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Political and Economic Inclusion Critical to Successful Transitions

MD Staff

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Political and economic inclusion is critical to successful transitions to prosperity and stability in the region, according to political and business leaders and academics at the World Economic Forum on the Middle East and North Africa.

Amr Darrag, Minister of Planning and International Cooperation of Egypt, noted that the Egyptian government is under huge pressures to solve problems immediately. “We need support from our citizens and the international community. We are working on an extensive plan of reform through extensive dialogue,” he said. In Egypt now everyone is allowed to express their opinions. The challenge, he added, is “how to manage disagreements”.

Elyes Fakhfakh, Minister of Finance of Tunisia, echoed these thoughts, observing that the new Tunisian government is endeavouring to be inclusive. However, he said: “It is very difficult to manage the transitions in these countries because governments are being pushed to implement reforms very quickly.”

Joseph E. Stiglitz, Professor, Columbia University, USA, argued for the importance of having more inclusive political processes with more consensus in the MENA region. “The lack of political and economic inclusion leads to uncertainty making investment growth difficult,” he said. Stiglitz suggested that MENA countries in transition should look to the inclusive systems in the Scandinavian countries for economic models.

Jin-Yong Cai, Executive Vice-President and Chief Executive Officer, International Finance Corporation, Washington, DC,  said that for successful transitions in the region, the public sector needs to build confidence through more transparency and clearer regulations. The private sector must engage governments on what is needed. Local investors should take the lead. “That would build confidence in international investors,” he said.

In order to promote successful public-private partnership for needed infrastructure construction in the region, governments need to be transparent and reform their judicial systems to encourage private sector investment, urged Samer S. Khoury, President, Engineering and Construction, Consolidated Contractors Company, Greece. Governments also need to consider whether they have the skilled workforce necessary to run the projects after completion.

Rich countries of the Gulf Cooperation Council are investing in the MENA region and are willing to increase their investments, noted Mustafa Jassim Al Shamali, Deputy Prime Minister and Minister of Finance of Kuwait. “The region needs good government and good management skills to realize its potential,” he said.

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Economy

Social Mobility and Stronger Private Sector Role are Keys to Growth in the Arab World

MD Staff

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In spite of unprecedented improvements in technological readiness, the Arab World continues to struggle to innovate and create broad-based opportunities for its youth. Government-led investment alone will not suffice to channel the energies of society toward more private sector initiative, better education and ultimately more productive jobs and increased social mobility. The Arab World Competitiveness Report 2018 published by the World Economic Forum and the World Bank Group outlines recommendations for the Arab countries to prepare for a new economic context.

The gap between the competitiveness of the Gulf Cooperation Council (GCC) and of the other economies of the region, especially the ones affected by conflict and violence, has further increased over the last decade. However, similarities exist as the drop in oil prices of the past few years has forced even the most affluent countries in the region to question their existing social and economic models. Across the entire region, education is currently not rewarded with better opportunities to the point where the more educated the Arab youth is, the more likely they are to remain unemployed. Financial resources, while available through banks, are rarely distributed out of a small circle of large and established companies; and a complex legal system limits access to resources locked in place and distorts private initiative.

At the same time, a number of countries in the region are trying out new solutions to previously existing barriers to competitiveness.

  • In ten years, Morocco has nearly halved its average import tariff from 18.9 to 10.5 percent, facilitated trade and investment and benefited from sustained growth.
  • The United Arab Emirates has increased equity investment in technology firms from 100 million to 1.7 billion USD in just two years.
  • Bahrain is piloting a new flexi-permit for foreign workers to go beyond the usual sponsorship system that has segmented and created inefficiencies in the labour market of most GCC countries.
  • Saudi Arabia has committed to significant changes to its economy and society as part of its Vision 2030 reform plan, and Algeria has tripled internet access among its population in just five years.

“We hope that the 2018 Arab World Competitiveness Report will stimulate discussions resulting in government reforms that could unlock the entrepreneurial potential of the region and its youth,” said Philippe Le Houérou, IFC’s CEO. “We must accelerate progress toward an innovation-driven economic model that creates productive jobs and widespread opportunities.”

“The world is adapting to unprecedented technological changes, shifts in income distribution and the need for more sustainable pathways to economic growth, “added Mirek Dusek, Deputy Head of Geopolitical and Regional Affairs at the World Economic Forum. “Diversification and entrepreneurship are important in generating opportunities for the Arab youth and preparing their countries for the Fourth Industrial Revolution.”

With a few exceptions, such as Jordan, Tunisia and Lebanon, most Arab countries have much less diversified economies than countries in other regions with a similar level of income. For all of them, the way toward less oil-dependent economies is through robust macroeconomic policies that facilitate investment and trade, promotion of exports, improvements in education and initiatives to increase innovation and technological adoption among firms.

Entrepreneurship and broad-based private sector initiative must be a key ingredient to any diversification recipe.

The Arab Competitiveness Report 2018 also features country profiles, available here: Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, United Arab Emirates.

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The impact of labour market trainings on unemployment process in the global labour economy

Gunel Abdullayeva

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Since the 1990s, the persistence of high unemployment has been followed by two downturns, which affected an economic life over the world across the nation-states. The overt consequences cost unpleasantly social and economic outcomes for the states as well as societies. Henceforth, activation turn has observed once more shifting passive employment policies within the active policy actions of countries upon labour market at the beginning of a new millennium. It was supposed that the activation of jobless people through keeping employees occupied, job-search assistance, job creation and work experience programs, training and invest in up skilling, is an open way to fight against high unemployment and secure economic growth as well. Hereby, the idea of an active labour market policy (ALMP) became again pivotal tool in the domestic policy agendas of states in order to engage in new challenges of labour markets. Since the 1950s,it is an apparent fact that in Europe and the Nordic countries that the effectiveness of ALMPs engenders diminution in a structural and long-term unemployment and leads to increase net income together with the employment ratio of targeted groups in national economies.

With the XXI century’s new technological vicissitudes and industrialization, the active employment policies have been designed to support people with monetary (income) and non-monetary (education) incentives in order to reduce inequality, keep the balance of social inclusion, and stimulate market beyond to decrease unemployment. Consequently, labour market training grew into to become an important measure of ALMP strategies in the background of “welfare to workfare policy approach” to create better-skilled workforce as well as to surge adequate match between skilled manpower and needs of progressive demand in labour markets.

In fact, the scholarly studies state significant impacts of training and vocational programs in the activation of the workforce. For example, the 1950-1960s – Post War Era characterized with the rapid economic growth and labour supply shortage in the European industry. And as a solution, national employment policies started to focus on labour trainings. So that Sweden with its successful retraining system has been the pioneer of ALMP idea in the history. On the other hand, Germany with 1969`s Employment Promotion Act considered training as a principal component of active employment policies to upskill workforce in terms of new industrial needs by market demand.

The UN 2009 reports that education is considered one of the main indicators of poverty reduction: education and human resource investments contribute to an economic development of nation-states and societies. Higher educated people or up-skilled workforce boost up productivity and react the positively to technological changes. Some scholars and interlocutors claim that in long-term perspectives ALMPs should have to aim to develop an education and training system that enhances the productivity and employability of a labour force. Because of the fact that the skilled manpower is one of the cornerstones of the higher employment, developed economy, higher net income and well-being of the whole society.

Many types of research have been carried out to identify the prominence of labour market training, however, the Katz`s study (1993) shows the significant point of job market training as turning “unskilled labour” into “skilled labour”. Perceptibly, the unemployment problem is more common among less skilled individuals and new entrants to the market. Shifting in demand against unskilled labour force causes an unemployment among those people. In contrast to unskilled force reservation wage and labour demand is high for skilled manpower in the market. Here, the training policy helps turn out unskilled to a skilled workforce and to increase total employment in order to decrease unskilled unemployment. Research argues that training policy extends the skilled labour force and close the gap between the unskilled and skilled workers. Caruana and Theuma (2012) refer to Katz (1993) argue that in order to push jobless people towards work, some trainings improve the qualification of those workers who are already in the market. Hence, Katz (1993) emphasizes the importance of labour market training in reducing the unemployment rate of unskilled labour by transferring more workers to the skilled labour pool. They also underline the significant role of a training policy in improving the skills of employees and increasing, the supply of skilled manpower in the economy. The following figure “Development of Unskilled Labour Force” visualizes Katz`s statement andshows how training measure affects the job market in both ways. The points where demand curves intersect supply curves, which are given wages for skilled and unskilled labour respectively. As the author explains, the wages represent the remuneration of foregone opportunity costs that, logically, is higher for skilled labour than for unskilled one. Since labour demand for the skilled labour is stronger than that of unskilled labour, thus, the demand curve for the former one is more elastic. As the figure illustrates, after the implementation of training, part of unskilled labour is moving up to the skilled.

At the same time, scholar states that wage setting regulation, training, and education systems affect differently net income and employment perspectives. Consequently, education and labour training policies create an equal distribution of skills and able to reduce supply and demand shifting on wages and employment. Another study by Calmfors et al., (2001) argue that training programs increase the reservation wage of attendees. However, salary growth and employment perspectives are possible by time after long run participation in the program.

To sum up, the training policy is considered as a main supply-side policy tool of activation to tackle unemployment. Scholars argue that training programs are useful to prevent the long run unemployment and to keep unemployed active in the market via participation. However, ex-post evaluation of training programs is controversial. Country case studies show that training programs are more effective in the background of vocational education reforms and collaboration with demand-side active labour market policies.

Reference list:

  • , Forslund A., &Hemstrom M., (2001), Does Active Labour Market Policy Work? Lessons from Swedish experiences, Swedish Economy Policy Review, 85, 61-124
  • Caruana C. &Theuma M., (2012), The next leap – From Labour Market Programmes to Active Labour Market Policy.
  • Katz, F.L., (1993), Active Labor Market Policies to Expand Employment and Opportunity.
  • United Nations, (2009), Rethinking Poverty: Report on the World Social Situation 2010, Retrieved from http://www.un.org/esa/socdev/rwss/docs/2010/fullreport.pdf
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Paid and well-designed internships work

Shane Niall O’Higgins

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“Before, they would ask for your diploma and maybe your grades. Now, when you are entering the labour market, you are asked for multiple internships and work experience here and there so I feel the pressure to intern so as to be better prepared for the labour market.”

That was what secondary school student, Georgia, told me while I was carrying out some focus group research last year for an ILO survey on youth aspirations.

Her frustration and worry are typical these days of many young people entering the labour market. They face the daunting task of finding a decent job and then keeping it when they do.

Unemployment and the proportion of young people not in employment, education or training are high, and new and emerging forms of ‘non-standard’ employment such as temporary, part-time and gig work are rapidly expanding.

These types of ‘non-standard’ jobs now dominate young people’s early labour market experiences, along with internships, which are becoming ever more common – not only in high income countries where they originated but also in low and middle income countries.

The idea is that internships help break that Catch 22 that many young jobseekers face – not having enough experience to get a job and not being able to get the experience needed because of not having a job.

But, just how effective are internships as a means of promoting the long term job prospects of young people like Georgia?

The fact is, there hasn’t been much solid research. Above-all, very little at all is known about the impact of so-called ‘open-market’ internships which are not undertaken as part of either an educational course or as part of an active labour market programme. In many – if not most- countries, these remain under-studied and under-regulated

This is the question that my colleague Luis Pinedo and I set out to answer in a new ILO working paper,  “Interns and outcomes: Just how effective are internships as a bridge to stable employment?”, which reviews existing studies and analyses primary data using surveys of interns undertaken by the European Commission and the Fair Internship Initiative (FII), an intern advocacy coalition.

We came to three main conclusions:

Not all internships improve career prospects

The impact of internships on the longer term integration of youth into work appears to be modest. Internships are, on average, less effective than either student jobs or apprenticeships as a means to bridge the gap between education and regular employment.

Paying interns pays off

It is clear, however, that paid internships offer better job prospects for youth in the long run than unpaid ones and that paid interns are more likely to find a job than those who were not remunerated. This may be because the payment itself may be linked to other positive features of a well-designed internship programme. These include the presence of a mentor; similar working conditions as regular employees; access to health insurance, and internships that are long enough for the young person to acquire and improve their skills. In addition, formal certification of the completed internship and/or undertaking the internship in a big firm both influence employment prospects and can also have a positive long-term impact.  However, the likelihood of finding a job does not increase in relation to the amount paid to the intern.

More and better research is needed

As yet, far too few studies have been carried out and those that do exist rarely make a serious attempt at identifying the causal links between internship programme features and post-internship labour market outcomes. Moreover, analyses of open market internships are even rarer. The task is clearly made more complicated by the fact that there is no agreement about what precisely is an internship. However, the lack of analysis is particularly worrisome not least because it is precisely open market internships which are least covered by existing forms of regulation. This paper, along with its two companion papers listed below mark a first step by the ILO to rectifying this information gap.

See the two other working papers that are part of the series:

Employment working paper no. 240: The regulation of internships: A comparative study Andrew Stewart, Rosemary Owens, Anne Hewitt and Irene Nikoloudakis

Employment working paper no. 242: Does work-based learning facilitate transitions to decent work? Laura Brewer and Paul Comyn

ILO

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