Inequality of opportunity and (unequal) opportunities in the youth labour market: How is the Arab world different?

• Date: 01 June 2020
• Author: Karim STEPHAN,Ralitza DIMOVA
• DOI: http://doi.org/10.1111/ilr.12144
• Published date: 01 June 2020

Copyright © The authors 2020

Journal compilation © International Labour Organization 2020

* University of Manchester, email: ralitza.dimova@manchester.ac.uk (corresponding author).

** Economic Policy Research Institute, Cape Town, email: karim.stephan@gmail.com.

Responsibility for opinions expressed in signed articles rests solely with their authors, and

publication does not constitute an endorsement by the ILO.

International Labour Review, Vol. 159 (2020), No. 2

Inequality of opportunity

and (unequal) opportunities

in the youth labour market:

How is the Arab world different?

Ralitza DIMOVA

* and Karim STEPHAN**

Abstract. The Middle East and North Africa (MENA) labour market is emblem-

atic of widespread youth unemployment and high discouragement rates, experi-

encing disproportionately high levels of unemployment among educated young

people. Using ILO School-to-Work Transition Surveys for Egypt, Jordan and

Tunisia, the authors explore whether this is related to inequality of opportunity or

to deeper structural characteristics that create a mismatch between skill demand

and supply on the labour market. The low availability of high-skilled jobs and the

low value placed on skills gained through the system of vocational training are

found to have high explanatory power.

Keywords: youth unemployment, transition from school to work, skill mismatch,

inequality of employment opportunity, MENA region.

1. Introduction

The labour market of the Middle East and North Africa (MENA) region is em-

blematic of a wider (youth) job crisis, which not only long preceded but also

provided an important trigger for the Arab Spring and subsequent mass out-

migration (World Bank, 2014a). The high level of youth unemployment and

inactivity in the region is consistent with the global trend of premature de-

industrialization that hampers the ability of low- and middle-income countries

to create jobs for their labour market entrants (Rodrik, 2016). The vast majority

of labour markets in MENA countries are characterized by dominant service

sectors, which have historically shown a lower labour absorption potential

than a typical booming manufacturing sector. The particularity of the region

lies not only in the size of this phenomenon – with youth unemployment rates

in most MENA countries double the global average (ILO, 2015) – but also in the

disproportionately high levels of unemployment found among educated young

people (Barsoum, Ramadan and Mostafa, 2014; ONEQ, 2014).

International Labour Review

218

Some argue that the current state of economic (and consequently labour

market) stagnation in the region is linked to the dissolution of the Arab model

of development that manifested itself from the time of independence in the

1960s and until the mid-19 80s. This model, characterized by bloated public sec-

tors and generous redistribution policies, was enabled by several decades of

high oil prices. According to Assaad (2014), its dissolution has resulted in job

scarcity causing labour market participants to queue up for jobs in the declin-

ing public sector.

However, there is little agreement on – and perhaps even understanding of

– the precise nature of labour market stagnation and the identity of the people

most severely aected by this lack of job opportunities. Inequality of opportu-

nity is frequently cited as a contributing factor to the malfunctioning of labour

markets. In the MENA region, Salehi-Isfahani, Hassine and Assaad (2014) argue

that educational attainment in as many as 16 countries depends signicantly

on parents’ backgrounds and on community characteristics. Where the labour

market values higher-skilled jobs, young people from privileged backgrounds are

found to have better outcomes in their transitions to the labour market. Yet in

the context of a declining public sector, which had served as a haven for labour

market entrants with tertiary education, the resulting outcome is a high level

of graduate unemployment. The World Bank (2014a) highlights another layer of

inequality of opportunity in the MENA labour markets created by the “connec-

tions” that play a role in the process of securing employment. Admittedly, irre-

spective of whether access to education is restricted to a privileged few, given

that family background and social connections play important roles in securing

employment, few people acquire desirable jobs in tting with their education.

At the same time, the alarming rates of unemployment among university

graduates might be a symptom of an even deeper structural problem. Some ana-

lysts attribute the phenomenon to poor-quality education in a system geared to-

wards the requirements of public sector employment in the post-independence

era (Assaad, 2014; Brown et al., 2014). These arguments are consistent with evi-

dence of high levels of qualication mismatch (Barsoum, Ramadan and Mostafa,

2014). In other words, it is possible that either (i) educational attainment is in-

consistent with the labour market’s demand for skills, owing to a decient edu-

cation system (which might, for instance, place emphasis on academic skills, as

opposed to transferable soft skills), or (ii) the supply of graduates signicantly

exceeds demand. Even in Jordan, which is one of the best-performing MENA

countries, there is evidence that most of the employment growth occurred in

low-skilled and low-paying industries such as the construction and garment in-

dustries (Brown et al., 2014). While jobs may be available in these low-skilled

industries, educated young people are reluctant to take them, preferring instead

to remain unemployed.

The purpose of this article is to explore a wide array of interrelated struc-

tural and inequality of opportunity factors aecting the youth labour market in

the Arab world. We use a two-step methodology that allows us, rst, to nd out

how family background and observed skills determine the allocation of young

people across dierent sectors of the economy. Second, conditional on this allo-

cation, and after accounting for the eect of unobserved characteristics in this