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The Arab region has witnessed remarkable socioeconomic improvements in the last decade. Reports indicate that roughly 10 million people enter the labor market annually. However, more than 40 million jobs need to be created over the next decade to keep up with the pace with new entries. The primary challenge facing the Arab nations today is that of youth employability. The region has a disproportionately large share of youth and the world’s highest youth unemployment rate. The region also has the lowest youth labor force participation rate in the world, which stands at 48% compared to 74% in the Americas and 62% in Europe. The labor force participation for young women is even lower compared to the rest of the world and stood at only 27% in 2013, compared to 64% in the Americas, 55% in Europe and 62% in Sub Saharan Africa. The participation for young men stood at 70% in 2013, similar to levels recorded in Europe, but lower than the 84% observed in the Americas or the 76% in Sub Saharan Africa.

World Bank reports indicate that a large proportion of Arab youth who do have jobs are underemployed. The Arab underemployment rate of 38% is similar to the underemployment rates seen in Sub Saharan Africa, but is much higher than that seen in other parts of the world. Underemployment rates in the region do not decrease with education levels. More than 44% of youth who finish university remain underemployed.

High youth unemployment and underemployment are serious economic issues reflecting the fact that the Arab world is not making full use of its human resources. One way to address this would be to encourage the private sector to invest in job creation, which would help increase youth employment. However, analysis of the labor supply in the region indicates that, despite high levels of unemployment, thousands of jobs remain unfilled due to the lack of qualified applicants. Several Arab countries are hiring foreign labor to carry out manufacturing jobs that could easily be carried out by qualified local workers. There exists a mismatch between the skills that Arab youth learn at schools and universities and the skills that are required by markets, reflecting a skill gap and mismatch between supply and demand.

GCC countries, which have achieved high economic growth with good levels of investment in education, find it hard to fill jobs with suitably qualified GCC nationals while thousands of young women and men remain unemployed and underemployed. Youth unemployment rates in the GCC countries in 2011 remained high at 23.3%.

Note must be made of the progress made by the UAE with regard to embracing a strategy for knowledge and innovation driven economies. World Bank reports indicate that the UAE doubled its employment from 1.7 million in 2000 to 3.5 million in 2009 with a compound annual growth rate of 8.3%. The UAE based its development over the last two decades on a clear knowledge and innovation strategy, and developed core competencies in technology, media and communication.

Reports indicate that the Arab world should target the development of knowledge and innovation driven economies. This requires essential elements like the introduction of basic institutional reforms to promote the quality of business education and the investment climate. The promotion of knowledge intensive sectors accompanied by economic diversification, as well as the enhancement of regional and international integration, should also be targeted.

A more recent review of jobs and skills in the region finds that there are four key factors that could drive growth. The first is a creation of a more dynamic private sector based on the region’s human capital, where emphasis is placed on reduction of barriers restricting entry to markets and their roles in promoting investment. The second is the opening of markets to human resources so that skills can be mobile with the elimination of constraints related to differentiation between public and private sectors. The third is to focus on the enhancement of the role of the next generations through access to knowledge and skills and the elimination of information gaps. The fourth is to help build short term interventions related to the immediate needs of establishing medium term social agreements related to reforms and the implementation of these reforms especially with respect to the angle of job markets.

The next section of this blog post highlights one of the most successful areas of youth employment and integration through the “Education for Employment Initiative for Arab Youth” (E4E).

Read Part II

Rema Nair Balasundaram is a professional in the area of education in Asia and Africa. She has worked extensively, leading operational teams, in the education sector for the World Bank, UNDP, ADB and the IFC. She has led delegations and task forces for technical assistance in Asia and Africa, focusing on primary education, secondary education and tertiary education over the years. She has also led operations and evaluations of Joint, Global and Regional Programs in the Education sector in Asia and Africa. She has graduate degrees in Development management, and Food Science and Nutrition, and a major in Public and Economic Policy.