While the Middle East lurches from crisis to crisis, its greatest challenge today is probably not what most people think. It’s jobs.
With 65 percent of the region’s population under the age of 25, the Middle East has the fastest-growing labor force of any part of the world. This youth bulge is surging onto the labor market like a massive demographic tsunami. Just to keep pace with population growth, the Middle East must create 80 million new jobs over the next 15 years. And if it hopes to put a dent in its already high unemployment rate of 15 percent, it must create 100 million new jobs by 2020—a near doubling of today’s total employment.
To put this into perspective, the Middle East must create jobs at twice the pace of the United States in the go-go Clinton years, in an increasingly competitive international environment that is already accommodating the rise of India and China. Without making deep structural reforms, Middle East governments will never be able to meet the employment needs of its increasingly disaffected youth—a stark fact that, left unaddressed, leaves an entire generation ripe for radicalization.
Unemployment is a problem throughout Arab society, but it is most acutely a youth issue. Fifty percent of those unemployed are between the ages of 15 and 24. Unemployment is also highest among those with some formal education. In the past, these young graduates could expect employment in the public sector, but as formal education has significantly expanded over the past generation and government coffers have come under increasing pressure, the public sector can no longer absorb what public school systems produce.
Nor is the private sector picking up the slack. Dull macroeconomic growth over the last few decades has barely kept pace with population growth. The region’s highly protective labor environment, which saddles the private sector with numerous restrictions, makes companies reluctant to hire.
Education across the region has been geared to turning out paper-pushing bureaucrats, not meeting the needs of private industry. There is a dire mismatch between the skill sets companies are seeking and what most regional high schools and colleges are producing. The result is an explosive combination of millions of young people with high expectations and no hope of fulfilling their dreams.
What can be done? Clearly, educational reform is imperative, and the challenge is at both ends of the educational spectrum: getting and keeping kids in school at the primary level, but also reforming higher education to produce graduates with more marketable skill sets.
As the U.N.’s Arab Human Development Report 2002 made abundantly clear, the Arab world’s track record on education, particularly girls’ education, is shameful. Sixty-five million adult Arabs are illiterate, and two-thirds of them are women. Illiteracy rates are higher in many Middle Eastern countries than those in much poorer states elsewhere in the world. While strides have been made over the past generation, more than 10 million Arab children between the ages of 6 and 15 are still not enrolled in any schooling, and this number is set to increase by 40 percent over the next decade.
Some countries have begun initiatives to reform primary education. Over the past decade, the Egyptian government has encouraged several reform programs that mobilize community involvement to improve education. Egypt’s innovative community schools differ in almost every way from its formal primary educational system. The curriculum is student-centered and interactive, with an emphasis on creativity, problem-solving and teamwork.
These initiatives are already showing some results. In the community schools, enrollment and completion rates, particularly for girls, are significantly higher than in government schools. Teacher absenteeism, endemic throughout Egypt’s educational system, is down, and test results indicate that students are achieving higher levels of literacy and analytic competency. But these reforms have yet to be rolled out to the whole country.
The poor quality of intermediate and higher education across the region poses an equally large challenge. Rigid, centrally mandated educational policies have created disaffected students and parents, contributing to high dropout rates. In some countries, particularly Saudi Arabia, curriculum control by Islamists has resulted in an inordinate emphasis on rote memorization of religious texts and insufficient development of marketable, practical skills.
Tiny Qatar is leading the way on higher-education reform. It has established a groundbreaking “education city” and attracted branches of several leading Western universities. But all governments must make educational reform one of their top priorities and work closely with the private sector to develop programs and curricula that will better meet companies’ needs.
In addition to broad and deep educational reform, regional governments must overhaul economic regulations and labor-market practices to encourage employment. The Middle East must aggressively seek greater integration with the global economy. Meeting its staggering employment needs will require external help. Today, with a population of over 300 million people, the region accounts for a paltry 2 percent of world exports and attracts less than 2 percent of global foreign direct investment.
American leadership will be vital in promoting the Middle East’s integration with the world economy. The U.S. government’s Middle East Free Trade Initiative, which has already opened up U.S. markets to Jordan and Morocco, should be accelerated throughout the region. But to attract foreign direct investment, regional governments will have to create a better investment climate. This will require greater transparency, stronger rule of law and more independent institutions of justice.
Just as China has absorbed tens of millions of workers in an infrastructure-building spree, the region’s employment hopes will depend in no small part on an effective recycling of its recent surge in petrodollars into bricks and mortar. A building boom is already well under way, transforming the skyline of Doha and Dubai, but infrastructure investment must expand beyond the oil-rich states of the Gulf. Populous, non-oil states like Egypt and Morocco should be thinking about innovative strategies to attract Gulf investment, like public-private partnerships to finance toll roads and airports.
Microfinance is another untapped opportunity to stimulate self-employment opportunities for people who have little prospect of getting a job in the formal economy. Microfinance is the provision of financial services to the poor, mostly in the form of small, noncollateralized loans. Borrowers use these loans to start small businesses that contribute significantly to family income. Although today more than 70 million households in developing countries have access to microfinance, less than 1 percent of these are in the Middle East. Regional governments should focus on creating a regulatory environment conducive to microfinance.
Microfinance has been shown to promote free markets and entrepreneurship, reduce the dependency of poor people and contribute to the emergence of a middle class, all of which are critical to Middle East reform efforts and employment hopes. Perhaps most important for the region, microfinance is also an effective mechanism for female empowerment. As several studies have demonstrated, Arab women’s economic participation remains the lowest in the world in quantitative terms, despite advances in recent years. The region as a whole has suffered economically due to the stifling of a huge proportion of its productive potential.
It is critical that countries in the region position themselves to reap the return on investments they have made—and must continue to make—in girls’ education over the past two decades. Removing restrictions on female workforce participation is vital for Middle East economies.
Some say that high unemployment is a reason to keep women out of the labor markets. But World Bank analysis suggests just the opposite. Countries in the Middle East with high female labor force participation have lower unemployment overall. Female labor force participation is correlated with healthy, flexible labor markets. Women tend to fill different jobs than men, attracting different forms of foreign direct investment and expanding the labor market overall. The World Bank study shows that a woman working raises family incomes by 25 percent on average, lifting millions out of poverty.
Over the next several decades, the Middle East will enjoy the lowest dependency ratio (its economically active population ages 15 to 64 vs. its economically dependent population) of any region in the world. This should be a demographic gift allowing governments to expand their tax base while not having to make relatively huge investments in children and the elderly. Yet if employment opportunities cannot be created, then the gift becomes a time bomb.
While opening up their economies is bound to be politically threatening to the region’s authoritarian governments, it will be more destabilizing to have millions of unemployed youths.
At this stage, only deep reforms will avert disaster.