Making sense of Arab labor markets: the enduring legacy of dualism

Abstract

It is well-established that Arab labor markets share certain common characteristics, including an oversized public sector, high youth unemployment, weak private sectors, rapidly growing but highly distorted educational attainment, and low and stagnant female labor force participation. I argue in this paper that all of these features can be explained by the deep and persistent dualism that characterizes Arab labor markets that resulted from the use of labor markets by Arab regimes as tool of political appeasement in the context of "authoritarian bargain" social contracts. Even as fiscal crises have long destabilized these arrangements in most non-oil Arab countries, culminating in the dramatic political upheavals of the Arab Spring, I argue that the enduring legacy of dualism will continue to strongly shape the production and deployment of human capital in Arab economies for some time. JEL classification: I25, J21, J24, J31, J45, O53, P52

Informality, public employment and employment protection in developing countries

“…This comes in accordance with the JTJ flows decreasing substantially in our theoretical model following the slowdown in the hiring of the public sector from all employment sectors. In real life this downsizing strategy has been adopted by the Egyptian government via rationing its hiring processes (Assaad, 2014). Indeed, in accordance with the theoretical simulations and the empirical results of the overall flows of the economy in Section 2, Figure 12 sums up all these results and identifies a significant increase (at the 1% level) after 2004 in the steady-state unemployment rate calculated using these relevant detailed flows (between unemployment, formal, informal and public sectors).…”

“…High levels of public sector employment are also used as part of the authoritarian bargain, where public employment has always been exchanged for political acquiescence under authoritarian regimes (Assaad, 2014). With an aim to portray the nature of labor markets in developing countries, we extend the Mortensen-Pissarides model to add to the conventional private formal sector, both a public and an informal wage employment sectors.…”

“…16 Assaad (2014) show how the public sector hiring has been declining over the past decade in Egypt given the fiscal constraints faced by the government and hence the inability of the government jobs to absorb the queuing masses of job seekers. incidences typically experienced by the Egyptian workers in the different sectors.…”

“…There is no distinction made between the three employment sectors to calculate the separation and job finding rates in Langot and Yassin (2015) 2 Assaad (2014) shows that public sector employment shares in individual MENA countries are significantly higher than in a sample of comparable developing countries. According to data pulled from the World Bank on a sample of 12 MENA countries, government wage and salary expenditures average about 10 percent of GDP, which is higher than in any other world region, including OECD countries.…”

The Egypt labor market panel survey: introducing the 2012 round

“…The Egypt Labor Market Panel Survey of 2012 (ELMPS 2012) is the third round of this longitudinal survey, which was also carried out in 1998 and 2006 1 . Like other labor markets in the MENA region, the Egyptian labor market suffers from high youth unemployment, low and stagnant rates of female labor force participation, rapid increases in educational attainment, but poor quality education, anemic private sector growth and continued informalization, and strong preference for public sector employment among new entrants (see Assaad 2013). In addition, the fact that Egypt is in the midst of a deep economic downturn, which started with the world financial crisis of 2008/9 and deepened considerably after the January 25th 2011 revolution, affords an opportunity to study how labor markets react to such economic downturns.…”