Making the numbers add up on youth unemployment

The demographic challenge no longer comes from the youth but from the adults and the elderly in the next few years, according to the author. Antonie Robertson / The National

A report released last month by the World Economic Forum, Rethinking Arab Employment: A Systemic Approach for Resource-Endowed Economies, noted that "progress needs to be achieved in how young people, a demographic majority, engage in the economy and society at large" in the GCC countries. I agree with the statement except with the reference to "majority".

Similarly, an earlier report also by the economic forum in 2012 focused on exactly what its title implied: Addressing the 100 Million Youth Challenge. It concluded that "by 2020, just to keep unemployment rates at present levels, 80 million new jobs will have to be created". the report stated: "To actually bring unemployment rates down to more sustainable levels, a figure of 100 million new jobs is more appropriate." Here I agree with the implied message, that is that the region faces a difficult employment situation. But I disagree with practically all the words included, that is, the number, the youth, new jobs, unemployment and 2020.

Is the challenge really that big? And is it really the youth at the core of it? I doubt it, for five reasons.

First, if one defines young people as those in the 15 to 24 age group (in line with the UN definition of the youth), this is not a demographic majority. In fact, a group whose ages span 10 years can hardly be a majority in populations that have seven “10-year groups” as life expectancy is 70 years plus.

Second, the ratio of youth to adult population in the Arab region has declined significantly in recent years after it peaked in the late 1970s in North Africa and the early 1990s in the Middle East. Specifically for the GCC countries, this ratio is already below the world average — according to a report by the ILO/UNDP last year ntitled Rethinking Economic Growth: Towards Productive and Inclusive Societies.

These two points are past and present. Regarding the future, can there really be a need for 100 million jobs in the next eight years?

This brings me to my third point: such an increase would amount to 12 million new jobs every year when the current size of the labour force in the Arab states is about 100 million. No country has ever needed such an increase. In fact, even in the most pressing times, more than a decade ago, the annual labour force growth in the region barely reached 3.5 per cent.

Fourth, according to the most authoritative predictions by the UN, the total population growth — not just increase in the number of workers — and until 2030, not just until 2020, will only be around 125 million. This increase will come from children (13 million), youth (14 million), prime-age adults (76 million) and elderly (above the age of 65: 21 million). All in all, annual population growth will be only 6 to 7 million and that for youth less than one million.

This makes clear that the demographic challenge no longer comes from the youth but from the adults and the elderly. In other words, even if the unemployment rate among the future youth is two and three times higher than that of adults, there would be more jobs needed for adults than for youth. And with regards to the elderly, who will pay for their pensions as their numbers are expected to more than double compared to less than one-tenth of that for the youth?

Fifth, it is true that the Arab youth have the highest unemployment rate in the world. But this is half the story: the adult unemployment rate is also the highest in the world. In other words, the regional labour markets create enough jobs neither for the youth nor for the adults. And to be precise, the situation for the adults has deteriorated. For example, with reference to the GCC, there were 60 per cent more unemployed youth than unemployed adults in the early 1990s. By 2010 there were 20 per cent more unemployed adults than unemployed youth.

Let me conclude that, despite these observations, one cannot but agree with the conclusion of the more recent report by WEF that what is needed to address economic, employment and social issues in the region are more holistic approaches than in the past, culminating into a new social contract. However, getting the numbers right is the first prerequisite for correct analysis. And getting the numbers right can help dispel some myths before we answer the question: is the problem the too many Arab youth or the policies of adults who control both the youth and the economy?

Professor Zafiris Tzannatos is an economist living in Beirut. He is a former adviser to many international organisations and regional governments, as well as chair of the economics department at the American University of Beirut.

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