The functioning of the labour markets in the Mediterranean Region: Selected issues
OR
Employment policy reform in the Mediterranean region: Selected issues on the functioning of the labour market
17 November 2006
Table of Contents
Preface
Executive Summary
Chapter 1. Background: Review of labour market statistics
1.1 Review of data sources
1.2 Key labour market variables
1.3 Concluding remarks
Chapter 2. Investment in education, employment and economic performance
2.1 Investment in human capital
2.2 Return to education
2.3 Transition from school to work
2.4 Concluding remarks
Chapter 3. Labour mobility and segmentation
3.1 Which sectors are growing?
3.2 The informal sector
3.3 Sectoral mobility: the case of Egypt
3.4 International migration
3.5 Concluding remarks
Chapter 4. Labour market institutions and employment policy
4.1 Institutions involved in policy formulation
4.2 Social partners
4.3 Labour legislation
4.4 Active labour market policies
4.5 Vocational training systems
4.6 Concluding remarks
Chapter 5. Ways forward for labour market reforms
Preface
The bilateral, multilateral and regional cooperation between the European Union and partner countries in the Southern Mediterranean have been intensified since the start of the so-called Barcelona Process in 1995. Strengthened development cooperation through the MEDA programme, the progressive adoption of sector wide support programmes, and the new European Neighbourhood Policy have provided a framework for a stronger cooperation and given a new perspective for integration with the EU’s Internal Market. This new agenda brings a perspective of increased human capital integration and create new challenges for employment and human resources development policies in the countries of the Mediterranean region. To get a better understanding of the key features governing this process, ETF has carried out a project on the functioning of the labour markets in the Mediterranean region through analysing some selected issues.
The project focuses on five countries - Egypt, Jordan, Lebanon, Morocco, and Tunisia; but developments in other countries in the region have also been discussed where data has been available. The report does not include the macro-economic perspective of employment policy, and instead the focus is on some structural issues affecting the functioning of the labour market and the appropriateness of policy responses to address these structural issues. Following a background chapter which reviews data sources in five countries and presents key labour market indicators in a comparative perspective, the three main issues covered by the report are the relationship between investment in education, training, employment and economic performance, labour mobility and labour market segmentation, and labour market institutions and employment policy. The report does not aim to provide a complete picture of the labour markets in the Mediterranean countries as some major issues such as the effects of the labour force growth and the gender perspective of the labour market are not discussed in detail.
Within the framework of the project, two sets of country-specific background papers have been produced for the five countries included in the project. The first set of country reports reviewed main data sources and presented basic background information on key labour market variables, and discussed investment in education, employment and economic growth, and labour mobility and labour market segmentation. The second set of country reports focused on the regulatory framework of the labour market institutions and employment policy the five countries and looked at in detail the institutions involved in policy formulation, labour legislation, social partners, active labour market policies and vocational training system.
This report is the end-product of a project outlining selected labour market issues in a regional perspective. It has been prepared by Ummuhan Bardak, Henrik Huitfeldt, and Jackline Wahba on the basis of country background reports. All country specific information in the report has been taken from the background reports unless the source is specified otherwise. The background papers have been produced by local experts from the countries: Mona Amer (Egypt), Nader Mryyan (Jordan), Makram Maleeb and Najib Issa (Lebanon), Mohammed Bougroum (Morocco) and Mongi Boughzala and Mohammed Chemingui (Tunisia). It is a compilation of the country information in a regional perspective and some basic analysis for the future implications.
Executive summary
Developments in the last decades have put employment on the political agenda and forced governments to take measures for employment creation in the Mediterranean region. Presumably, it will continue to be one of the most important economic and social challenges in the region over the next decades. Increasing interest in employment issues has created not only a political rhetoric and some reform initiatives at national level, but also a growing interest in donor cooperation. However, the challenge is still ahead to build comprehensive strategies which are interlinked and coordinated between different fields of policy (e.g. labour market, economy, education and training and social policy) in the countries.
Despite its increasing importance, employment has received relatively little attention from the Euro-Mediterranean Partnership agenda since 1995 and no high level meeting of labour ministers/experts took place yet between EU and Meda countries (Martin 2006). In fact, employment creation has implicitly been taken as a by-product of the economic growth that is assumed to be the result of economic reforms and gradual trade liberalisation with the EU. With an ever-growing young labour force, and a lack of massive and immediate creation of jobs (not low-skilled, low-wage informal jobs, but decent formal jobs), the employment problem poses the most serious challenge with many negative implications for the countries as well as for the region as a whole.
This project has been inspired by the information needs of the European Commission and Partner Countries on the functioning of the Mediterranean labour markets. Labour market analyses are crucial for informed policy-making in both national and regional contexts as well as Euro-Med partnership. Although macroeconomic conditions are important, labour market structures and policies play a major role in shaping employment patterns of the countries. The report tries to shed light on some common issues of the Meda labour markets, but more analytical work needs to be done in the future to assess the role of labour market policies and institutions on labour market participation and employment properly. The main conclusion of this work is that to obtain wide-ranging benefits from economic reforms and increasing investment in education and training in form of increasing employment, the functioning of the labour market is fundamental.
Below follows a short summary of each chapter of the report. It should be emphasised that each issue included in this report is relevant to understand the functioning of the Meda labour markets, but they are self-standing independently and not necessarily linked with each other.
The first chapter starts with background information for this report and summarises the main characteristics of the labour markets in the region through presenting key labour market statistics. The aim is first to review existing labour force surveys in the region and second to present the data collected on the activity rate, employment rate, and unemployment rate by gender, age, and educational attainment for the countries included in the study. These data are accompanied by some basic analysis and a discussion of major challenges in the Mediterranean labour markets.
The chapter highlights the low labour force participation among youth and women with secondary education or less, the role of education for successful labour market integration, and the high unemployment rate for young university graduates. It is however noted that the definition and interpretation of employment in labour force surveys are sometimes ambiguous and that longitudinal data would be necessary to better analyse the functioning of the labour market in the Mediterranean region.
Investment in education and training is considered a major factor for economic growth. However, in the Mediterranean region, a growing literature suggests that the relationship between investment in education and economic growth is weak. In the second chapter, we are discussing why large investments in education and training to a large extent not have been transformed into higher employment and economic growth in the Mediterranean region. The chapter looks in particular at trends in investment in education, returns to education and where the graduates go after leaving the education system, at what opportunities and incentives exist to facilitate the access into the labour market, and how these influence this process. The chapter draws the conclusion that the quality of education system do not seem to have deteriorated during the period of large expansion and that individual (private) returns to education are substantial. Instead, MEDA economies seem to have not been able to match these large investments in education with comparable reforms in the labour market to make effective use of the entering cohorts of educated workers to the labour market.
The third chapter is discussing dynamics of labour allocation in the Mediterranean context. An important source of economic growth is that unproductive jobs continuously are replaced with more productive jobs. This is the core of the labour market reforms in countries where the public sector had had a dominating role and where the formal labour market has been static often aiming at creating life-long jobs for workers. The public sector is traditionally the most important employer in the Mediterranean region. Little job creation is taking place in the formal private sector. However, for most people both these routes are blocked and the only opportunity that exists is work in often less productive informal economy jobs. At the same time, mobility between the different sectors is low.
The fourth chapter aims at analysing labour market institutions and employment policy framework of the MEDA region. Labour market institutions are taken as those institutions and policies that are designed to intervene in the labour market in order to improve the match between labour demand and supply, protect employment in current jobs, move workers to new jobs, encourage transition of persons between different employment statuses, and help restore equality and equity for diverse social groups in the labour market. In this broad definition, they include ministerial and public employment services, labour legislation, unemployment benefit schemes and taxes on labour, social partners, active labour market policies and vocational training system. Labour market outcomes can be positively influenced through developing and implementing particular strategies, policies and measures by these actors.
The chapter begins with a general overview of employment policy approach existed in national and regional context and then focuses on the following dimensions of the labour markets: labour market institutions in charge of policy formulation and implementation, social partners, labour legislation, active labour market policies and vocational training systems. Therefore, most issues of labour markets are covered in the report to give a snapshot of the institutional, regulatory and policy framework of the Meda labour markets to the readers. The quality of administrative systems and national priorities are also evaluated when necessary as they determine the implementation level of the rules and the nature of the relationship among these players.
Finally, the fifth chapter looks at ways forward in search of feasibility of labour market reforms in the region. Based on the findings from the previous chapters, and apart from the challenges facing the quality of education, the need for comprehensive labour market reforms seems crucial since labour markets in the region may not be functioning well in the allocation of human resources to their best uses, which is crucial to the success of any policy aimed at fostering economic growth. The final chapter gives an overview of the reform initiatives of labour markets that are mostly supported by donor-funded programmes. The role of donors in initiating and supporting change is substantial in the region, but more than donor support is needed if it is to be a real reform. The chapter ends with an overall assessment of the favourable and unfavourable factors of change in the region for the future of the reforms.
Chapter 1. Background: Review of labour market statistics
1.1 Review of data sources
The key data source to analyse labour market developments is labour force surveys. Most countries in the Mediterranean region are carrying out regular labour force surveys (see Table 1.1). In particular, Jordan, Morocco and the Palestinian Authority have carried out quarterly labour force surveys since the end of the 1990s. These surveys include basic information on working-age population, labour force, employment and unemployment and can be disaggregated by gender, age, educational attainment, rural/urban, economic activity and occupation. However, in most countries little information from the labour force surveys is published and made available for research. In some countries, notably Algeria, Tunisia and Egypt, published data are limited to a few indicators. For the purpose of this report, some additional information has been made available to ETF by the statistical offices in Morocco, Egypt, Jordan, Syria, and Tunisia.
Table 1.1 Labour force surveys in MEDA countries
Algeria / Occasional surveys. The latest in 2001, 2003, 2004 and 2005.Egypt / Annual surveys since 1968, more extensive ones in 1988, 1998, and 2005.
Jordan / Quarterly surveys since 1999. Earlier annual or biannual surveys.
Lebanon / Last official survey in 1997. Survey by the University of Saint Joseph in 2001.
Morocco / Quarterly surveys covering the whole country since 1999. Earlier annual or biannual surveys.
Syria / Annual surveys in 2001-2004. Earlier occasional surveys.
Tunisia / Annual surveys in 1997 and since 1999.
West Bank and Gaza Strip / Quarterly surveys since 1995
Even if most countries are carrying out similar surveys and publishing the same indicators on employment and unemployment, the statistics are difficult to compare between countries. Small differences between countries (and also changes between different survey years in the same country) in definitions and survey questions used and also to some extent how the survey is carried out and which instructions are given to interviewers can lead to significant differences in the statistics published. Thus, comparisons between different countries and between different survey years should be done with caution. In particular, some difficulties in defining what should be considered as employment makes comparisons between countries difficult. Some main issues to take into consideration while interpreting and comparing results from labour force surveys in the MEDA region is discussed in the following.