1. Creating Jobs for the Youth
Imed Drine and James Thurlow
World Institute for Development Economics Research, United Nations
University (UNU-WIDER)
1

2. There are many similarities across MENA countries
• Youth unemployment rates are extremely high
• Unlike most regions, unemployment rates are highest
amongst more educated youth
Youth and adult unemployment Youth unemployment by education
35% Youth
Basic education
30% Adult
Unemployment rate
60% Tertiary
Unemployment rate
25% 50%
20% 40%
15% 30%
10% 20%
5% 10%
0% 0%
Turkey
Jordan
Tunisia
Algeria
Egypt
Iran
Syria
Morocco
Jordan
Egypt
Tunisia
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3. But there are also many differences
• Youth unemployment rates are much higher for
women in some countries, but not in others
• Pressures to find a job also vary across countries
Youth unemployment by gender Youth willingness to work in next 7 days
60% 100% Male
Male
Share of unemployed
50%
Unemployment rate
Female 80% Female
40%
60%
30%
40%
20%
10% 20%
0% 0%
Jordan
Tunisia
Jordan
Tunisia
Egypt
Egypt
Morooco
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4. MENA has region-wide problems,
but needs country-specific solutions
Case study:
Youth unemployment in Tunisia
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5. High and persistent youth unemployment
• Most unemployed youth are Share of unemployed youth by education
7%
actually less educated Primary
40% Secondary
• But unemployment rates rise 53%
Tertiary
with education levels
Unemployment rates
• So providing more schooling 60%
50%
may not solve the problem 40%
30%
20%
• Q1: Why don’t wages fall to 10%
0%
reduce unemployment?
Youth
Adult
Tertiary
Primarly
Secandary
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6. Wide regional variation in unemployment rates
• Tunisia has a coastal “core” and an inland “periphery”
• Youth unemployment is much higher in the periphery
• Male-female differentials 50%
Unemployment rates (%)
Male Female 44%
35%
narrow towards the core 40%
30% 23%
28%
• Average monthly wages 20%
10%
0%
are much higher in the core Core Periphery
for similarly-educated workers Average monthly wage in private sector
(3.5 years after high school; dinar)
600
• Q2: Why don’t young people 400
458
372
(women) migrate to the core? 200
0
Core Periphery
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7. Q1: Why don’t wages fall?
Vacant jobs in major urban centers
• There are vacant jobs available 250
Vacancies (1000s)
• But youth’s “reservation wages” 200 Hiring (1000s)
150
may be high relative to their skills 100
50
• Demand-side explanation: 0
2004 05 06 07 08 09 10
– Firms value experience and Education levels of the employed
skills more than education Adults
Primary
Evidence: Fewer adults have Secondary
Tertiary
completed primary school and
yet they have less unemployment
Youth
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8. Q1: Why don’t wages fall?
• Supply-side explanation:
– We suspect that educated youth won’t accept lower wages
– They overestimate the value of schooling Monthly Net Wages (dinar)
700
because their “reference wage” has been 600
625
500
biased by the public sector 400
518
461
300 396
Evidence: Wages are higher in the 200
100
public sector at similar education levels 0
Public Sector Private Sector
Total "Techniciens superieurs"
– Families provide a strong fallback position
Evidence: 85% of unemployed youth rely on their family
for their incomes and housing
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9. Q2: Why don’t young people move to the core?
• The usual explanations don’t apply to Tunisia:
– No language barriers or ethnic discrimination
– No lack of jobs in the core coastal region
– Education levels of youth are not lower in the periphery
Negligible education differences between regions
100%
Share of unemployed
80%
60% Tertiary
40% Secondary
Primary
20%
0%
Male Female Male Female
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10. Q2: Why don’t young people move to the core?
• Regional unemployment gaps are largest for women
– Means that women’s migration is particularly constrained
– May be due to cultural preferences
• But unemployment gaps also exist for men
– A lack of job information or social networks
Evidence: 80% of the youth who find a job rely on
personnel effort (“connections”) and not official channels
– High migration costs and family fallback reduces mobility
Evidence: Although poorer, periphery households still
support 87% of unemployed youth (higher than in core)
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11. Tunisia needs youth-focused labor market policies
• Reservation wage problem
– Current policy: US$100 a month to university graduates
– Better policy: wage subsidy for all young formal employees
Lowers effective wage demands, reduces the “cost of
inexperience”, and incentivizes on-the-job training
• Regional mobility problem
– Current strategy: Public sector investment and jobs in the
periphery (this is costly and unsustainable)
– Better strategy: Subsidize youth mobility (e.g., reduce
migration costs by providing better information systems,
housing and transport for young job seekers)
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12. In the long-run, MENA needs a new growth strategy
• Youth unemployment is a major problem for MENA
• But adult unemployment is also too high
• So while youth-focused labor market policies are
crucial, they will not be enough to address MENA’s
long-term challenges
• Arab Spring offers us a good opportunity to think
about new development models that could promote
global competitiveness and labor-intensive growth
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