The context - International Policy Centre for inclusive Growth

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Transcript The context - International Policy Centre for inclusive Growth

Managing without growth:
challenges confronting the Syrian
labour market
Iyanatul Islam
Email: [email protected]
UNDP-IPC International Conference on employment
Brasilia, January 11-12, 2005
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The context
• Syria – low middle income [about US$1000 p.a.] and oil dependent
economy
• Expected to run out of oil reserves in about 10-12 years
• Faces uncertain international climate
• Seeking closer ties with EU and Arab states to offset frosty
relationship with US
• Struggling to recover from recession of 1999, with per capita growth
in recent years less than 1 per cent p.a.
• Yet, maintained respectable progress in human development and
expected to reach most of the MDGs by 2015
• Labour market caught in a ‘double squeeze’, with rapid labour force
growth and slow economic growth.
• Labour market policies will have to be more astute than in the past.
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Labour market-poverty linkage
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The public sector-private sector divide is a defining feature of the
Syrian labour market
27 per cent work in the public sector, the rest in the private sector
Within the private sector, the relative size of the informal economy is
36 per cent
66 per cent of employed university graduates and 82 per cent of all
employed graduates from intermediate institutions work in the public
sector
The proportions are even higher for female workers
Gender wage gap much higher in private than in public sector
The sectoral distribution of workers with higher educational
qualifications lies at the core of the labour market-poverty nexus in
Syria
The private sector accounts for 85 per cent of the share of poverty
Incidence of low paid workers are much higher in the private sector
than in the public sector [53 per cent vs 26 per cent]
Public sector wages are 1.5 times private sector wages
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Unemployment, underemployment and poverty
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Unemployment rates for 2003 vary from 7 per cent to 16 per cent, with
labour force survey [LFS] suggesting 12 per cent
Ministry of Social Affairs and Labour endorses LFS figure, but the
State Planning Commission prefers to work with a ‘range’ of
estimates.
Significant share of unemployment [47 per cent] may be attributed to
those with elementary education
75 per cent of the total stock of unemployed in the 15-29 age group
Female unemployment lower than males in the 15-19 age group as well
as for cohorts with elementary education, but the converse is true for
other groups
Duration of unemployment is high – 65 per cent of total experience a
spell of unemployment lasting one year
Multiple job holdings reported to be widespread but not reflected in
data
‘Gross’ underemployment afflicts 52 per cent of the labour force
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Unemployment, underemployment and poverty – con’td
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Unemployment-poverty nexus quite close for those with elementary
education, but not for other cohorts
At the regional level, only four governorates account for 50 per cent of
total stock of unemployment
But these are not the regions with the highest poverty incidence
Also, areas with high underemployment rates are not synonymous
with high poverty rates
In general, the correlation between poverty, unemployment and
underemployment at the regional level is either statistically
insignificant or of the ‘wrong’ sign
Hence, regional unemployment map constructed by the Syrian
government in 2003 likely to be an unreliable guide for identifying
impoverished regions.
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Child labour and poverty
• In recent years, child labour has become a prominent
and contentious issue in Syria
• Coincides with publication of a major report by UNICEF
• Incidence of child labour around 18 per cent
• Child labour much higher in poorer rural areas [64 per
cent] than in urban areas [36 per cent].
• It is also higher in agriculture [56 per cent] than in
manufacturing [18 per cent]
• Child labour rates much higher in regions with an
extensive rural and agricultural base
• Girls represented disproportionately in urban based
agriculture, but the gender gap is less conspicuous in
rural based agriculture.
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Policy issues – growth, investment and employment
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Government and other stakeholders agree that rapid, investment-led
growth is key to durable employment creation and poverty reduction
State Planning Commission maintains that 185,000 jobs need to
created to maintain ‘flow’ equilibrium in the labour market, but others
[eg World Bank, CAIMED] suggest much higher figures
State Planning Commission maintains that growth of 6-7 per cent
required to reach job creation target, but Damascus Chamber of
Commerce and others maintain growth rate of 8 per cent required
State Planning Commission recommends investment ratio of 47 per
cent of GDP to sustain growth rate of 7 per cent, but this threshold has
historically never been reached
Less attention seems to have been paid to employment elasticity,
although global evidence shows link between poverty reduction and
high employment elasticity
Modest improvements in employment elasticity can reduce required
growth to meet job creation targets from 8 per cent to 6 per cent
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Policy issues – growth, investment and employment
• Lack of a modern financial system that is able to tap new
investment funds is a major institutional impediment
• Legislative initiative in place for setting up a stock market
• Trade liberalization is on the policy agenda, but
privatization is not
• Rigorous assessment required for monitoring
employment consequences of liberalization-cumprivatization
• Global evidence shows that such a reform agenda can
engender negative employment consequences in the
short run, but not in the long run
• Hence, prudent management of policy reform required
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Policy issues – The Agency for Combating Unemployment [ACU]
• ACU set up as supra-ministerial agency to deal with unemployment
• Granted mandate to disburse US$ 1 billion and create 440,000 jobs
over five years [2001-2005]
• Policy instruments include credit for business start-ups, microfinance
and training and re-training, esp. self-employment
• According to ACU’s own forecasts, at best 250,00 jobs will be
created by end 2005.
• Maintains that this is due to funding shortfall and acknowledges that
ultimately job creation will depend on investment-led growth
• Given heavy investment of human capital in ACU [more than 70
PhDs], the agency could be transformed into a policy advisory unit
working on labour market-poverty linkages
• Collaborative arrangements between, ACU, State Planning
Commission and Ministry of Social Affairs and Labour need to be
designed
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Policy issues – child labour
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Syria has ratified the ILO convention on eliminating the worst forms of
child labour
Current approach is to penalize firms and families using child labour
Ministry of Social Affairs and Labour is arguing for an alternative
incentive-driven approach
The aim is to design schemes that will provide financial incentives for
poor families to invest in children’s education
A resolution of alternative policy approaches is required
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Policy issues – employment security and social protection
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About 19 per cent of Syrians are vulnerable to at least a transient spell
of poverty. Also the incidence of both seasonal
employment/intermittent work is quite high
Hence, employment security and social protection are high on the
Syrian policy agenda
Need a combination of policy instruments – such as unemployment
insurance, public works and microfinance
Syria does not have unemployment insurance, but uses stiff anti-firing
legislation as a surrogate
Such legislation is both ineffective and a source of contention with
investors
Cross-country evidence suggests that unemployment insurance can
be fiscally affordable and designed to mitigate disincentive effects
Both public works and microfinance part of the ACU’s role, but they
need to be a regular feature of labour market policy
Given that these initiatives are in their infancy, Syria can learn from
best practice elsewhere
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Policy issues – wage disparities and wage policy
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In May, 2004 public sector wages increased by 20 per cent, private
sector urged to adopt pay increases between 5 to 20 per cent, while
minimum wages are poised to increase by more than 40 per cent
Given that the wage gap is currently in favour of the public sector,
such wage policy will worsen wage disparities
It could help those employed in the formal sector, bypass those in the
informal sector and hurt those seeking work
An effective solution to improving wages in the private sector is to
improve its human capital endowment
This requires reform of education and training system to produce
graduates with skills pertinent to private sector needs and by fostering
in-firm training
Promising initiatives in place – reform of VET and conclusion of ‘EFA
assessment’, industrial scholarship schemes and private sector-public
sector collaboration in industrial training
Minimum wages should be indicative rather than mandatory and used
to monitor conditions of ‘working poor’
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Policy issues – labour market flexibility
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Engendering labour market flexibility is now a major part of the policy
agenda
There is a good deal of support among key stakeholders to reform
labour laws that have remained largely unchanged over the last 40
years
At the same time, Syria has ratified the core ILO conventions on
fundamental principles and rights at work
In pursuing an agenda of labour market flexibility, some issues need
to be kept in perspective
Comparative data show that, apart from high firing costs, Syria is not
too far out of line with international norms
More importantly, international evidence shows that the benefits of
labour market flexibility have probably been oversold
The challenge for Syria is to combine reform of labour laws with its
commitment to uphold labour rights
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