Will the Current Oil BoomSolve the Employment Crisisin the Middle East?
Dubai School of Government
Dubai School of Government
At the 2003 annual meetings of the InternationalMonetary Fund and the World Bank in Dubai,theWorld Bank released a flagship report on labor marketsin the Middle East and North Africa (MENA).
Thereport described an unprecedented job creationchallenge facing the region.By 2020,according to thereport,an estimated 100 million jobs would have to becreated to employ new entrants and reduce unemploy-ment to sustainable levels.To create these jobs,theregion would have to maintain average annual economicgrowth rates of 6 to 8 percent between 2000 and 2020,far higher than the average 3.6 percent growth witnessedover the 1990s.The report went even further,suggestingthat if MENA countries were to replicate the job creationrecord of the 1990s in the present and next decade,reasonable estimates indicate that unemployment rateswould rise significantly across the region.Since the report’s publication,however,much haschanged in the region’s economic outlook.Most impor-tantly,oil prices—which had been forecast in 2002 tostay at or below US$25 a barrel for the foreseeablefuture—rose to $29 a barrel in 2003 and $53 a barrel in2005.For many countries,this unexpected and dramaticrise in oil prices has been reflected in rising personalincomes and government revenues.Thus,regional GDPgrowth improved from 2.9 percent in 2002 to an esti-mated 6.0 percent in 2005.
Growth in 2006 was forecastat 5.6 percent and is projected to remain higher than5.0 percent for the foreseeable future.
In turn,theregion has seen higher rates of job creation and decliningrates of unemployment for the first time in almost twodecades.Even the estimates of regional labor supplyhave been revised,with overall labor growth ratesprojected to be lower than the original estimatesprovided in 2003.
Given these changes,the relevant question becomeswhether MENA’s labor market pressures have suddenlybecome manageable.More precisely,has the current oilboom solved the unemployment crisis facing theregion? This chapter reviews recent developments inMENA’s labor markets,focusing on job creation,unem-ployment,and government policies aimed at improvinglabor market outcomes.Rather than providing anexhaustive survey of the issues at the individual countrylevel,the chapter tackles the subject from a regionalperspective.As such,it will be organized around a setof stylized facts that make up the important componentsof a general story.
Labor force growth and participation rates
As of 2005,the labor force in MENA stood at nearly120 million persons,accounting for some 56 percent of the working-age population (ages 15–64) and 35 percentof the total population.Average annual growth rates for the regional labor force between 2000 and 2005 averaged3.6 percent a year (Figure 1).The rate of growth in
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