Labour market performance and migration flows - European ...

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European CommissionOccasional Paper 60, Volume ITable 2.3.2. GDP per capita 1995-2007 (PPP constant 2005 international US$)1995 2000 2005 2007Morocco2661298035893880(10,69%) (10,57%) (12,13%) (12,55%)Algeria5631608771767310(22,63%) (21,59%) (24,25%) (23,64%)Tunisia4422544464457102(17,77%) (19,31%) (21,78%) (22,97%)Egypt3586421145744628(14,41%) (14,94%) (15,46%) (14,97%)Jordan3547363243424628(14,25%) (12,88%) (14,67%) (14,97%)Syria3759372540024260(15,11%) (13,21%) (13,52%) (13,78%)Lebanon7979832895619546(32,06%) (29,54%) (32,31%) (30,87%)AMC (a)4294474354175537(17,26%) (16,82%) (18,31%) (17,91%)Euro Area 24884 28194 29590 30921a) Weighted average. In parenthesis, the ratio to GDP per capita of the Euro Area.Source: World Development Indicators Database, World BankState Jobs, Migration and Reservation WagesThe higher salaries and the job security of public administration jobs exert a powerful attraction onyoung workers, in particular graduates, in a region where public sector employment is already thehighest in the world (over a third of all jobs are in the State sector). But the implicit social contractguaranteeing a State job to all graduates has been terminated, and the State no longer provides realisticemployment prospects. Thus, migration has become the employment solution of choice (Martín 2009).Indeed, migration prospects and (in some cases, e.g. Lebanon) the high cost of living in townstranslates into a high reservation wage (i.e. the minimum income for which a worker is ready to work)which, in turn, creates severe distortions in AMC labour markets.Indeed, a widespread characteristic of wage structures in AMCs is the high prevailing reservationwage. The higher wages in the public sector typical of AMCs, as well as the prospects for migration tohigher salary countries, disincentives many workers from searching out a low-paid job in the localmarket. When reservation wages are higher than equilibrium wages (in theory determined by marginalproductivity) for a particular category of workers, this leads to structural unemployment. This isparticularly evident in the case of the graduate unemployed having expectations of getting a publicsector job despite the bleak prospects of getting one. In Jordan, according to research carried out bythe World Bank (2007, p. 21), about 20% of all unemployed individuals and 45% of unemployedwomen have submitted applications to the Civil Service Bureau. This is a key factor in understandingAMC labour market behaviour.42
Chapter IFinal Report2.4 Unemployment Situation and Trends in AMCs: Excluding Youth and Female WorkersThe eight AMCs under study have an official number of unemployed workers close to 7 million, almosthalf of them in Egypt (2 million) and Syria (close to 1.5 million), with Algeria and Morocco alsoexceeding the 1 million mark (data from National Background Papers based on national official data,estimated using the ILO definition and hence excluding workers with an informal employment). The firstcomments these figures merit is that they are most probably a major underestimation. The ILO definitionof unemployment (registering as employed any person having worked at least one hour during the lastweek before the survey is conducted, and hence including subsistence activities and non-remuneratedwork, as well as any kind of underemployment) is not fit for economies with a high incidence ofinformal employment. In any case, it is notoriously inappropriate as a variable in determining themigration potential of a county, for which the relevant variable would be full-time paid employment. Butwe do not have this kind of data.Second, in all countries under study (with the exception of Palestine), unemployment rates haveclearly fallen in the last few years, in the most dramatic case, Algeria, from 29% in 2000 to less thanhalf of that figure today. Between 2002 and 2006, Morocco, Egypt, Jordan and Syria experienced too asignificant reduction in unemployment rates of between 3 and 6 percentage points. But this positivetrend has hardly benefited female employment, and, at least in some cases, female employment hasactually fallen. Morocco is a good case in point. There the participation rate went down from 50% in1996 to 44.8% in 2006. Young workers have also benefited to only a limited extent from thisemployment boom, which has tended to favour older workers and in some cases immigrant workers.Jordan is an extreme case in this respect: 63% of new jobs created between 2001 and 2007 went toimmigrant workers. In this regard, the reduction in unemployment rate gives only a partial view oflabour market performance: it is the employment rate, i.e. the ratio of total employment to thepopulation, which is more significant (see Table 1.2.1). Now, given that population has been growing ata faster rate than employment over the last ten years or so, this ratio has tended to increase over time.As shown in Table 2.4.1, unemployment is especially high for new entrants to the labour force andfor women. Across the region, unemployment is essentially a problem relating to the labour marketinsertion of a growing and increasingly educated youth population. So the vast majority of theunemployed are younger than 30, have at least an intermediate level of education, and have neverworked before. Indeed, a unique feature in AMCs is the increase in unemployment rates as theeducational attainment of workers increases, with graduate unemployment rates typically doubling therates for workers with primary or no education (which points to a major mismatch between educationalqualifications and labour market demand, and a worrying waste of educational investment). Thisunusual unemployment structure suggests that a significant part of unemployment may be the result ofhigh job expectations on the part of workers with some formal education, and a low valuation of thesecredentials on the part of the private sector because education systems have concentrated on makingpublic sector jobs accessible rather than on building the skills that are in demand in the private sector.In the case of women it may reflect as well a lack of alternatives to public sector employment. Youngwomen with secondary or university studies, which already, as we saw above, have the lowestparticipation rates in the world experience unemployment rates of close to 30%.43
Page 5 and 6: STUDYLABOUR MARKETS PERFORMANCE AND
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