Labor and Employment

 

Demographic trends and natural resources have long affected the Arab region’s labor market. With the protracted conflicts that hit the region since 2011, major repercussions have been witnessed in several Arab countries, such as Syria, Iraq, Yemen, Libya, Somalia, Palestine and Lebanon. Recently, more emergent challenges are facing the Arab region resulting from the fluctuating oil prices and Coronavirus outbreak along with different structural challenges in the economies. Despite the widening disparities, the Arab countries continue to share common labor market features and face similar challenges. The challenges that mark the labor market are in general related to low labor force participation, especially among women, high unemployment rates, especially among youth, large but decreasing shares of public sector employment, and high prevalence of informal employment.

 

ILO estimates for 2019 show that labor force participation rate in the region at 48 percent, is significantly lower than the global average of 60.7 percent, mostly due to low participation rates of women at  20.8 percent.[1] Despite the slight improvement in labor force engagement in the past years, especially with regard to women, in 15 Arab countries less than half the labor force is actively engaged in the labor market. This rate is the lowest in conflict-inflicted countries such as Yemen (38 percent), Palestine (43.8 percent), and Syria (44.1 percent) and the highest in the GCC countries, reaching 86.8 percent and 82.1 percent in Qatar and the United Arab Emirates respectively.[2] This is explained by the fact that the latter are labor importers. The labor force participation rate of men (72.9 percent) is more than triple that of women in the Arab region. In Yemen, male labor force participation rate is more than 12 times higher than female labor force participation rate, registering only 5.8 percent. Only Djibouti and Comoros show a female to male labor force participation ratio above the global average of 0.64,  with 0.74 and 0.73 respectively.[1]
 

There is a wide mismatch between labor supply and labor demand resulting in high unemployment rates in many countries, especially among youth. This mismatch is largely the result of the structure of the economy in most countries, whereby it is locked into low value-added activities. According to ILO modelled estimates, unemployment in the Arab region is estimated at 10.4 percent in 2019,[1] twofold the world average of 5.4 percent.[3] However, if we exclude the labor importing economies of GCC countries, the rate would increase to 12.1 percent.[1] While unemployment rates are alarming in some Arab countries— namely 55 percent in Syria[4] and 25 percent in Palestine[5] (according to the latest statistics)—GCC countries have very low unemployment rates, with Qatar registering the lowest rate in the world at 0.1 percent.[2] However, the region is expected to witness higher rates due to the occurring and foreseen economic recessions, the outbreak of COVID-19 and the resulting lockdown. According to ESCWA, the Arab region Gross Domestic Product (GDP) is expected to decrease by $42 billion, as a result 1.7 million jobs could be lost, thus increasing the unemployment rate by 1.2 percentage points in 2020.[6]

 

The Arab region is characterised by a young and well-educated population,[7] with around 60 percent of the population below the age of 30.[8] However, the lack of job creation and the mismatch between the highly educated new entrants into the labor market and the market needs has led to high youth unemployment, especially among women and the more educated. Youth unemployment rate in the region was estimated at almost 26.4 percent in 2019 however it is predicted that real numbers are significantly higher and increasing.[1] Only 5 countries have registered youth unemployment rates lower than the world average of 13.6 percent, namely 4 GCC countries and Comoros.[3]
 

Cultural and social norms, as well as, structural obstacles limit women’s participation in the labor market. Women in the Arab region face a higher risk of unemployment and they still face high barriers to entry into the labor market. The female unemployment rate registered 20 percent and is still very high compared to men’s unemployment rate at 7.8 percent [1] and to a world average of 5.6 percent.[4] Female youth unemployment rate registered a high 38.5 percent, is the highest in the world, almost double the rate among young men.[1]

 

Although most of Arab countries have social security systems, less than a third of the region’s[1] labor force contributes to social security on average, only covering public and private sectors employees that have regular contracts,[9] with public sector workers, which their percentage varies between 20 and 30 percent in most Arab countries,[2] enjoying more generous social insurance schemes and attractive financial benefits and stability.[3] This has led to the public sector being the preferred source of employment for job seekers in the Arab region, especially in the GCC countries, absorbing most of the national employment, despite the reforms and policies that support national employment in the private sector.

  

The role of the informal sector in the economy has been a persistent feature of the Arab economies. Job creation has been always shaped by the low productivity and informal sector. According to latest available data by the International Labor Organization (ILO), 68.6 percent1 of the Arab country’s workforce is employed in the informal sector, lacking access to job security, social protection and other fundamental rights.[10]

 

The labor market in the Arab region is expected to experience some serious fluctuations due to the foreseen economic challenges. The drop in oil prices, the outbreak of COVID-19, high debt ratios, and budget deficits leading to the contraction of the existing low productive Arab economies will have severe consequences on the employment prospects across all sectors. The services sector, employing 54.4 percent of total employment in comparison with 24.3 percent for the industry and 21.4 percent for the agricultural sector, is the most severely affected, leading to drastic reduction in working hours, wage cuts and layoffs.[11] The COVID-19 crisis  is expected to wipe out 8.1 percent of working hours in the Arab states1 in the second quarter of 2020 – equivalent to 5 million full-time workers.[12]





This overview has been drafted by the ADP team based on most available data as of June 2020. 
 


Sources:
[1] ADP calculations based on data extracted from  the International Labour Organization (ILO). 2020. ILOSTAT. [ONLINE] Available at: https://www.ilo.org/ilostat [Accessed 28 May 2020].

[2] The International Labour Organization (ILO). July 2019. ILOSTAT. [ONLINE] Available at: https://www.ilo.org/ilostat [Accessed 28 May 2020].
[3] The International Labour Organization (ILO). November 2019. ILOSTAT. [ONLINE] Available at: https://www.ilo.org/ilostat [Accessed 28 May 2020].
[4] Palestinian Central Bureau of Statistics (PCBS). 2020. [ONLINE] Available at http://www.pcbs.gov.ps [Accessed 06 May 2020].
[5] Whole of Syria Strategic Steering Group (SSG). March 2019. 2019 Humanitarian Response Plan (HRP). Syrian Arab Republic. [ONLINE] Available at: 
https://reliefweb.int/sites/reliefweb.int/files/resources/2019_Syr_HNO_Full.pdf [Accessed 27 April 2020].

[6] Economic and Social Commission for Western Asia (ESCWA). 18 March 2020. Regional Emergency Response to Mitigate the Impact of COVID-19. [ONLINE] Available at: https://www.unescwa.org/sites/www.unescwa.org/files/20-00116_rer_mitigatingimpact_covid-19_eng_mar27.pdf  [Accessed 2 June 2020].
[7] The International Labour Organization (ILO). 2019. Employment Promotion. [ONLINE] Available at: https://www.ilo.org/beirut/areasofwork/employment-policy/lang--en/index.htm [Accessed 2 June 2020].
[8] ADP calculations based on data extracted from the Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat. 2019. World Population Prospects. [ONLINE] Available at: https://population.un.org/wpp/ [Accessed 2 June 2020].
[9] ILO. 2020. ILO in the Arab States: Social Security. [ONLINE]. Available at: https://www.ilo.org/beirut/areasofwork/social-security/lang--en/index.htm [Accessed 2 June 2020].
[10] ILO. 30 April 2018. More than 60 per cent of the world’s employed population are in the informal economy. [ONLINE] Available at: https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_627189/lang--en/index.htm [Accessed 2 June 2020].
[11] The World Bank. 2020. World Development Indicators. [ONLINE] Available at: https://databank.worldbank.org/source/world-development-indicators [Accessed 2 June 2020].
[12] ILO. 7 April 2020. COVID-19 causes devastating losses in working hours and employment [ONLINE] Available at: https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_740893/lang--en/index.htm [Accessed 2 June 2020].

 

[1] This rate only covers 12 countries from the region: Bahrain, Iraq, Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syria, United Arab Emirates, Yemen



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Data Highlights

  • Labor force participation rate in the region is the lowest worldwide at 49.8% in 2015, mostly due to the low participation rates of women. This rate is the lowest in conflict-inflicted countries such as Palestine (43.7%), Iraq (42.4%), and Syria (41.7%).

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