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EU: Arab Mediterranean Challenges - Unemployment & Migration

Thursday, 20 May 2010 08:53

EU faces a manger challenge as result of immigration from the Arab Mediterranean Countries (Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia and the Occupied Palestinian Territories).
The European University Institute (RSCAS) was selected by the European Commission to carry out a Study on “Labour Markets Performance and Migration Flows in Arab Mediterranean Countries: Determinants and Effects”

The objectives of the Study are two-fold:

* to analyze the key labour market determinants of migration flows from selected Arab Mediterranean Countries (Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia and the Occupied Palestinian Territories), with a particular emphasis on demographic pressures, wage differentials and relative income disparities with the EU, employment policies, labour market flexibility and unemployment rates; this analysis includes the impact of migration on Arab Mediterranean Countries (AMCs) labour markets;
* to propose a series of specific recommendations to improve the design of EU’s migration policies towards AMCs and policy options available to them for the management of mismatches between labour supply and demand.

To cope with the ample regional diversity and the variety of issues addressed in the Study, 10 background papers have been commissioned to feed the Study:

* 8 national background papers on labour market performance and migration flows in Arab Mediterranean Countries
A country-by-country analysis (on Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia and the Occupied Palestinian Territories), following a common questionnaire, of the migration trends in the AMCs, with particular emphasis on key labour market factors such as demographics, labour costs, skills composition, effectiveness and efficiency of current employment policies, recent labour market reforms, contractual arrangements and size of the informal sector
* 2 thematic background papers on “EU migration Policy’s Impact on AMC Labour Markets” and “Impact of Migration on AMC Labour Markets”

The main objective of this Study is to analyze the key labour market determinants of migration flows from selected Arab Mediterranean Countries (Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia and the Occupied Palestinian Territories) and the impact of outward migration on the labour markets of Arab Mediterranean Countries (AMCs). This has been done mainly on the basis of the evidence and analysis produced by the two Thematic Background Papers and the 8 National Background Papers commissioned for the Study. In turn, the National Background Papers are deliberately based on national statistical data sources: this makes comparability less straightforward, but has the merit of using original data available at the local level, where they are collected and generated.
The main findings of the Study can be summarized as follows:

INSUFFICIENT DATA AND RESEARCH
• Scarce and problematic DATA
Despite recent improvements in the availability and the quality of employment and migration statistics for AMCs, any serious analysis of labour markets and migration in AMCs is seriously hampered by a widespread scarcity of data at the national level, the inaccessibility, unreliability and inconsistency of available data and the difficulty of comparing data from across the region. This Study is based on best available national data collected in National Background Papers according to a common template, but still all tables and data included in it should be subject to this major caveat.

•INSUFFICIENT RESEARCH on the interaction between labour and migration in the region
As the literature review produced for this Study underlines, there is a shortage of research on labour and migration in AMCs, and even more so on their interaction. The theoretical literature, indeed, comes mainly from other regions, and even this is scarce and fragmentary in some respects, for instance the impact of migration on labour markets in countries of origin. So a first step in facing the huge challenge of employment in AMCs and the complex issue of migration in the region is to know more about these issues, their magnitude and characteristics. This Study makes a contribution in this direction by systematizing the existent literature on the impact of migration on labour market and providing a possible analytical framework that could guide future research on this topic.

THE CHALLENGES OF EMPLOYMENT
•Employment in AMCs poses a CRUCIAL CHALLENGE for the region – and for Europe – in the next 10 to 15 years
AMCs are, taken together, the world region with arguably the most daunting employment challenge, at least in relative terms. Official labour participation rates there are the lowest in the world (below 46% of working age population, compared to the world average of 61.2%), a consequence this of the lowest female participation rate in the world (below 25% as compared to a 42% world average). Despite this average unemployment rates (almost 15% of the labour force) are higher than in any other region with the exception of Sub-Saharan Africa. And the demographic prospects for the coming ten to fifteen years make all foreseeable scenarios even bleaker.

•15 MILLION NEW JOBS NEED TO BE CREATED BEFORE 2020, between 1/3 and 2/3 more jobs per year than have been created during the last five years of high economic growth
Adding together the projected needs for new jobs calculated for this Study under conservative assumptions on the basis of national statistical sources, the AMCs will need more than 1,500,000 additional jobs a year over the coming 10 years in order to provide employment opportunities for new labour market entrants and to keep the (already very high) number of unemployed unchanged, and this under the (hardly realistic) assumption that there will be constant labour participation rates. So the 15 million new jobs which are needed until 2020 would mean an increase of 30% in relation to the current level of total employment in those countries, and would amount to between 1/3 and 2/3 more jobs per year than those that have been created over the last five years in the region, a period, note, of marked economic prosperity. And the foreseeable decline of employment elasticity to growth (which, with an 0.9 average for the region, stands at a level three times higher than the world average) means that the economic growth rates needed to achieve this job creation goal will have to be substantially higher than in the past.

•IMMEDIATE ACTION IS NEEDED…because the STATUS QUO in terms of employment risks causing permanent damage to the development prospects of those countries
Thus in terms of employment policies and development models the status quo risks putting strains on the social fabric through tensions in the labour market, greatly affecting social cohesion and stability in the region – and hence adding to migratory pressures. The prevailing unemployment rates for young people also risk causing permanent damage to the development prospects of these countries, to the extent that young people will be discouraged from engaging in the labour market and will see their qualifications stagnate or deteriorate as the informal economy spreads. This would have long-lasting consequences for the development of human capital and productivity and for the functioning of a regulated market economy. This requires immediate policy action by AMCs – and by the EU, which would suffer from any instability in the region.

•AMC WOMEN are largely absent from the labour markets
Labour participation rates in AMCs are the lowest in the world: only one in four of their 180 million inhabitants actually have a job, giving a 3 to 1 dependency ratio. The main explanatory factor for this is the lowest labour participation rate of women in the world: only one in four working-age women are in the labour markets, and an average of 20% of these are unemployed. This means a de facto exclusion of 85% of working age women in the region from the labour markets. The loss of educational investment in women that this entails is enormous, not to mention the constraint this imposes on their right to economic and social emancipation.
On the other hand, if the participation rate of women increases over the next years to catch up to the world average (as is happening already, though at a slow pace), an increase of 5 percentage points on the labour participation rate of women in the next ten years, consistent with the increasing trend observed in the last decade, would mean that the number of jobs to be created in AMCs to cope with the expansion of the labour force would increase by more than 240,000 a year for the 8 countries under consideration.

•Despite low labour participation, UNEMPLOYMENT is already at socially unsustainable levels, in particular for youth and women
Although official unemployment figures in the region are arguably underestimated in many respects and often show striking discrepancies, the number of the unemployed exceeded 7 million by 2008, almost 15% of the labour force (which is in turn under-registered as a consequence of the very low participation rate of women). 80% are young first-time job seekers. Female unemployment averages over 20% in the region, and youth unemployment often exceeds the 20% mark or 30% for young women. Paradoxically, in all AMCs unemployment increase among workers with higher qualifications, and graduate unemployment is a widespread phenomenon. This involves a dramatic loss of educational investment and has attracted the attention of analysts and policy-makers alike. But one should not forget that university graduates are fewer than 15% on average of labour force in AMCs, and only slightly more than 1 out of the 7 million unemployed. This means that, in absolute terms, the main employment challenge in AMCs is not related to graduate unemployed, but to workers with no education or only primary education.

•The HIGH ECONOMIC GROWTH RATES achieved by most AMCs over the last six years have not benefited all workers alike…
In the six years since 2002 economies in the region followed a high growth path (in the 5-6.5% range on average), which led to an average annual job creation rate of 4.5%, enough to offset the labour force growth rate of 3.6% a year on average (for a working age population growth of 2.8%). So global unemployment rates have been reduced in all countries during this period of high growth rates, but average wages have not followed suit and the categories of workers most affected by unemployment or informal employment (women and youth, in particular) have hardly benefited from this trend. The rate of precariousness of employment increased in many AMCs.

•...and the GLOBAL ECONOMIC CRISIS could turn the job crisis into a major destabilising force
The present economic crisis is intensifying a series of labour market and education challenges that the Arab Mediterranean Countries have not solved in the last 20 years of relative macroeconomic discipline and which have hardly even been tackled in the last six years of high growth. As migration chances diminish as a consequence of the economic downturn and the return of temporary migrants, in particular from Gulf countries, becomes more notable the long-lasting job crisis the region is suffering might intensify in terms of its social destabilizing potential and end up causing major damage to the development prospects of this region. The situation is compounded by the lack of unemployment insurance schemes in most countries in the region, or a lack of coverage in existing schemes. In any case, the link between migration and development should be revisited in the light of the crisis.

•This is making INFORMAL EMPLOYMENT a solution of last resort for increasing numbers in AMCs…
Informal employment already accounts for between 45% and 55% of total non-agricultural employment in the region. This means that the chances of finding formal, decent jobs are very low. Informal employment depresses wages, hampers the development of human capital and introduces major distortions into the functioning of the goods and services markets in AMCs, including the operations of foreign investors and the prevalence of low productivity jobs. The extent of informal employment in AMCs has become the main objective symptom of labour market distortions in the region. However, we still know too little about the working of the informal economy and its impact on economic activity and development prospects in the region, not to mention its interaction with international migration.

•…so that MIGRATION remains the first choice for many workers (in particular youths)
The higher salaries and the job security of public administration jobs still exert a powerful attraction on young workers in AMCs, in particular graduates, in a region where public sector employment is already the highest in the world (over a third of all jobs are in the State sector). But the implicit social contract guaranteeing a State job to all graduates that prevailed until the 1980s has been terminated, and the State no longer provides realistic employment prospects. Thus, short of prospects for a decent job in the private or in the State sector, migration has become the employment solution of choice. Indeed, migration prospects, in some cases (e.g. Lebanon) combined with the high cost of living in urban areas, translates into a high reservation wage (i.e. the minimum income for which a worker is ready to work) which, in turn, creates severe distortions in some AMC labour markets.

•But SKILLS MISMATCHES in the labour markets and the poor performance of education systems remain the main problem
However, the main problem for the labour markets of the region is not so much the issue of the growing labour force and the concomitant need to create a substantial number of jobs. Rather it is the structural demand-supply mismatches in the labour market, in particular the discrepancy between the outcome of the education system and the skills required by the private sector.

Global Arab Network

Extracted from : “Labour Markets Performance and Migration Flows in Arab Mediterranean Countries: Determinants and Effects”, by The European University Institute (RSCAS).

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Last Updated on Thursday, 20 May 2010 09:43

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