Introduction
In the context of an increasingly competitive global economy, the transition from education to productive and rewarding employment is challenging for young people everywhere. Nevertheless, the situation has reached a particularly critical juncture in the Middle East and North Africa (MENA), where regional youth unemployment rates are the highest in the world: 27.2% in the Middle East and more than 29% in North Africa, which is more than double the global average.1 With more than half of the region’s population under 25 years old and 2.8 million young people2 entering the labour market every year, the demographic “youth bulge” represents one the greatest challenges faced by MENA economies.
Creating an enabling environment in which young people can turn their education into employment and realize their aspirations is critical to avoid frustration and to ensure social stability. At the same time, these large cohorts of young people represent an enormous pool of talent, with a huge potential to drive the innovation necessary to build more competitive and sustainable economies.
In light of such social and economic imperatives, youth employment is at the top of policy and business agendas.
However, little progress has been made towards increasing youth employment in a productive and sustained manner. The recent experience of the Gulf Cooperation Council (GCC) countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) – has clearly demonstrated that effectively addressing the youth employment agenda requires more than budgetary capacity and economic growth. Supported by a spectacular rise in oil prices, the fast economic expansion of the GCC during the past decades enabled substantial job creation3 and the accumulation of considerable wealth. A significant portion of these gains has been translated into extensive investments in education and infrastructure projects, and into the diversification of the GCC economies. Yet, Gulf countries still face persisting high youth unemployment rates, particularly for young women (see Figures 1 and 2), suggesting that economic expansion is not enough to solve the youth unemployment challenge in the region.
Figure 1: In GCC countries, youth unemployment rates are more than twice as large
as overall unemployment rates
Source: World Bank, World Development Indicators
Figure 2: With the exception of Kuwait, youth unemployment rates in GCC countries
are much higher for women
Note: When accounting for the national population only, unemployment rates tend to be higher than the ones presented in Figures
1 and 2. For instance, in the case of Saudi Arabia, according to World Economic Forum calculations based on national statistics
(see Central Department of Statistics & Information, Labour Force Survey 2012), the youth unemployment rate among nationals
reaches 41% and more than 70% among young national women. Source: World Bank, World Development Indicators
Youth unemployment is a complex structural problem, driven by deep-rooted social and economic behaviours, shaped by institutions, rules and norms governing the labour market and education system.
Designing interventions to sustainably increase productive youth employment is not easy; adopting a more holistic approach appears to be essential to the effort. For instance, different stakeholders view the solution to youth unemployment from varying angles based upon their assumptions about the root causes of the problem. As the development and effective implementation of options often requires the support of a multitude of stakeholders, it is essential that these stakeholders hold a level of shared understanding of both the challenge and potential solutions. Furthermore, solutions to complex problems often require a long time to bear fruit. This means decisions must take into account not only present contexts and risks, but also future ones, which are likely to be very different from the current.
Against this background, the World Economic Forum engaged leaders from business, government, civil society and academia in a series of conversations between August 2013 and January 2014 to develop a comprehensive analysis of the employment system in Arab resource-endowed economies, with a particular emphasis on GCC countries, shedding light on the fundamental reasons for youth unemployment and their interdependencies. This approach, based on the World Economic Forum’s Strategic Foresight practice, aims at creating a common understanding of the structural reasons for youth unemployment and raising awareness of potential consequences – intended and unintended – of interventions, to help decision-makers identify effective and robust solutions, and ensure their successful implementation (for further details on the process, see Annex 1).
This report provides the main conclusions of the process. The first part of the report summarizes stakeholders’ various perceptions of the root causes of youth unemployment. Building on this preliminary exploration, the second part uses a systems thinking approach to provide a holistic analysis of the employment system, integrating the different causes of youth unemployment and mapping out their interdependencies into a synthesized framework. It includes an analysis of external changes to the employment system that might undermine social stability and economic prosperity, the system’s very objectives. The third part of the report suggests how the insights presented in the second part, generated through a collaborative cross-stakeholder process, can contribute to advance fruitful discussions to sustainably increase productive youth employment.
Box 1: Historical Context
The current employment situation in GCC countries has been shaped by the oil-based growth model adopted by these economies and has evolved supported by, and to support, rapid economic development. The discovery of vast oil reserves in the 1930s,4 and their subsequent extraction and exportation, allowed Gulf States to generate considerable revenues from oil – which today account for at least 80% of total government revenues in all GCC countries, with the exception of Qatar for which combined oil and gas revenues represent about 70% of government revenues.5
Through oil exports, GCC countries have been able to record rapid economic growth, accumulate considerable wealth, modernize infrastructure and greatly improve their citizens’ living standards, all of which with various and overall relatively low levels of diversification of the economy into productive, labour-intensive sectors.6 This distinguishes the GCC’s economic path from that of most advanced economies, for which the transition to higher per capita income has generally been associated with greater diversification. Furthermore, large oil revenues have enabled the provision of a generous social contract, so that GCC governments do not need to tax their citizens to ensure social welfare. Through implementing the social contract – materialized by subsidies, free access to public services, and the provision of jobs in the public sector – governments commit to securing their citizens’ economic and social well-being, and in turn, citizens support their government.
The hiring of both skilled and unskilled non-national labour, which has been needed to sustain the rapid oil-based growth of GCC economies, has also helped shape the employment situation of Gulf States, with non-nationals filling the majority of jobs in the private sector. Labour migration began following the initial discovery of oil, but increased substantially only after the 1973 oil boom and subsequent initiation of ambitious development projects. Such projects led to a rapid increase in labour demand that could not be met by national workforces, either because they were too small or did not have the required skills. In parallel, nationals were absorbed in the social contract that commits to offering comfortable, well-remunerated jobs in the public sector. Thus, by giving citizens an entitlement on oil wealth without promoting the productive use of national labour resources, the social contract has led to low labour force participation rates among GCC nationals (see Figure 3) and a high proportion of non-working dependents per employed person.7
While economic growth has been translated into high medical standards, it has not yet significantly altered cultural norms that still put a premium on large families and traditional gender roles. As a result, fertility rates have remained high over the past decades.8 This can be linked to the remarkable pace of economic growth that has occurred so far, without needing to productively mobilize the entire national labour force. The resulting high population growth has led to today’s inordinately large youth population, with about one-third to one-half of the GCC’s populations under the age of 25.9
Figure 3: Although aligned with the average rate for MENA non-oil exporting countries,
labour force participation rates in GCC countries are low compared to selected
international cases
* OECD countries
Note: Figures for GCC countries are for nationals only. All figures are for 2011, expect for the United Arab Emirates, for which figures are for 2009. For a list of countries included in aggregates, see Endnote 10.10 Source: For GCC countries, United Arab Emirates National Bureau of Statistics, Labour Force Survey 2009; Kuwait Central Statistical Bureau, Annual Statistical Abstract 2012; Qatar Information Exchange; Central Department of Statistics & Information, Labour Force Survey 2011; World Economic Forum calculations. For aggregates, World Bank, World Development Indicators; World Economic Forum calculations