Youth Unemployment Problem In Middle Eastern and North African Countries

While developed countries like Europe, USA and Japan encounter decreasing birth rates and ageing population problems;according to demographic properties, the young constitutes the majority of the population in Middle East and North Africa (MENA) countries. This situation may suggest the presence of dynamic labor force and human capital; however it also creates a big problem of youth unemployment, compared to the other countries in the world. Not only in Yemen, the most under-developed country in the region, but also in Turkey, the most developed country in the region, and in Saudi Arabia, with the largest oil reserves in the world, it is getting more and more difficult for the young population to find a job. Increasing youth unemployment not only creates socio-economic and political problems, but also possible members for radical groups, which is one of the biggest problems in the region.

Unemployment refers to a disequilibrium in the labor market.  There are two types of market disequilibrium: excess supply and excess demand. Unemployment occurs when the labor supply is bigger than the demand in labor market. Excess labor force supply happens basically due to rapid increase in the population and also market failure. According to World Bank’s data, in 1990 the population growth rate in the world was 1.7 %, and in MENA countries it was 3.5%, which was more than twice the world average. According to the averages taken for five years, from 2011 to 2015, population growth rate in the world was 1.2%, but in MENA countries it was 1.9%. These results indicate that population growth rate in the world is decreasing, so is the rate in MENA countries, which is decreasing more rapidly, and getting closer to the population growth rate in the world. But still the rate is 1.6 times greater than the world average. Compared to population growth rate in European Union in the last 5 years, which is %0.2, the increase in the population growth rate in MENA countries becomes more visible. On the other hand, the population growth rates are not homogenous in MENA countries. For example, the average population growth rate in Iran, Iraq, Saudi Arabia, Egypt and Turkey are 1.3%, 3.3%, 2.3%,2.2% and 1.7%, respectively.

One other type of market disequilibrium which causes unemployment is the lack of demand. In that sense it is referred to as structural disequilibrium. Except for the unemployment when the labor quality and the quality the job requires don’t meet and also for the temporary unemployment for those who are looking for a job, the main reason for unemployment is that the economy does not have enough infrastructure to create jobs and cannot make productive investments.The source of investments consists of national savings. Both the level of investment and savings, and also savings gap, which means the difference between the savings and the investment, show the potential of that economy to provide jobs. According to 2011-2015 data, we see that the world saved approximately one fourth of its national income and transferred it to fixed capital investments. Between same years, EU saved approximately 22% of its gross domestic product (GDP), and invested 20% of its GDP, which means EU didan over-saving of2%. In Turkey, the situation is opposite: national savings are 15% and investments are 21%. On the other hand, in Arab world and in MENA countries, the amount of over-savings is fairly high.The savings and investments rates in these two countries are 24% and 39%, respectively. In Saudi Arabia, which is the second biggest economy of the MENA region after Turkey, the amount of over savings are much higher, with 25% of savings and 45% of investments. This means that these over-savings are used for financing the investments in other countries rather than investing it on creating jobs.

Lack of investments causes slow economic growth. High interest rate is one of the factors that increase investment costs. Slow economic growth, on the other hand, is one of the important factors which reduce demand for the productive investment. After global financial crisis in 2008, economic growth rates declined significantly, especially in developed countries. In last five years, the average growth rate in the world was 2.6%, and in EU it was only 1%. Arab world and MENA countries scored 3.1% of growth performance, which was significantly behind their long term growth rate. Due to the decline in prices of oil and other energy sources in the last two years, the growth rates recorded 2.5% and 2.9%.

Lack of infrastructure and productive investments, low growth rate, and socio-political instability in the region since 2010, war and terrorism caused youth unemployment to increase. In 2011-2015 the average unemployment rate in MENA countries was 11.1%, 8.6% for men and 20.2% was for women. The average youth unemployment, which refers to the unemployment rate of people in 15-24 age group, recorded 28.9%; 23.8% for men and 46.1% for women, which happens to be a very big number. In Europe, where global financial crisis still continues, the average youth unemployment rate is 24.2%, 24.3% for men and 24.2% for women. As you can see, MENA countries have 4.7 points higher youth unemployment rate and for women this rate is more than twice, compared to EU. If we look at the average youth unemployment rates in the world, we can see the size of youth unemployment problem in MENA countries more clearly. The average youth unemployment rate is 13.9% in the last five years, 13.3% for men and 15.5% for women. Here we see that MENA countries have a youth unemployment rate of more than twice the world rate. For men MENA countries have twice, and for women three times higher youth unemployment rates compared to the world rate. These rates show that lack of dynamic labor force in today’s developed countries is turning into a problem in MENA countries. This situation creates both economic development problems, and social and political instability in MENA countries. On the other hand, it should be emphasized that, this problem will not go away just by increasing investments and economic growth rates. There is a need for a deep reform process of democratization in socio-political and economic organizational forms. In this context, economic investments, which could increase human capital, like education and health; and economic policies, which could increase the information technology investments and other infrastructure and productive investments, should be prepared and put into effect. Also, it is necessary to make these transformations in a way that matches up the quality of the jobs with the quality of labor force in modern economies.