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2012

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Working Paper 158 - Tackling Graduate Unemployment through Employment Subsidies an Assessment of the SIVP Programme in Tunisia
29/10/2012 11:28
Working Paper 158 - Tackling Graduate Unemployment through Employment Subsidies an Assessment of the SIVP Programme in Tunisia
It is widely agreed that the level of unemployment among university graduates in Tunisia contributed to the rise of social unrest that culminated in what is popularly dubbed as ‘the Arab Spring’. While the number of university graduates in Tunisia increased fivefold, so did the graduate unemployment rate. In 2009/10, one year prior to the Tunisian revolution, nearly one is four university graduates were unemployed.  High levels of unemployment are not unique to Tunisia. Countries in the MENA region including Egypt, Morocco and Algeria faced unemployment rates in excess of 18 percent, 19 percent and 21 percent, respectively. Although the causes of graduate unemployment in Tunisia are likely to be more frictional and solving the problem will require long-term interventions and structural change to the economy, active labor market policies were thought to alleviate some of the pressure in the short to medium term. Until recently, the main policy intervention aimed at promoting paid employment for graduates was the Stage d’ Initiation à la Vie Professionelle (SIVP). The program provided a wage subsidy ranging between TND equivalents of (€50 - €125) depending on qualifications. Firms receive exemption from taxes and national insurance contributions and can top up the graduate’s salary with tax free supplements. Eligibility for support requires registration with the national employment agency (ANETI) and actively seeking employment. Similarly, eligible firms should be part of the social security system and have intern-to permanent staff ratio not exceeding 40 percent. This paper assesses the impact of SIVP by addressing the non-random nature of selection into the program. The paper uses a variety of matching methods to estimate the welfare effect of the program. The dataset considered is a graduate tracer survey of over 4000 graduates who qualified for the program in 2004 and were interviewed in both 2005 and 2007. In spite of the non-random nature of selection into the program, graduate who benefited from the program are expected to have better labor market outcome that those that did not. The data show that women were slightly less likely than men to have benefited from SIVP in the first three and a half years after graduation. The distribution of SIVP by governorate of residence in 2004 shows a bias towards large urban areas (e.g. Tunis, Ariana, Nabeul and Bizerte). Those with ‘good’ or ‘satisfactory’ degree are more likely to benefit from SIVP as opposed to those with just a ‘pass’ or a ‘very good’ degree. At the level of discipline, those with Social Science, Law and Language degrees are considerably less likely to benefit from SIVP than those with Finance and Management degrees.   The study found that SIVP has a positive outcome on the likelihood of having a job (especially for those at high risk bracket of unemployment), but there is less strong evidence that the program has any effect on the likelihood of having a contract, or on salaries. SIVP beneficiaries are less likely to find employment with a large firm, and are more likely to enter the private sector. The multivariable analysis slightly lowers the estimate of the effect of the program on joblessness and unemployment but they remain statistically significant and stable across all specifications. SIVP participation results in an estimated reduction in the likelihood of joblessness of around 7 percentage points. However, although the program appears to increase the likelihood of obtaining a job, it does not appear to have any impact on the quality of that job.   One out of four individuals who spent zero or one month of unemployment in the first six months of graduation benefited more from the program than other individuals in their cohort. Similarly, one out of four individuals who spent five or six months of unemployment after the first six months of their graduation benefited more from the program than other individuals in the same cohort. The study finds that the program is poorly targeted and is therefore poorly targeted. Although the program should probably be kept, the targeting of the funds should be improved in order to minimize deadweight loss. The subsidy should be restricted to job-seekers who have been registered with ANETI and who, despite demonstrating job-seeking effort, have been unable to find work for a considerable period of time. The program should be better targeted geographically by removing the requirement that the company should be part of the social security system so that smaller, informal enterprises also become eligible to recruit SIVP interns.Read more
Working Paper 155 - Youth Jobs and Structural Change: Confronting Africa’s “Employment Problem”
08/10/2012 14:22
Working Paper 155 - Youth Jobs and Structural Change: Confronting Africa’s “Employment Problem”
Africa has enjoyed over a decade of sustainable growth where regional growth has exceeded the global average and per-capita income for the region is steadily increasing. During the past decade sub-Saharan Africa was home to six of the ten fastest growing economies in the world. However, there are signs that this growth turn-around has not resulted in robust growth of ‘good’ jobs particularly for the young whose share has been rising over time. The share of the youth in Africa is now higher than any other part of the world. This demographic transformation offers the possibility of a growth dividend, as in the case of Asia, if a rapidly growing work force can be combined with capital and technology. However, it can also present a major challenge. The continent is not creating the number of jobs required to absorb 10-12 million young people entering the labour market each year and as recent events in North Africa have shown, lack of employment opportunities in the face of rapidly growing young labour force can undermine social cohesion and political stability. According to a recent projection, Africa will have the largest workforce in the world by 2040, surpassing both China and India. The paper argues that sub-Saharan Africa does not face a severe employment problem but that of the absence of decent job opportunities. It argues thatAfrica’s employment problem is symptomatic of its lack of structural change –the shift in resources from lower to higher productivity uses. In spite of rapid growth, Africa has undergone very little structural transformation. While unemployment rates in most African countries are low, they also tend to have very large informal sectors, with a bulke of the employed langushing in vulnerable employment and working poverty. There is quite a bit of evidence that since 1990 structural change has moved in the wrong direction in Africa where labor has moved from higher to lower productivity employment.&nbsp; &nbsp; Youth unemployment rates in Africa compare favourably compared to regional and world averages. Worldwide there is a fairly regular relationship between the overall rate of unemployment and the rate of youth unemployment. However, at 1.9 the ratio of sub-Saharan Africa’s total unemployment to youth unemployment rate is below that which would be predicted from the region’s overall rate of unemployment. The global ratio of total unemployment to youth unemployment is higher (at 2.7). However, North Africa’s youth unemployment rate substantially exceeds its predicated value. The African Development Bank’s 2012 household and labour force survey with its coverage of 16 countries provides the most comprehensive picture to date of the performance of African labour markets. The survey finds considerable heterogeneity in Africa’s labour markets. These results confirm that neither overall nor youth unemployment rates in sub-Saharan Africa stand out globally, while variations across countries is significant.&nbsp; African countries with well-structured labour markets and a large formal sector tend to have higher unemployment rates. This is especially true in southern Africa where unemployment exceeds 15 percent in Botswana, Namibia, and South Africa. Unemployment is also high by international standards in North Africa – especially in Algeria and Tunisia. Unemployment is relatively low in lower income countries while the informal sector is large (Ethiopia, Ghana, Tanzania and Uganda). A third group comprises of countries with large informal sectors and unemployment rates in the range of five to 15 percent.&nbsp; &nbsp; In most African countries job search periods are longer for those with higher education levels and therefore tend to constitute a larger cohort of the unemployed. Except for Niger and South Africa, youth unemployment rates tend to be lowest among those with either no or basic education. In 6 of 14 countries for which data were available, the unemployment rate for those with tertiary education was the higher of all. In many African countries, self and informal employment accounts for a majority of young workers. With some country specific exceptions, less than 20 percent of Africa’s young workers find wage employment and over 70 percent of workers in Congo, DRC, Ethiopia, Ghana, Malawi, Mali, Rwanda, Senegal, and Uganda are either self-employed or find themselves in family work. The paper argues that the key to reducing unemployment and informality in all levels including the young is the rapid growth in good jobs as a result of substantial structural change. Industrialization can boost formal job creation through labour intensive growth. Nevertheless, critical changes in the labour market and in the education system will also be needed to increase the employment intensity of growth in the formal economy. In the short run a number of interventions can be undertaken to improve the employment prospects of new labour force entrants. <ul><li>Addressing open unemployment and helping the young find better jobs: Governments can target young workers in employment intensive activities, such as tourism and construction with programs that offer cash for work. Public works programs provide opportunities for young workers with low skills to acquire work experience and subsequently find more permanent work.&nbsp; </li><li>Building relevant skills: Increased emphasis on post-primary education through education budgets, improving the quality of teachers and instruction in public schools are critical. In the long-term it is essential to restructure education systems to teach the skills needed to succeed in a global marketplace. &nbsp;</li><li>Reform of labour legislatives and institutions: pertinent changes in labor regulations that set minimum wages determine social insurance contributions and protect job security need to be changed. In some countries high level of wages relative to productivity are deterrents to growth in outward-oriented manufacturing. In many countries procedures for laying-off workers for economic and technological reasons are complex and seldom used. Separating social insurance from formal job status and social contributions from formal sector wages should be an important long-term goal. </li></ul>Read more
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