Closing the Jobs Gap

• Author: Yasser Abdih
• Position: an Economist in the IMF’s Middle East and Central Asia Department.

EVER since Tunisian street vendor Mohamed Bouazizi's death from self-immolation in January, the world's attention has been drawn to the spreading unrest in the Middle East. Bouazizi's dramatic suicide and the ensuing turmoil served as a wake-up call to policymakers, who didn't foresee such an abrupt end to the status quo.

In hindsight, it's clear that many Middle Eastern societies were resting atop massive fault lines. While the unrest in these countries stemmed partly from political repression, unsustainable economic issues, such as high youth unemployment, were also simmering below the surface.

Labor market data for the region are scarce, but available statistics covering six countries—Egypt, Jordan, Lebanon, Morocco, Syria, and Tunisia—indicate that average unemployment has remained around 12 percent for the past two decades. In 2008, despite faster growth for eight consecutive years, unemployment rates for these countries averaged 11 percent, the highest regional rate in the world. And, at 48 percent, the percentage of people in the job market (the combined labor force participation rate) is much lower in these countries than in any other region.

High unemployment in these countries, together with low labor force participation rates, has resulted in very low ratios of employment to working-age population. With less than 45 percent of working-age people actually employed, this regional rate is the lowest for any region in the world (see Chart 1).

Unemployment in the region is largely a youth phenomenon. Young people, ages 15 to 24, account for 40 percent or more of the unemployed in Jordan, Lebanon, Morocco, and Tunisia, and nearly 60 percent in Syria and Egypt. The average unemployment rate among youth in these nations was 27 percent in 2008, higher than in any other region in the world (see Chart 2). In contrast to most of the world, joblessness in many Middle Eastern countries tends to increase with schooling: the unemployment rate among those with college degrees exceeds 15 percent in Egypt, Jordan, and Tunisia.

Such levels of unemployment imply substantial social and economic costs. In part because of the paucity of job prospects at home, people have left these countries in large numbers, with the estimated number of migrant workers abroad equivalent to about 16 percent of the combined labor force present in these six countries. But workers from Egypt, Jordan, Lebanon, Morocco, Syria, and Tunisia are now facing reduced prospects abroad given the sharply higher unemployment in advanced economies and a trend toward the nationalization of the labor force in the Gulf Cooperation Council countries. With greater competitive pressure from other emerging markets, the region increasingly cannot afford the status quo.

Looking ahead, the region faces a daunting challenge. To provide jobs for those now jobless as well as new entrants to the labor force, these countries have to increase employment by an estimated 18½ million full-time positions over the period 2008–20. Even this...