GOVT 331 Dyer - Will the Current Oil Boom Solve the Employment Crisis in the MidEast

GOVT 331 Dyer - Will the Current Oil Boom Solve the Employment Crisis in the MidEast

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CHAPTER 1.3 Will the Current Oil Boom Solve the Employment Crisis in the Middle East? PAUL DYER, Dubai School of Government TARIK YOUSEF, Dubai School of Government At the 2003 annual meetings of the International Monetary Fund and the World Bank in Dubai, the World Bank released a flagship report on labor markets in the Middle East and North Africa (MENA). 1 The report described an unprecedented job creation challenge facing the region. By 2020, according to the report, an estimated 100 million jobs would have to be created to employ new entrants and reduce unemploy- ment to sustainable levels.To create these jobs, the region would have to maintain average annual economic growth rates of 6 to 8 percent between 2000 and 2020, far higher than the average 3.6 percent growth witnessed over the 1990s.The report went even further, suggesting that if MENA countries were to replicate the job creation record of the 1990s in the present and next decade, reasonable estimates indicate that unemployment rates would rise significantly across the region. Since the report’s publication, however, much has changed in the region’s economic outlook. Most impor- tantly, oil prices—which had been forecast in 2002 to stay at or below US$25 a barrel for the foreseeable future—rose to $29 a barrel in 2003 and $53 a barrel in 2005. For many countries, this unexpected and dramatic rise in oil prices has been reflected in rising personal incomes and government revenues.Thus, regional GDP growth improved from 2.9 percent in 2002 to an esti- mated 6.0 percent in 2005. 2 Growth in 2006 was forecast at 5.6 percent and is projected to remain higher than 5.0 percent for the foreseeable future. 3 In turn, the region has seen higher rates of job creation and declining rates of unemployment for the first time in almost two decades. Even the estimates of regional labor supply have been revised, with overall labor growth rates projected to be lower than the original estimates provided in 2003. 5 Given these changes, the relevant question becomes whether MENA’s labor market pressures have suddenly become manageable. More precisely, has the current oil boom solved the unemployment crisis facing the region? This chapter reviews recent developments in MENA’s labor markets, focusing on job creation, unem- ployment, and government policies aimed at improving labor market outcomes. Rather than providing an exhaustive survey of the issues at the individual country level, the chapter tackles the subject from a regional perspective.As such, it will be organized around a set of stylized facts that make up the important components of a general story. Labor force growth and participation rates As of 2005, the labor force in MENA stood at nearly 120 million persons, accounting for some 56 percent of the working-age population (ages 15–64) and 35 percent of the total population.Average annual growth rates for the regional labor force between 2000 and 2005 averaged 3.6 percent a year (Figure 1).The rate of growth in 31 1.3: Will the Current Oil Boom Solve the Employment Crisis in the Middle East?
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