North Africa needs labour market reforms to boost employment and economic growth

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It is now three years since the Arab Spring and while some steps have been taken by governments in North Africa, the region remains in transition with a growing divide between the ‘haves’ and the ‘have-nots’ that still needs to be bridged to achieve social stability and make growth more inclusive. A new economic brief from the African Development Bank says labour market reforms are a key aspect of the post-transition measures that are needed and it provides an overview of the main issues that policymakers should consider when formulating labour market policies in the aftermath of the Arab Spring.

The brief emphasizes how the region is now at a crossroads where it needs to strike the right balance between supporting private sector development and new job creation while also protecting existing jobs and workers. The brief points out that policymakers should consider several factors when rethinking labour market policies for to North African countries. First, they should keep in mind the four dimensions along which labour market policies are affected – active labour market programmes, labour regulations, social protection legislation and collective representation – and should ensure that their overall strategy takes into account all four dimensions.

Labour regulations may need to be revised to allow for greater flexibility so that they support formal employment growth. However, this change in legislation simultaneously creates the need to protect workers who are between jobs. The region currently lacks adequate social safety nets, so this would need to be addressed to prevent further growth in inequalities. In the post-Arab Spring era, reforms to labour regulation will be difficult to pass, finance and sustain without some form of collective representation and bargaining.

The AfDB brief also reiterates some fundamental guiding principles that should be observed by decision makers in the short-term during the transition, but also to support job creation in the mid- to longer-term. First, macroeconomic stability is paramount and needs to be preserved. This stability is currently being weakened in some countries in the region because of a tendency to implement expensive short-term measures. Without macroeconomic stability, there will be no job creation. Second, there needs to be an enabling business environment that includes wider access to credit. The right type of human capital should be developed and in particular vocational training should be better valued. Finally, the rule of law needs to be observed to attract investors who will bring innovation and sophistication to the countries, which is needed to drive forward the economies and produce faster and higher productivity growth. It is also the only way for the region to create the kinds of jobs that are needed today and in the future.

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