would be especially advantageous for countries (such as the GCC member states) seeking to diversify their economies, and for those in the Levant seeking increased internal stability and opportunity.
In order to harness the enormous potential that the “youth bulge” presents, there are a number of policies that MENA countries are – and should be – looking into, though policy prescriptions and relative efficiencies clearly vary from country to country. Some labour-importing GCC nations, such as Saudi Arabia and Kuwait, have instituted national policies of replacing expatriates with nationals in the private sector, most of which are primarily based on requiring companies to employ a certain percentage or quota of nationals. These have faced some implementation and enforcement challenges and can certainly be revised and improved, but have been broadly successful in increasing the employment of nationals in the private sector in recent years.
As these high rates of unemployment continue, many youth feel increasingly disillusioned and left behind as their economic situation and potential for social mobility remains unsure.
Ensuring that new graduates have the skills demanded by private sector employers, by coordinating with private sector officials in developing vocational education programs, and offering increased university scholarships and bursaries to students pursuing relevant degrees could augment such policies. This could also assist in actually incentivising companies to invest in the region and hire nationals, as they become increasingly perceived as well-prepared and suited for the job, meaning that the employment quotas are seen as less of a burden on companies themselves.
Finally, as we are discussing a young, often tech-savvy generation, there is also significant room for the introduction of policies promoting entrepreneurship, namely, the creation of a supportive and accommodating regulatory infrastructure for potential entrepreneurs, and increased access to credit where possible. This would not only allow youth and new graduates to attempt to create new employment opportunities for themselves and for others, but may also help to fill gaps in the service economy where they exist in these countries.
Youth un- and underemployment is one of MENA’s most significant challenges and opportunities moving forward.
All of these policies, in addition to finding ways to incentivize foreign investment and the growth of the private sector, and ensuring that the wages offered in the private sector are at least roughly similar to those offered by public sector positions, will help to ensure that private sector employment of youth is maximised by creating new demand for the skilled labour that the region’s youth represents.
While un- and underemployment amongst youth is one of the most significant internal economic challenges facing the MENA region today, it is also one of the region’s biggest opportunities for future development and progress, and is definitely a trend to watch as we consider the economic, social, and political stability of the region as a whole.
Feature image courtesy of Kashif/Dilkash Photography.
Secondary image courtesy of Tanya Habjouqa.