Labour market performance and migration flows - European ...

Chapter IFinal ReportBut one should not forget that one of the main causes of graduate unemployment in AMCs is the lack ofdemand for graduate employment in the private sector, reflecting the underdevelopment of high addedvalue economic activities and more generally the choice for a low wages, low added value exportorientedeconomic model, often promoted by the tax incentives structure (see Saif and El-Rayyes 2009,National Background Paper on Jordan). To this extent, it is a whole review of industrial policies, andmore generally economic policies, what is required to face this challenge (see Section 7.3).In any case, graduate unemployment is a source of major macro-economic inefficiency, as the humancapital of the country is wasted, the education investment made in these workers is lost and does notcontribute to economic growth and, most worryingly, it reduces the incentives for new generations toinvest in education (unless this investment is related to migration prospects) instead of engaging ininformal employment, bypassing the positive externalities derived from this investment for the economyas a whole.In all countries but Palestine there is a positive correlation between the level of education attainedand the unemployment rate, which is very specific to the region (see Table 2.4.1). In Maghrebcountries, in particular, this is a major problem. In Tunisia, for instance, the average level of educationamong unemployed workers exceeds that of the employed population: between 1994 and 2007 it hasgone up from 4.5 to 8.3 years of education for the unemployed and from 5.4 to 7.3 for the employed.Expectations and reservation wages also play a role in explaining high rates of graduateunemployment, to the point that, as stated by other authors in the past (see Middle East YouthInitiative 2009, pp. 8-9), the National Background Paper for Egypt points out that “probably for them[graduate workers] unemployment is a luxury”.This phenomenon of graduate unemployment in AMCs is attracting much public and specializedattention, in part due to the higher degree of political mobilization among this class, and in part also tothe higher potential interest they have as migrant workers for host countries. However, it should not beforgotten that, whereas graduate unemployment underlines a major distortion in resource allocationand incentives in the economy, in most AMCs the majority of the unemployed are not graduate, buthave only a primary or secondary education. In Tunisia, for instance, 35% and 40% of the unemployedhave only primary or secondary education, whereas graduate unemployed make up 20% of totalunemployment. So it is unemployment among workers with only primary or secondary education thatposes the main challenge in absolute figures (and hence also in migration potential terms): onlyslightly more than 1 out of the 7 million unemployed in AMCs are graduates.2.5 Informal EmploymentGiven the current state of labour markets in AMCs, an active and dynamic informal sector remains theonly systemic response to their malfunctioning, working as a buffer to allow an important part of theworkforce to make a living. So in practice it serves as a kind of security net, offering jobs or at leastincome generating activities to excluded workers. This has become a structural, integral part of labourmarkets in AMCs and indeed the main objective symptom of the distortions they are exposed to.If we know little about employment in AMCs and data is very unreliable, the knowledge aboutinformal employment is even slighter, even in those countries, such as Morocco, where specificsurveys have been conducted to gauge the informal economy (in 1999 and 2008). The share ofinformal employment in AMCs can be estimated in the 35-55% range for non-agriculturalemployment, but estimates for the same country show huge variations (depending on methodology anddefinition of “informal”). For Syria, for instance, they varied between 19% and 59%. In Morocco,informal employment has been estimated at 45% of non-agriculture employment. And in Algeria,excluding the public administration, where by nature there is no informal employment, andagriculture, where it is not well measured, informal employment goes to make up 45% of total47