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Norway should do more to improve job prospects of low-skilled youth

MD Staff

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Norway should step up its efforts to boost the job prospects of young people without upper-secondary qualification to further reduce the share of under-30 year-olds who are Not in Employment, Education or Training (NEETs), according to a new OECD report.

Investing in Youth: Norway says that labour market conditions of young people in Norway are generally favourable, with more 15-29 year-olds employed than the OECD average (59% vs 52%). The youth employment trend is declining, however, as the number of job opportunities for them has failed to match the rapidly increasing youth population, which rose by 18% between 2007 and 2016. Immigration accounted for over four-fifths of this increase.

Nearly one-in-ten (9%) young people – 86 000 of all 15-to-29 year-olds – were NEET in 2016, two percentage points higher than in 2008. Nearly two-thirds of NEETs were not actively looking for work. More efforts are needed to help NEETs, particularly inactive youth, according to the report.

Norwegian NEETs tend to be more disadvantaged than in other OECD countries. More than half (56%) have not completed upper-secondary education and young people born abroad are more than twice as likely to be NEETs as their Norwegian-born peers. NEETs are also nine times more likely to be of poor health and six times more likely to feel depressed than other young people.

Combatting early school leaving has been a policy priority in Norway for decades but almost one-in-five (19%) 25-34 year-olds do not have an upper-secondary qualification, well above the OECD average of 16%. Early school leaving is especially common among students in vocational education and training (VET), with only 63% graduating within two years of the end of the regular programme, compared to 72% in Sweden or 80% in Austria.

The first two years of VET are mostly school-based and many students then struggle to find an apprenticeship place with a firm for the next two years. Employers are often reluctant to take on apprentices as most students only have limited job-specific skills and apprentice remuneration is also comparatively generous.

The “New Youth Effort”, which replaced Norway’s “Youth Guarantee” in 2017, has the potential to improve employment opportunities for NEETs. For this new policy framework to be effective, its implementation through the Norwegian Labour and Welfare Administration NAV needs to be systematically monitored, however, and additional funding for employment programmes may be needed.

The report also recommends that Norway take further steps to reduce receipt of incapacity-related benefits among yong people, which – in spite of recent reforms – is the highest across all OECD countries.

Among the report’s recommendations to help young people in Norway into work are to:

Align VET provision more closely with labour market demand by bringing forward specialisation in the school-based part of VET and combining school- and work-based training from day one.

Continue expanding lower-level VET tracks to enable academically weak or practically minded young people to attain a qualification.

Ensure rigorous work capacity assessments and better gatekeeping for disability benefits through clearer guidelines to NAV staff and general practitioners and better compliance monitoring.

Devote additional resources to supporting young Social Assistance recipients with mental health problems and little work experience.

Re-assess the strong reliance on work experience measures for young jobseekers, whose effectiveness have been questioned by a number of recent evaluation studies.

Expand the use of training programmes for jobseekers to include vocational training for low-skilled jobseekers and Norwegian-language classes for migrant jobseekers.

Facilitate data exchange between the educational authorities and NAV to permit NAV caseworkers to better follow up on their users and observe their transitions into education and training.

Make rigorous impact evaluations a pre-requisite for national funding for educational, employment and social-support programmes for NEETs.

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Economy

Belarus: Strengthening Foundations for Sustainable Recovery

MD Staff

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The speed of economic recovery has accelerated in early 2018, but the foundations for solid growth need to be strengthened, says the latest World Bank Economic Update on Belarus.

The economic outlook remains challenging due to external financing needs and unaddressed domestic structural bottlenecks. Improved household consumption and investment activity, along with a gradual increase in exports, will help the economy to grow, but unlikely above three percent per annum over the medium term.

“The only way for ordinary Belarusians to have better incomes in the long run is to increase productivity, which requires structural change. While macroeconomic adjustment has brought stability, only structural change will bring solid growth to the country,” said Alex Kremer, World Bank Country Manager for Belarus. “Inflation has hit a record low in Belarus, driving the costs of domestic borrowing down. However, real wages are now again outpacing productivity, with the risks of worsening cost competitiveness and generating cost-push inflation.”

A Special Topic Note of the World Bank Economic Update follows the findings of the latest World Bank report, The Changing Wealth of Nations 2018, which measures national wealth, composed of produced, natural, and human capital, and net foreign assets. Economic development comes from a country’s wealth, especially from human capital – skills and knowledge.

“Belarus has a good composition of wealth for an upper middle-income country. The per capita level of human capital exceeds both Moldova and Ukraine. However, the accumulation of physical capital has coincided with a deterioration in the country’s net foreign asset position,” noted Kiryl Haiduk, World Bank Economist. “Belarus needs to rely less on foreign borrowing and strengthen the domestic financial system, export more, and strengthen economic institutions that improve the efficiency of available physical and human capital.”

Since the Republic of Belarus joined the World Bank in 1992, lending commitments to the country have totaled US$1.7 billion. In addition, grant financing totaling US$31 million has been provided, including to programs involving civil society partners. The active investment lending portfolio financed by the World Bank in Belarus includes eight operations totaling US$790 million.

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Economic Growth in Africa Rebounds, But Not Fast Enough

MD Staff

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Sub-Saharan Africa’s growth is projected to reach 3.1 percent in 2018, and to average 3.6 percent in 2019–20, says Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank, released today.

The growth forecasts are premised on expectations that oil and metals prices will remain stable, and that governments in the region will implement reforms to address macroeconomic imbalances and boost investment.

“Growth has rebounded in Sub-Saharan Africa, but not fast enough. We are still far from pre-crisis growth levels,” said Albert G. Zeufack, World Bank Chief Economist for the Africa Region. “African Governments must speed up and deepen macroeconomic and structural reforms to achieve high and sustained levels of growth.”

The moderate pace of economic expansion reflects the gradual pick-up in growth in the region’s three largest economies, Nigeria, Angola and South Africa. Elsewhere, economic activity will pick up in some metals exporters, as mining production and investment rise. Among non-resource intensive countries, solid growth, supported by infrastructure investment, will continue in the West African Economic and Monetary Union (WAEMU), led by Côte d’Ivoire and Senegal. Growth prospects have strengthened in most of East Africa, owing to improving agriculture sector growth following droughts and a rebound in private sector credit growth; in Ethiopia, growth will remain high, as government-led infrastructure investment continues.

For many African countries, the economic recovery is vulnerable to fluctuations in commodity prices and production,” said Punam Chuhan-Pole, World Bank Lead Economist and the author of the report.  “This underscores the need for countries to build resilience by pushing diversification strategies to the top of the policy agenda.”

Public debt relative to GDP is rising in the region, and the composition of debt has changed, as countries have shifted away from traditional concessional sources of financing toward more market-based ones. Higher debt burdens and the increasing exposure to market risks raise concerns about debt sustainability: 18 countries were classified at high-risk of debt distress in March 2018, compared with eight in 2013.

“By fully embracing technology and leveraging innovation, Africa can boost productivity across and within sectors, and accelerate growth,” said Zeufack.

This issue of Africa’s Pulse has a special focus on the role of innovation in accelerating electrification in Sub-Saharan Africa, and its implications of achieving inclusive economic growth and poverty reduction. The report finds that achieving universal electrification in Sub-Saharan Africa will require a combination of solutions involving the national grid, as well as “mini-grids” and “micro-grids” serving small concentrations of electricity users, and off-grid home-scale systems. Improving regulation of the electricity sector and better management of utilities remain key to success.

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Multilateral Development Banks Present Study on Technology’s Impact on Jobs

MD Staff

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Rapid technological progress provides a golden opportunity for emerging and developing economies to grow faster and attain higher levels of prosperity. However, some disruptive technologies could displace human labor, widen income inequality, and contribute to greater informality in the workforce. Tapping new technologies in a way that maximizes benefits, mitigates adverse effects, and shares benefits among all citizens will require public-private cooperation and smart public policy.

That is one of the main conclusions of a new study, The Future of Work: Regional Perspectives, released today by four regional multilateral development institutions: the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), and the Inter-American Development Bank (IDB).

The study, which was presented at a seminar hosted 19 April at the IDB in Washington, D.C., explores the potential impact of technology in global labor markets and identifies concrete actions countries can take to prepare for the changing nature of jobs and leverage the benefits of emerging technologies.

The Future of Work: Regional Perspectives analyzes the challenges and opportunities presented by artificial intelligence, machine learning, and robotics in what is known as the Fourth Industrial Revolution. Potential challenges include increased inequality and the elimination of jobs, as well as the high degree of uncertainty brought about by technological change and automation. The greatest opportunities come from gains in economic growth that can result from increased productivity, efficiency, and lower operating costs.

The study includes chapters focusing on how new technological developments already are affecting labor markets in each region.

In the case of Asia and the Pacific, ADB research shows that even in the face of advances in areas such as robotics and artificial intelligence, there are compelling reasons to be optimistic about the region’s job prospects. New technologies often automate only some tasks of a job, not the whole. Moreover, job automation goes ahead only where it is both technically and economically feasible. Perhaps most importantly, rising demand—itself the result of the productivity benefits that new technologies bring—offsets job displacement driven by automation and contributes to the creation of new professions.

“ADB’s research shows that countries in Asia will fare well as new technology is introduced into the workplace, improving productivity, lowering production costs, and raising demand,” said Yasuyuki Sawada, ADB’s Chief Economist. “To ensure that everyone can benefit from new technologies, policymakers will need to pursue education reforms that promote lifelong learning, maintain labor market flexibility, strengthen social protection systems, and reduce income inequality.”

The publication was launched with a panel discussion featuring senior officials of the four regional development banks leading the study: Luis Alberto Moreno (IDB President), Charles O. Boamah (AfDB Senior Vice-President), Takehiko Nakao (ADB President), and Suma Chakrabarti (EBRD President). They were joined by Susan Lund (Lead of the McKinsey Global Institute) and Pagés, one of the co-authors.

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