“Jobs trump everything else,” says Masood Ahmed, director of the International Monetary Fund’s Middle East and Central Asia Department. Ahmed, of course, is referring to one of the most pressing economic and political challenges that countries in the Middle East and North Africa are facing in the midst of their political turmoil: high levels of unemployment, especially among youth. The subtext to Ahmed’s comment is that “just job” creation—jobs with labor rights including the right to organize and bargain collectively, with appropriate remuneration and social protection such as health care and pensions—are key, especially for youth, who today are front and center in the political movement known as the Arab Spring.
The IMF’s April 2011 regional economic outlook for the Middle East draws a sobering picture. It is against this sobering backdrop that the political turmoil and unemployment challenges confronting the region must be addressed. Oil importing countries, such as Egypt and Tunisia, will likely see slow gross domestic product growth rates of about 1 percent and 1.3 percent this year, after growing 5.1 percent and 3.7 percent respectively in 2010. As prices for oil and food rise and revenues from tourism decline, projected fiscal deficits will widen to 9.7 percent of GDP in Egypt and 4.3 percent of GDP in Tunisia.
Simultaneously, countries in the Middle East and North Africa are battling high unemployment rates. In 2008, the last year for which complete data is available, the average unemployment rate was 11 percent, with youth unemployment reaching 25 percent in Egypt and 30 percent in Tunisia. Even youth with college degrees in both countries suffer from unemployment rates of more than 15 percent. And employment conditions have only grown worse in the past global economic recession.
Given the pressing nature of creating economic opportunity for an entire generation and its beneficial effects on political stability in the region, it is surprising that job creation is not at the center of the European or American political debate on how best to support the region. The Party of European Socialists—a political party organization that brings together 33 progressive parties of the European Union—adopted an action plan at a conference in Tunis in April 2011 that talks about social and economic progress. But battling unemployment did not make it to the top of the agenda. In the United States, a focus on national security concerns, the role of Islamist parties in Egypt, and the country’s relationship with Israel tend to take precedence over a focus on addressing unemployment in the region.
But even if job creation in these regions does get more political attention on both sides of the Atlantic in the coming months, can the European Union and the United States at least also agree on how to best assist these countries in making their own economic transitions? One major obstacle is the fact that the lessons that the United States and Europe have drawn from the recent global financial and economic crisis are fundamentally different.
As a U.S. Labor Department official said recently: “The crisis has shaken peoples’ faith in God but not in markets.” In the United States, a distrust in large public investments remains high, collective bargaining is frequently seen as part of the problem not part of the solution, and industrial policy is being branded as socialist. In contrast, in some European countries such as Germany, which weathered the crisis thanks to a more regulated labor market, relatively strong labor unions, and a quickly recovering manufacturing sector—larger industrial policy strategy is embraced.
Economic assistance from the United States and Europe, then, will likely follow different approaches. The U.S. approach will advocate for cutting public subsidies and spending, for stimulating private-sector investments and deregulated markets to make the economies more competitive. The EU’s “partnership for democracy and shared prosperity” with the region will focus on public investments in infrastructure, education, and more effective social safety nets to support inclusive economic development. Eventually, Egypt and other countries in the Middle East and North Africa have to find their own paths to balancing the free market and social policies.
On their part, the European Union and the United States should jointly tackle a reform of their agrarian policies. Many countries in the Middle East and North Africa import U.S. and European farm products that are heavily subsidized. Giving farmers in these countries a chance to sell their products in a fair market environment would be more beneficial than billions of dollars or euros in debt relief and economic aid packages. Developing rural areas and opening markets for local agricultural products would be a win-win: The labor-intensive sector would provide income and jobs for the rural population and its products would increase food security.
But job creation in agriculture alone is not enough. Transatlantic partners must focus on “just jobs” across sectors in these developing economies to ensure that people have access to decent wages and social benefits. As the IMF stated in its report:
“Policy should aim at relaxing rigid labor market regulations, while at the same time preserving the right to collective bargaining and providing effective social protection, including unemployment insurance, for workers.”
This is also one of the objectives for which the Just Jobs Network advocates. Supporting the Middle East and North Africa in making a successful transition requires addressing employment challenges, especially for youth. Without this, political stability and broad-based economic growth will be illusive.
Knut Panknin is a program officer in Washington for the Friedrich Ebert Foundation, a nonprofit German political foundation committed to the advancement of public policy issues in the spirit of the basic values of social democracy through education, research, and international cooperation. The foundation’s Washington office is a member of the “Just Jobs” network organized by the Center for American Progress in its Just Jobs program.