Youth Unemployment: What are the Causes?

Youth unemployment is the highest in the Middle East and North Africa (MENA). “Youth between the ages of 15 and 24 constitute 30% of the region’s working age population, and a quarter of them are unemployed, compared to the 14% international rate. There are approximately 71 million youth in the region out of an estimated 359 million total population.”

Economists argue that the effect of unemployment in some of the MENA countries is felt even more strongly due to high inflation. Inflation in Egypt, Yemen and Iran is estimated to be higher than 9 percent in 2010.  Existing research examined the underlying causes of the high youth unemployment in the region and its impact on the well being of societies. In light of the current global economic crisis and political transitions in Arab states, the topic of youth employment has taken the forefront of the international community agenda, generating interest by public and private stakeholders.  Some might argue that the major cause of instability in the MENA region today is the high rate of unemployment.

This paper presents a demographic overview of the region and outlines the effect of youth unemployment of societies in MENA, with a focus on Egypt, where estimates of the aggregate economic costs of youth exclusion are as high as US$53 billion in Egypt (17% of GDP). Specifically, this analysis aims at exploring the causes behind high youth unemployment in the MENA region and its impact on the overall well being of societies. Prior research conducted by the International Labor Organization (ILO), the World Bank, and Middle East Youth Initiative (MEYI) on youth unemployment will be described.  Most importantly, this research will outline existing strategies that aim at tackling youth unemployment on the macroeconomic level and provide recommendations for job creation and education reform.

Analysis

It is challenging to conduct developmental analysis on the Middle East and North Africa (MENA) region as a homogeneous whole, since countries within the region fall anywhere between the high or low end of the Human Development Index (i.e., Qatar has a very high HDI while Yemen has a very low HDI). Most importantly, each country is affected by unique socioeconomic, cultural and political factors that affect policy and the overall well being of its residents. Jad Chaaban, for example, developed a methodology to analyze economic trends among Arab states by grouping them into six economic categories, formed by the interaction between hydrocarbon endowments and labor market characteristics:

1. Oil rich and labor importing countries (Gulf States);
2. Oil rich and labor abundant countries (Libya and Algeria);
3. Oil-poor but labor abundant (Egypt);
4. Labor-exporting economies (Tunisia and Morocco);
5. Poor countries (Comoros, Djibouti, Mauritania, Sudan and Yemen); and
6. Conflict-stricken countries (Somalia, West Bank and Gaza and Iraq).

Chaaban’s grouping does not exclude one country from belonging to another category, and it classifies each country based on dominant trends that reflect its socioeconomic characteristics and construct.  Egypt, for example, is unique as it lacks in natural resources (beyond agriculture) but has a significantly large labor force. “With a population of over 300 million people, the Arab world has the highest concentration of inhabitants in Egypt (74 million), and in labor-exporting countries (70 million).  This translates into high levels of working age population in these two country groups, with 46 million in Egypt and also 46 million in labor-exporting countries. The total labor force in the Arab World is just above 100 million, with half of it concentrated in Egypt and labor-exporting countries.” With a relatively large labor force, Egypt becomes an interesting case to examine in terms of labor force employment and trends.

Underlying Causes of Youth Unemployment

Research shows that the highest youth unemployment rate is among mid-high education graduates in the MENA region, and it’s slightly higher (more than 50%) in rural areas. Social scientists argue that this trend is attributed to structural failures in the design of educational systems and job creation models, influenced by government policies and socioeconomic factors. Specifically, some of the underlying causes of youth unemployment can be traced to the skill mismatch (where university graduates lack the skills that employers need), difficulty in obtaining entry-level jobs..  Gender and cultural dynamics also directly affect the unemployment rate among youth – although this will not be covered in this study, it should be acknowledged as a key factor influencing the region’s labor force.