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World Bank Document YOUTH EMPLOYMENT IN TUNISIA CONCEPT NOTE FOR ACTIVITIES UNDER THE NEW WINDOW ”BETTER EMPLOYMENT POLICIES” Public Disclosure Authorized 1. Country and Sectoral context 1. Tunisia faces a fragile macroeconomic situation. GDP growth was 2 percent in 2017 and 2.6 percent in 2018 and is mainly driven by the agriculture and services sectors. Growth is projected to drop below 2 percent in 2019 before starting to slowly recover, contingent on the completion of pressing reforms to improve investment climate and ensure greater security and social stability. Growth will be supported by expansions in agriculture, manufacturing, and tourism, and oil and gas production. Inflation significantly accelerated between 2017 and mid-2018 (7.8 percent in July 2018). In response, the Central Bank increased the policy rate to 7.75 percent, and authorities recently moved to enforce tighter loan-to-deposit ratios among banks and reduce liquidity injections through FX swaps. Consequently, inflation has been decelerating since the second half of 2018, and stood at 6.7 percent in August. 2. Despite many active labor markets programs (ALMPs), the large number of unemployed people remain high. The unemployment rate has stagnated, recording 15.1 percent during the third quarter of 2019, compared to 15.9 percent in 2013. Unemployment rate for certain socio-economic groups is Public Disclosure Authorized significantly higher than the national average: women (22.0 percent in Q3-2019) and graduates (28.6 percent in Q3-2019). The socio-economic groups facing the most severe constraints to employment are graduated women (38.7 percent unemployment rate in Q3-2019) and youth aged 15-24 years old (34.7 percent in Q3-2019 with only one percentage point difference between males and females)1. Given the prevalence of unemployment among graduates, priority has been given to highly educated youth, at the expense of the unemployed who have secondary education and below. However, while much progress has been done in tertiary education, the population with tertiary education (about 1,800,000 Tunisian people) is significantly smaller in size compared to the population with secondary education (about 3,300,000), with primary education (about 2,900,000) and is similar in size to the number of people with no education at all (1,800,000)2. As a result, the number of unemployed with secondary education and below is almost twice the size of unemployed with tertiary education while this population is less served by active labor market programs than unemployed graduates. Public Disclosure Authorized 3. Beyond the problem of unemployment, many workers are in low-quality jobs. As much as three quarters of Tunisia’s workforce are employed in low-productivity sectors3, while high productivity service sectors absorb less than 10 percent of total employment.4 Overall, 41 percent of the labor force are employed in low-quality jobs, i.e. self-employed (in agriculture or non-farm activities), un-paid work, or informal wage employees. There are important variations in labor market outcomes across regions, for example, in Jendouba, Kebili and Sidi Bouzid a higher share of the workers is engaged in unpaid work or self-employment in agriculture, whereas Tunis, Ariana, Manouba, Ben Arous and Sousse, the majority of workers are wage-employed (either in the public or private sector). 4. A large share of the working-age population is idle. There are low levels of labor participation, especially amongst women (under 26 percent compared to 71 percent for men) and youth (15-24 years old). In 2014, around one third of the youth population were categorized as Not in Employment, Education or 1. 1 Institution National des Statistiques (2019) 2 Recensement Général de la Population et l’Habitat (2014) – RGPH 2014 Public Disclosure Authorized 3 Low productivity sectors refer to those with below-average productivity (e.g. agriculture, textile, construction, public infrastructure, commerce, and manufacturing (see World Bank (2015), “Labor Policy to Promote Good Jobs in Tunisia: Revisiting Labor Regulation, Social Security, and Active Labor Market Programs”. Directions in Development. Human Development) 4 See World Bank (2015), “Labor Policy to Promote Good Jobs in Tunisia: Revisiting Labor Regulation, Social Security, and Active Labor Market Programs”. Directions in Development. Human Development. Training (NEET), an additional two fifth percent were students, while the remaining (around 30 percent) were working. NEET rates are the highest among young women (38 percent compared to 25 percent among young men). Lastly, education also matters since almost two thirds of the NEET did not complete secondary education. Source: World Bank Jobs Tool based on the World Development Indicators 5. Since the 2011 Revolution, under- and unemployment put tremendous pression on the Government of Tunisia (GoT) to deliver on the promised social contract with its citizens and demonstrate the tangible socio-economic dividends of democracy. While poverty incidence was halved between 2000 and 2010 (from 32 percent to 15.5 percent), considerable disparities exist among regions and age groups (World Bank Group (WBG) Country Partnership Framework (CPF), 2016). This pattern has persisted since the Revolution and has actually worsened in some regions. Household vulnerability to poverty also remains considerable (Systematic Country Diagnostic (SCD), 2015: 24). Social Safety Nets (SSNs) such as the Program for Needy Families (Programme National d’Aide aux Familles Nécessiteuses, PNAFN) and Subsidized Health Cards (Assistance Médicale Gratuite, AMG2) exist but they lack adequate coverage and targeting accuracy. Social and economic exclusion is increasing for certain groups, especially youth. This exclusion of large segments of Tunisia’s youth population from the country’s social and economic mainstream has created a breeding ground for radicalization. At the core of public dissatisfaction is under- and un-employment, particularly among graduates, youth and residents of lagging regions or marginalized peri-urban areas. 6. The job challenge is the resultant of various issues: on the supply side of the labor market (namely orientation of youth but also the stakeholders’ capacity in skilling youth), on the demand side (namely the ability of the private sector to generate jobs, in particular decent and high productivity jobs), and on the efficiency of intermediation mechanisms to link the supply and the demand sides. 7. After a long recovery, the private sector is slightly picking up again in terms of job creation. The aftermath of the 2011 Revolution (delays in reform implementation, and security-related incidents, social unrest, and regional instability) has deterred private investment in the country and created an uncertain business environment. This had led to a significant slowdown of economic growth (only 1.4 percent post-revolution compared to 4.4 percent during the five years before the revolution), and hence job creation. Indeed, between 2005 and 2010, businesses in Tunisia were growing by 3.6 percent annually in terms of job creation. After the 2011 Revolution and looking at the period 2010-15, the number of jobs created was almost null (+0.1 percent annually). The private sector is picking up again with + 3.8 percent of new employees in private businesses being created on average every year. This regain translated into 117,000 new jobs on the Tunisian labor market over the period 2015-18. While it is encouraging for the economy, this number is still significantly below the 634,900 unemployed people. 8. In Tunisia, the shortage of jobs is not the only problem: among youth, expectations on the return to education are high. When asked why they are not been working over the past seven days, most job seekers point out the lack of jobs5 (68 percent of the respondents who are actively looking for a job). However, among graduates, a significantly larger share of the job seekers highlights the limited suitability of jobs to their experience, qualification or salary expectations (44 percent to be compared to 18 percent for job seekers with secondary education or below). 9. The Tunisian educational system does not align with the needs of the private sector. In Tunisia, like many other MENA countries, the education system has had a quantitative and qualitative evolution over the past two decades. In fact, the proportion of youth following higher education has increased from 10 percent of the total learner population in 2004 to 25 percent in 2009. This significant increase in the number of students with higher education reflects both the arrival of increasingly large cohorts of youth with secondary education and a government policy that has promoted higher education at the expense of technical and vocational training. The low return on education can be partly explained by an oversized production coming from the tertiary education system and when compared to the needs of the productive sectors. This leads to a significant skills’ mismatch. 10. As a result, there are jobs that are published by businesses but not filled. The national statistics agency indicates that in 2017, about 36,000 jobs are still waiting to be filled6. These statistics probably underestimate the number of these to-be-filled jobs as only a handful of businesses use the government systems to post a job offer. This indicates that youth are either not well informed about salaries in the private sector or that their qualifications are not in line with the private sector’s needs. 11. Intermediation systems are underutilized by businesses. As highlighted by a recent survey conducted by the ANETI (National agency for employment and self-employment), many businesses are in contact with the ANETI to benefit from the wage subsidies tied to the recruitment of first-time young jobs seekers (59 percent of interviewed businesses). But only 31 percent of businesses use the ANETI to post a job offer7 and about two thirds have never seen any ANETI job counsellor. This highlights the weak link between the ANETI and the private sector.
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