How does the lack of dynamism in the job market affect economic development and social progress in the MENA region?
The Arab Spring uprisings in 2010 did not succeed in bringing a breath of fresh air to a region lacking momentum. Political instability and ideological wars have led countries like Syria, Yemen, and Libya into critical situations. To combat the resulting poverty, entrepreneurship and innovation are emerging as the driving forces for employment.
A large portion of the working-age population is excluded from the job market. Onein three young people aged 15 to 24 is not studying, undergoing training, oemployed. With the highest youth unemployment rate (80%) and femaleunemployment rate in the world, MENA countries are depriving themselves of the main resources for future economic and social development.
Furthermore, these problems are exacerbated by the repercussions of the global COVID-19 pandemic, which has significantly contributed to business failures and job losses. It is crucial for MENA region countries to invigorate their economies to combat poverty. Here is an overview of the reasons why the employment challenge in the MENA region remains unaddressed.
Lack of market contestability:
Market contestability refers to the ease with which businesses can enter the market, compete with existing companies, and exit the market if they wish to do so.
A market with low contestability has high barriers to entry, making it difficult for new businesses to enter and compete with existing ones. In such a market, companies are less incentivized to innovate, making it challenging to start and expand new enterprises, thus preventing job creation from keeping up with the growing working-age population.
- This lack of market contestability is partly explained by the policies and regulations of the region's states. Notably, the excessive intervention of the state and ambivalent positions contrary to Western liberalism have negative effects on Article 1 2
the economy. These interventions limit entrepreneurial freedom, create rigidities, and impede innovation. - Other factors contributing to the lack of market contestability include non-uniform rules of the game, which result in certain actors enjoying preferential treatment, leading to a lack of competitive neutrality that hampers the proper functioning of markets (favoritism, tax exemptions, etc.).
- Price controls also play a role. Most economies in the MENA region control the prices of basic commodities such as milk, bread, and liquefied petroleum gas (LPG). This reduces incentives for productivity and efficiency, as companies are not encouraged to reduce production costs or innovate to improve profitability.
Lack of market contestability:
The lack of investment is another major challenge for employment in the MENA region. In 2019, only 6% of the surveyed businesses in MENA countries, as part of the World Bank's survey, were young enterprises (five years old or less), and this percentage decreased on average between 2012 and 2019. Very few companies invest in physical and human capital, as well as research and development. This is partly due to a lack of financing and support for young enterprises, which are often job creation drivers. Additionally, inadequate financing and lack of incentives to invest in workforce training and skill development make it difficult to create quality jobs in the region.
MENA region businesses also face additional investment challenges, such as foreign exchange restrictions, unfavorable tax policies, lack of legal security, and an unfavorable business environment. These factors discourage businesses from establishing or investing in the region, further limiting employment opportunities.
Labor regulations and taxation:
Labor regulations do not promote labor market flexibility or protect workers' rights.
For example, some economies in the MENA region suffer from high severance pay, which hampers companies' flexibility in hiring and firing workers. This contributes to a stagnant labor market with few opportunities for new entrants and difficulties in adapting to economic fluctuations.
Moreover, the absence of adequate unemployment benefits exacerbates the difficulties faced by unemployed workers, especially women who already face additional obstacles in the labor market. Without a financial safety net, workers are forced to accept precarious or poorly paid jobs.
Regarding taxation, high payroll taxes represent a significant portion of companies' and workers' tax obligations. This reduces incentives for hiring and income reporting, creates job insecurity, and limits economic growth.
Gender-specific laws:
Despite reforms enacted in recent years in some countries, there are still persistent challenges regarding women's economic autonomy and their participation in the labor market.
According to a recent OECD study, only 2 out of 10 women in the MENA region work or are actively seeking employment, compared to 7 out of 10 men. Women's labor force participation rates are much lower than those of men (21% versus 70% in Morocco, for example).
Women in the MENA region face laws that restrict their access to employment and their full and equal participation in the economic life. These restrictions can take various forms, such as discriminatory employment laws, mobility regulations, requirements for male guardianship, wage inequalities, restrictive cultural norms, etc.
These laws and practices have a negative impact on women's professional opportunities, access to education, ability to make independent economic decisions, participation in leadership positions, and the region's economic activity. If men and women participated equally in the labor market, an additional USD 2.7 trillion could be added to the region's GDP.
In conclusion, the lack of dynamism in the job market in the MENA region poses a significant barrier to economic development and social progress. Barriers to entry, lack of investment, labor regulations, and gender discrimination are all challenges that need to be overcome to create sustainable and inclusive employment opportunities.
However, it is important to emphasize that these challenges are not insurmountable. The MENA region is rich in human potential and natural resources that can be mobilized to stimulate economic growth and improve living conditions. It is essential for governments, businesses, civil society, and international partners to collaborate in implementing structural reforms, promoting innovation, fostering entrepreneurship, and investing in education and training.
Addressing the employment challenge in the MENA region requires strong political will, bold reforms, and a long-term vision. By investing in talent, promoting innovation, and removing structural barriers, the MENA region can aspire to a Article 1 4 prosperous future where economic development and social progress go hand in hand, offering opportunities for all individuals and contributing to the stability and prosperity of the region as a whole.
https://www.oecd.org/fr/sites/mena/competitivite/autonomisation-economique-des-femmes/