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Session 1 imed drine & james thurlow


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Session 1 imed drine & james thurlow

  1. 1. Creating Jobs for the YouthImed Drine and James ThurlowWorld Institute for Development Economics Research, United NationsUniversity (UNU-WIDER) 1
  2. 2. There are many similarities across MENA countries • Youth unemployment rates are extremely high • Unlike most regions, unemployment rates are highest amongst more educated youth Youth and adult unemployment Youth unemployment by education 35% Youth Basic education 30% AdultUnemployment rate 60% Tertiary Unemployment rate 25% 50% 20% 40% 15% 30% 10% 20% 5% 10% 0% 0% Turkey Jordan Tunisia Algeria Egypt Iran Syria Morocco Jordan Egypt Tunisia 2
  3. 3. But there are also many differences• Youth unemployment rates are much higher for women in some countries, but not in others• Pressures to find a job also vary across countries Youth unemployment by gender Youth willingness to work in next 7 days 60% 100% Male Male Share of unemployed 50%Unemployment rate Female 80% Female 40% 60% 30% 40% 20% 10% 20% 0% 0% Jordan Tunisia Jordan Tunisia Egypt Egypt Morooco 3
  4. 4. MENA has region-wide problems,but needs country-specific solutionsCase study:Youth unemployment in Tunisia 4
  5. 5. High and persistent youth unemployment• Most unemployed youth are Share of unemployed youth by education 7% actually less educated Primary 40% Secondary• But unemployment rates rise 53% Tertiary with education levels Unemployment rates• So providing more schooling 60% 50% may not solve the problem 40% 30% 20%• Q1: Why don’t wages fall to 10% 0% reduce unemployment? Youth Adult Tertiary Primarly Secandary 5
  6. 6. Wide regional variation in unemployment rates• Tunisia has a coastal “core” and an inland “periphery”• Youth unemployment is much higher in the periphery• Male-female differentials 50% Unemployment rates (%) Male Female 44% 35% narrow towards the core 40% 30% 23% 28%• Average monthly wages 20% 10% 0% are much higher in the core Core Periphery for similarly-educated workers Average monthly wage in private sector (3.5 years after high school; dinar) 600• Q2: Why don’t young people 400 458 372 (women) migrate to the core? 200 0 Core Periphery 6
  7. 7. Q1: Why don’t wages fall? Vacant jobs in major urban centers• There are vacant jobs available 250 Vacancies (1000s)• But youth’s “reservation wages” 200 Hiring (1000s) 150 may be high relative to their skills 100 50• Demand-side explanation: 0 2004 05 06 07 08 09 10 – Firms value experience and Education levels of the employed skills more than education Adults Primary Evidence: Fewer adults have Secondary Tertiary completed primary school and yet they have less unemployment Youth 7
  8. 8. Q1: Why don’t wages fall?• Supply-side explanation: – We suspect that educated youth won’t accept lower wages – They overestimate the value of schooling Monthly Net Wages (dinar) 700 because their “reference wage” has been 600 625 500 biased by the public sector 400 518 461 300 396 Evidence: Wages are higher in the 200 100 public sector at similar education levels 0 Public Sector Private Sector Total "Techniciens superieurs" – Families provide a strong fallback position Evidence: 85% of unemployed youth rely on their family for their incomes and housing 8
  9. 9. Q2: Why don’t young people move to the core?• The usual explanations don’t apply to Tunisia: – No language barriers or ethnic discrimination – No lack of jobs in the core coastal region – Education levels of youth are not lower in the periphery Negligible education differences between regions 100% Share of unemployed 80% 60% Tertiary 40% Secondary Primary 20% 0% Male Female Male Female 9
  10. 10. Q2: Why don’t young people move to the core?• Regional unemployment gaps are largest for women – Means that women’s migration is particularly constrained – May be due to cultural preferences• But unemployment gaps also exist for men – A lack of job information or social networks Evidence: 80% of the youth who find a job rely on personnel effort (“connections”) and not official channels – High migration costs and family fallback reduces mobility Evidence: Although poorer, periphery households still support 87% of unemployed youth (higher than in core) 10
  11. 11. Tunisia needs youth-focused labor market policies• Reservation wage problem – Current policy: US$100 a month to university graduates – Better policy: wage subsidy for all young formal employees Lowers effective wage demands, reduces the “cost of inexperience”, and incentivizes on-the-job training• Regional mobility problem – Current strategy: Public sector investment and jobs in the periphery (this is costly and unsustainable) – Better strategy: Subsidize youth mobility (e.g., reduce migration costs by providing better information systems, housing and transport for young job seekers) 11
  12. 12. In the long-run, MENA needs a new growth strategy• Youth unemployment is a major problem for MENA• But adult unemployment is also too high• So while youth-focused labor market policies are crucial, they will not be enough to address MENA’s long-term challenges• Arab Spring offers us a good opportunity to think about new development models that could promote global competitiveness and labor-intensive growth 12