International Labour Organization RETHINKING ECONOMIC GROWTH: Towards Productive and Inclusive Arab Societies RETHINKING ECONOMIC GROWTH: Towards Productive and Inclusive Arab Societies ILO Regional Office for the Arab States UNDP Regional Bureau for Arab States Copyright © International Labour Organization 2012 First published 2012 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email:pubdroit@ilo. org. The International Labour Office welcomes such applications. 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Catalogues or lists of new publications are available free of charge from the above address, or by email: [email protected] Visit our website: www.ilo.org/publns For ILO publications in Arabic, please contact: ILO Regional Office for Arab States P.O.Box 11-4088 Riad El Solh 1107-2150 Beirut – Lebanon Publications in Arabic are available on: www.ilo.org/arabstates Printed in (Lebanon) Contents Foreword 9 Background papers 12 Acronyms 13 List of definitions 15 OVERVIEW Summary of findings and policy directions 18 Introduction 18 The labour demand side: binding macroeconomic policy constraints 20 The supply side: more education but low labour force participation 22 The labour market in action: mixed results across the region 23 Quality of employment, poverty, inequality and social protection 24 Prospects 25 General policy directions 26 1. Macroeconomic policy coherence aimed at economic growth and shared benefits 26 2. Promotion of participatory and inclusive social dialogue 26 3. Expansion of coverage and increased effectiveness of social protection 26 Specific policies 27 4. Improved migration management 27 5. Well-designed employment policies and active labour market programmes 27 6. Increased quality and greater relevance of education and training 28 7. Better statistics and effective monitoring and evaluation of policies and programmes 28 Chapter 1 Output and employment growth 30 Introduction 30 Slow growth but fast employment creation 30 Sectoral changes in employment: resilient agriculture and expanding services 32 The private sector: still constrained after the reforms 34 The key role of migration in the region 38 Social unrest: the ingredients were present 39 Post-2010 policies: a strategic approach required 43 Concluding remarks 45 Chapter 2 Population, labour supply, employment and unemployment 47 Introduction 47 The labour force participation rate: not that low except for women 50 Uneven reduction in total unemployment 52 Youth unemployment: more concrete changes 52 Concluding remarks 61 Chapter 3 Quality of jobs and standards of living 63 Introduction 63 Quality of jobs 64 3 Working poor: fewer but not by much 64 Employment vulnerability: low but not for Arab women 65 Quality of life 68 Declining poverty but small gains in human development 68 Low expenditure inequality but little known about wealth accumulation 69 Chapter 4 Education and skills 74 Introduction 74 The supply of education: educated and jobless 75 The demand for skills: at what wages and for what jobs? 76 Large inequality of educational opportunity 77 To vocationalize or not? This is the curriculum question 79 Educated entrepreneur or educated employee? 80 Gender parity: almost there but not quite 81 The case of the GCC 82 Concluding remarks 82 Chapter 5 Social protection 85 Introduction 85 Social protection: limited coverage 85 Pensions: only for the formal sector, still fiscally unsustainable 85 Unemployment insurance: limited but expanding 87 Health care: uneven with high out-of-pocket expenses 88 Maternity: mainly for the public sector and costly for the private sector 89 Social assistance: fragmented and poorly targeted 91 Post-2010 changes: the need for comprehensive social protection 93 Concluding remarks 94 Chapter 6 Prospects and policy directions 98 Summary 98 Low prospects and an ageing labour force 98 Policy directions 101 General policies 101 Macroeconomic policy coherence aimed at economic growth and shared benefits 102 Promotion of participatory and inclusive social dialogue 103 Expansion of coverage and increased effectiveness of social protection 104 Specific policies 104 Improved migration management 104 Well-designed employment policies and active labour market programmes 105 Increased quality and greater relevance of education and training 105 Better statistics and effective monitoring and evaluation of policies and programmes 106 Concluding remarks 106 Chapter 7 Workers’ perspective Breaking with the past: a new Arab development model promoting trade union rights, industrialization, wage-led growth and decent work 108 Background and introduction 108 International labour standards 109 4 Freedom of association, collective bargaining and social dialogue 109 Creating jobs, structural transformation, industrial development and productive employment 110 Chapter 8 Employers’ perspective Creating an enabling environment for enterprise-led growth and job creation: the role of representative national employer and business membership organizations 115 Trade, competition and investment policies for growth, innovation, wealth and employment creation 115 Inclusive labour market regulatory frameworks 116 Regulatory frameworks that support innovation and promote competition 116 Tackling corruption and good governance 117 Increase efforts for more efficient and more equitable distributive mechanisms 117 The specific role of private sector organizations in policy dialogue 118 Recommendations for chambers and EOs in the region 118 Endnotes 120 Annex Methodology and country groupings 125 Appendix 129 Bibliography 146 Databases 150 5 List of figures Figure 1.1: Arab countries had low GDP per capita growth in the 1980s and 1990s 31 Figure 1.2: GDP growth in the Arab region accelerated after 2000 but was still slower than other regions 31 Figure 1.3: The employment response to output growth was significant 32 Figure 1.4: Productivity gains have been small in the Arab region 32 Figure 1.5: In relation to incomes, employment growth in agriculture is still high in the Arab region 33 Figure 1.6: Labour reallocation across sectors contributed negatively to productivity growth in the Arab region 34 Figure 1.7: Most employment gains were in the services sector 35 Figure 1.8: Selected indicators for the private sector 36 Figure 1.9: Investments in manufacturing led to sizeable employment creation 37 Figure 1.10: Access to land is a major or severe constraint on investment 37 Figure 1.11: Income growth and voice and accountability have been low in the Arab states 41 Figure 2.1: Population and labour force pressures have declined in the last 20 years 48 Figure 2.2: Ratio of youth-to-adult population declined continuously 48 Figure 2.3: Demographic dependency has declined 48 Figure 2.4: Male labour force participation in the Arab region is similar to that in other regions 50 Figure 2.5: Arab region has low labour force participation rates mainly as a result of low female participation rates 50 Figure 2.6: Female labor force participation rate increased in practically all Arab countries in the last 20 years 51 Figure 2.7: The unemployment rate in the Arab region is very much influenced by the unemployment rate of women 51 Figure 2.8: In most Arab countries unemployment decreased 52 Figure 2.9: In MENA unemployment rates do not decline as household income increases 53 Figure 2.10: Youth unemployment in the Arab region is high in a comparative context 53 Figure 2.12: Female labour force participation tends to be low among middle income countries 55 Figure 2.13: Women are overrepresented among wage and unpaid family workers 56 Figure 2.14: Ratio of national workers to migrants workers in the GCC declined considerably since the 1970s with the exception of Kuwait