A new report from the International Labor Organization (ILO) and the United Nations Development Program (UNDP)—Rethinking Economic Growth: Towards Productive and Inclusive Arab Societies—examines employment issues, the relative lack of dynamic private sectors, broken social contracts, and more in the Arab world.
The chapter on education is particularly interesting. The report focuses on the problems of the demand side in explaining the lack of good jobs in the region, rather than the skills gap that many other studies have emphasized. It argues that it is “mainly the type of jobs that are created that leads to investments in human resources, rather than investments in human resources leading to job creation. Once the macro economy and various sectoral policies create opportunities for productive types of jobs that require more skills, job seekers will have the incentive to make the appropriate investments in their human capital in order to get those jobs.”
The report also makes compelling distinctions between employment outcomes in the GCC economies and other countries in the Arab world. Since government employment in the GCC “is more or less an automatic entitlement,” students in those countries lack an incentive to bolster their skills and receive great educations. Nationality, more than education, is critical for getting a job in the oil economies. Meanwhile, the report argues that in Arab countries where educated people face less certainty about their economic futures, they do better in school so that that they can emigrate or compete for a decent job at home.
The report cites World Bank statistics that speak to this phenomenon: in the 2000s, 45.3 percent of high-skilled people from Lebanon emigrated to OECD or GCC countries, as did 31.3 percent from Yemen, 19.1 percent from Morocco, 13.2 percent from Tunisia, and 11.5 percent from Iraq. (In a focus group I did with recent college graduates in Tunisia last fall, almost all of them expressed a desire to emigrate.) Yet when it comes to the GCC countries, only 6 percent of high-skilled people from Bahrain emigrated, 2.3 percent from Qatar, 1.1 percent from Saudi Arabia, 0.9 percent from the United Arab Emirates, and 0.5 percent from Oman.
Not surprisingly, World Economic Forum data cited in the report show that only 2.6 percent of executives in Lebanon say there is an “inadequately educated workforce” versus 21.8 percent of executives in Oman. In the Arab world, a higher percentage of executives report an inadequately educated workforce in GCC countries (14.4 percent) than executives in other oil-producing economies (8.6 percent) and non-oil states (6.6 percent).
The relationship between education and employment is somewhat of a chicken-and-egg issue. For the most part, economies in the Arab world have not created nearly enough good jobs for their rapidly expanding number of university graduates. However, strong employment-oriented educational systems are vitally important for creating a skilled workforce. Even a much stronger private sector may not fully be able to provide young people with “the incentive to make the appropriate investments in their human capital in order to get those jobs.” The United States is a case in point when it comes to this problem, with large quantities of STEM jobs going unfilled and high attrition rates in the STEM subjects in colleges, even as relatively high unemployment persists.
That being said, the report also makes a valuable contribution in highlighting the factors that hurt the private sector. When it comes to explaining the constraints on employers’ willingness to invest in the Middle East and North Africa, the report suggests (using World Bank data) that ahead of employers’ concerns about skills are concerns about tax rates, cost of finance, access to finance, macro instability, tax administration, informality, access to land, and corruption. It is also worth noting that there currently is not one Arab country in the most recent top twenty Doing Business ranking slots (Saudi Arabia and Bahrain were in the top twenty in 2010, but have since dropped down to 22 and 42 respectively.) The ILO/UNDP report notes that Arab countries’ average Doing Business ranking is a lowly 97, and a better GCC average (43) arguably reflects reforms that may not practically improve the business climate. Indeed, much of the Arab world is insufficiently open for business, with a detrimental impact not only on employment but also education.