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| World Bank Headquarters in Washington DC [PHOTO: Shiny Things] |
Washington: A young and increasingly educated population could be the
source of prosperity in the Middle East and North Africa (MENA) region if an
environment that promotes open competition is created, supported by an
education system that teaches relevant skills, according to a forthcoming
report from the World Bank Group. A forthcoming World Bank report on Jobs in
MENA offers a detailed analysis of the many factors that have contributed to
one of the highest rates of youth unemployment in the world, along with one of
the lowest rates for female participation in the labor force. It proposes a set
of policy reforms to unlock the region’s large and untapped human potential.
“The call for bread, freedom and dignity is a mandate for
change in the Arab World, and the expression of immense expectations, on the
part of young people in particular,” said Inger Andersen, World Bank Vice
President for the Middle East and North Africa. “This presents an unprecedented
opportunity for enacting the reforms that will set the stage for higher growth
and the more and better jobs the region needs. This report offers a formula for
seizing this opportunity.”
Increased competition will be critical for converting the MENA
private sector into an engine of economic growth and good jobs. The current
environment continues to protect a limited number of privileged firms through
complex and unevenly enforced regulations, and limited access to credit. This
has resulted in an insider/outsider model that has limited innovation and
creativity, which played such an important role in the fast growing economies
of Eastern Europe and South Asia. The report identifies a number of remedies to
ease the entry of new firms; including the aggressive simplification of
business regulations, along with holding to account those responsible for
enforcing them, and building the financial infrastructure necessary to expand
access to credit. Lowering the barriers to both entry and exit would create a
dynamic private sector, which encourages investment and innovation, and
ultimately increases the demand for labor.
In addition to an environment that stifles competition, MENA
is also subject to a set of regulations and incentives that make hiring difficult,
and encourage investments in machinery over labor. In the same way current
rules protect a limited number of firms, labor laws that restrict an employer’s
ability to manage the workforce end up protecting the privileged few with jobs
(mainly older men). The report recommends strengthening unemployment benefits
and safety nets while easing regulations to increase the mobility of workers
and encourage more hiring. This should be accompanied by the removal of energy
subsidies that make it cheaper to buy and operate more machines rather than
hire new workers.
Once the private sector is ready to hire, reforms will be
needed to ensure it can find the skills required. The public sector continues
to dominate employment in MENA, with its promise of job security and better
conditions. This has led to the phenomenon of the most talented and skilled
essentially standing in line and waiting for public sector jobs that provide
high individual returns, but are not necessarily associated with the highest
social productivity. Success in this environment is all too often dependent on
connections rather than aptitude; again excluding all but the most privileged.
It has also influenced education systems, which focus on providing students
with skills relevant to the public sector, at the expense of those required by
the private sector.
MENA has one of the highest numbers of employers that
complain about the difficulty of finding prospective employees with the right
skills. The report proposes diminishing the pull of the public sector by making
its salaries and benefits symmetrical with the private sector, and reforming
education systems to ensure they equip students with more relevant skills.
Specific policies would also be needed to address the barriers women face, by
guaranteeing a safe working environment, and compensating for the additional
domestic burdens they shoulder. The sum total of these reforms would guarantee
the flow of the most skilled labor to the most productive sectors of the
economy. A closer relationship between universities and the private sector
would not only foster the design of more appropriate courses, but also help
students make informed decisions about their educational choices.
“Young people in the region need a clearer path from school
to work,” said Steen Jorgensen, MENA Director for Human Development at the
World Bank. “The private sector should signal to students what skills are most
valued, and higher education needs to adapt and offer students courses that
respond to those signals.”
Beyond identifying problems and offering solutions, the
report recognizes the challenge policymakers face in building and maintaining
the consensus needed for change. The powerful demand for democracy and an end
to the system of privileges provides a significant mandate. Going forward, the
process should be fully transparent and aim to engage the new constituencies
that emerged from the ‘Arab spring.’ With investments in early visible and
measurable gains, governments in MENA could consolidate their credibility. This
could take the form of investments in training programs to help people develop
new skills and increase their employability, as well as the launch of labor
intensive public works projects to develop critical infrastructure and social
services using public/private partnerships. This would set the stage for the
game-changing reforms that would drive competition, generate jobs, and allow
the region’s great human potential to become the source of prosperity.