As part of the recently proposed Labour Market Information System [LMIS] Project for the Gulf Cooperation Council (GCC) region, Tanmia, the National Human Resources Development and Employment Authority, has announced the findings of its latest study on the causes of long-term unemployment in GCC economies.
The paper uses micro and macro-level data and analysis, and considers the relationship between unemployment evolution and oil prices, output gaps, and other macroeconomic indicators. It also explores the lessons learnt from labour market policies implemented in the GCC and other economies.
The findings of the study show that labour market segmentation is a main cause of unemployment through; the clustering of nationals in the public sector through past creation of public sector jobs to accommodate them; low-skilled, low-wage private sector jobs that do not attract nationals, and a pool of foreign workers willing to take those private sector jobs.
The other findings of the study reveal that falling revenue from oil and high remuneration expectations of nationals have stemmed governments' ability to continue public sector job creation; there is a tendency towards persistent unemployment, which is based on disproportionately large labour market responses to short-term adjustments to address output gaps; the incidence of unemployment falls as level of education rises, but increases among secondary school leavers; and once wages rise to a certain level, some of the inactive move into the labour force and become available for work.
The findings do not support the claim that nationals' unemployment is voluntary. Unemployment rates were found to be five times higher among poorer nationals than among the wealthier: 11 percent for the poorest 20 percent of households compared to 2.2 percent for those in the highest income group. Further, the probability of unemployment was found to be higher among nationals with disabilities (this was demonstrated using data from Oman).
Tanmia’s study also shows that employment subsidies and employment quotas have had negative rather than positive effects on employment, with subsidies serving to increase wages overall, thereby reducing labour demand; and firms employing ghost workers' (on paper only) just to meet quotas.
A major conclusion of the paper is that any attempt by GCC economies to address unemployment must tackle the causes of unemployment.
A strong case is made for the abandonment of the policies tried until now, in favour of others that seek to reform the labour market in a comprehensive way. These include measures to reduce labour market segmentation over time; improve workers' mobility (especially foreign workers); enhance nationals' productivity; and strengthen the links between the education system and the labour market.
The paper recommends, specific measures such as enhancing the productivity of national workers so that they can compete more effectively with more experienced foreign workers; adopting a system of apprenticeship, similar to the German system, that links the education system to the labour market; instituting programmes and policies that will attract the unemployed into employment; training and retraining for the previously employed who become unemployed; and exposing nationals to programmes that make them more docile so that they can match the docility of foreign workers.
Finally, the paper calls for the development of a common framework for statistical measurement and reporting among GCC countries and for more systematic collection and dissemination of labour market data and information.
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