Labour market performance and migration flows - European ...

European CommissionOccasional Paper 60, Volume I2. The Labour Markets Performance in AMCs2.1 Labour Market and Employment in AMCs: A Review of International ReportsThe 2003 World Bank report set out a series of alarming projections on job creation needs in MENAcountries over the coming two decades, underlining how national employment policies, and indeedAMC economic models at large, are ill-equipped to face those challenges. World Bank (2003)estimated that, in order to absorb labour force growth in the region, 80 million new jobs would need tobe created before 2020, plus 20 million more to absorb the existing unemployment at that point (15%of the labour force). To achieve these goals, the region would have to maintain average annualeconomic growth rates of 6 to 8% a year, far higher than the average 3.6% growth witnessed in the1990s. So, it concluded, “in no small measure, MENA’s economic future will be determined by thefate of its labour markets”, and “if current trends continue, economic performance and the well-beingof workers will be undermined by rising unemployment and low productivity”. This has beenconfirmed by all later reports on this issue. As a solution, the World Bank proposed a thorough reviewof the social contract established since independence that had produced high growth rates between1965 and 1985, but poor labour market (and economic) outcomes in the two decades since. To unlockthe job creation potential of the Middle East and North Africa, it argued, labour market reforms werenecessary, but insufficient, and MENA countries needed to travel the road of three transitions: from apublic sector dominated to a private sector dominated economy, from closed to more open economies,and from oil dominated to more stable and diversified, that is, a completely new social contract. Itlinked the need for these economic reforms to political reform and liberalization in the region(improving governance) and, although it recognised external partner support as critical, it stated thatthe main responsibility rested with MENA countries themselves. So it set up a framework for athorough review of the economic model, but without entering into details on a country by country orsector by sector basis.Three years later the World Bank published a further report on Middle East and North Africanlabour markets, this times with a more optimistic tone: 2007 Middle East and North Africa EconomicDevelopment & Prospects: Job Creation in an Era of High Growth (World Bank 2007b). It took stockof the four successive years of high growth experienced in the region and the high level of job creation(4.5% on an annual basis between 2000 and 2005, the highest of all developing regions) over thisperiod, with the subsequent decline in unemployment (from 14.3 to 10.8 of the labour force), with evena moderate increase in the labour force participation of women. The double challenge of the quantityand the quality of jobs created was underlined, the latter depending on an increase in productivity,which would only assure the sustainability of the jobs created. In a section devoted to migration(section 2.2.3), it was stated that migration provides an important mechanism for risk diversificationand income growth, but the sheer size of the job challenge means that labour demand abroad cannot fillthe employment gap. Thus, the region must maintain through 2020 the exceptionally high rates ofemployment growth seen in recent years, while advancing reforms to provoke even greater job creation,particularly in the private sector. The World Bank insisted on structural reform, in particular in the fieldof governance (quality of public administration and public sector accountability), improvement ofbusiness climate and trade policy. It also advocated the establishment of efficient safety nets to protectthose who may be left behind by structural changes, so that “labour policy must strike a balancebetween these two fundamental objectives – protecting workers from the risks of unemployment, lostincome, and poor working conditions, and encouraging job creation and the allocation of labour to itsmost productive users”.36